Libertarians for Protectionism, Appendix A

There’s been some debate recently over whether recent studies show that the lack of pharmaceutical patent laws didn’t stifle, and perhaps even accelerated, the development of innovative drugs in Italy. (Italy did not join the global intellectual enclosure movement with regard to drug research until 1978.)

I haven’t read the paper and I don’t know that much about pharmaceutical research and marketing processes to begin with, so I don’t know how much water the study holds. (For the pro, see Samizdata (2006-01-09): Can pharmaceuticals be developed without patents? and Kevin Carson (2006-01-23): Alex Singleton: The Effect of Patents on Drug R&D; for the anti, see the comments sections and Joshua Holmes (2006-01-24): On the Italian Pharmaceutical Industry.) My interest here isn’t to ajudicate the dispute. Maybe patent monopolies accelerate new drug production; maybe they stifle it; maybe they don’t affect it at all. The usual moral and economic arguments against intellectual property apply regardless of what effects patents happen to have on the velocity of pharma R&D. What I do intend to do is once again ridicule self-proclaimed free marketeers who throw it all overboard to indulge in the crudest forms of corporate protectionist argument when it comes to so-called intellectual property. Thus:

It takes a $500 million and 12 to 15 years to discover and bring a significant drug to market today. Who is going to invest that kind of money without patent protection?

Posted by Jake at January 9, 2006 03:14 AM

And:

To those of you who think patents are unnecessary:

Why don’t you take out a huge loan (say $500,000,000), invest it in the R&D and production of a new drug, and then send me a copy of your findings. That way I will be able to produce the drugs and sell them to the public myself without having to invest all that money.

No rational person would invest such a huge amount of time and money into pharma if there wasnt a protection in place that made it possible for them to make a profit off of their findings. …

Without the patent protection there would be far less innovation in pharmaceuticals, and without the time limit on the patent, prices would remain unnecessarily high. Both aspects are necessary, so we put up with high prices for awhile to encourage the future production of new drugs. …

Posted by Ryan at January 28, 2006 04:10 PM

Without a protective tariff, what rational person is going to invest in American automobiles? In a free market, who will be in charge of making the shoes?

The horrors we face are numerous. Pharmaceutical companies may have to re-evaluate their business plans. If people can’t make a profit on in-house research and development for new drugs, then drug research will have to be done, God forbid, out of house or by not-for-profit organizations!

A special prize goes to Shannon Love, for the accomplishment of combining crass protectionism in the name of the free market with an overtly state-constructivist theory of property rights in the name of denouncing state socialism, and topped off with the most absurd non sequitur of the entire thread:

We basically have two choices in managing intellectual resources of all kinds: (1) a private property system with all its warts or (2) socialism. If a decision-making about a resource cannot be effectively allocated to private entities via a property mechanism then state will allocate the resource via politics.

The destruction of intellectual property rights will inevitably lead to a new era of sweeping socialism, except in this era it will not be factories that get nationalized but research, art, software and media. State sponsored intellectual products will push private ones out of the market because only the state backed products will have a secure source of funding. …

So make your choice. If you want to live in a world where politicians control the production of virtually all information then by all means pirate media and violate patents but if you want to have some freedom and some hope that people can actually make a living producing information, then you should think long and hard how to make intellectual property systems work.

Posted by Shannon Love at January 9, 2006 03:59 PM

Because, of course, the world owes a living to people producing information, and what better way to ensure that than by allocating them proprietary control over my mind and my copying equipment?

After all, if folks can’t make their living producing information for profit, then some of the work will have to be done by means other than a for-profit retail business model. Some of it may even, God forbid, be left to rank amateurs!

How will we ever survive?

Look, the same lessons still apply. Before you have a successful reductio ad absurdam the conclusion of the lemma must actually be absurd.

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5 replies to Libertarians for Protectionism, Appendix A Use a feed to Follow replies to this article

  1. M. Enright

    Without a protective tariff, what rational person is going to invest in American automobiles? In a free market, who will be in charge of making the shoes?

    I’m not sure that these two issues (drug patents and automobile tarriffs) are all that similar. The whole point of the issue of automobile tarriffs was that the government was supressing competition from superior foreign cars to help crappy American ones. There is no competition in research and design of patents that is being suppressed. If American automobiles failed, then we would just drive superior Japanese ones. If pharmecutical research was no longer profitable it is not clear that there is a subsititute.

    The horrors we face are numerous. Pharmaceutical companies may have to re-evaluate their business plans. If people can’t make a profit on in-house research and development for new drugs, then drug research will have to be done, God forbid, out of house or by not-for-profit organizations!

    What makes you so sure that not-for-profit drug research would work as well as for profit? What makes you think that as much time, effort, and money would be placed in it? What makes you think that there is a susbstitute for the current system of research and design?

    Because, of course, the world owes a living to people producing information…

    And what makes you think we don’t owe them their asking price for their effort and investment?

  2. Rad Geek

    Mike, the explicit purpose of patent protection is to suppress potential competitors (mainly on price, by generic drug-makers), on the grounds that the patent-holders can’t recoup their investment otherwise. Research and development isn’t a product at all, but rather the part of the process of developing and producing the drugs that intellectual enclosure advocates happen to point to as especially costly and risky, thus bringing about economic conditions that are supposed to merit protectionist legislation for the end-product.

    In any case, the point of adding Without a protective tariff, what rational person is going to invest in American automobiles? and In a free market, who will be in charge of making the shoes? to Who is going to invest that kind of money without patent protection? is that, from the standpoint of free trade economic principles, they are all the wrong question to ask.

    Mike:

    What makes you so sure that not-for-profit drug research would work as well as for profit? What makes you think that as much time, effort, and money would be placed in it? What makes you think that there is a susbstitute for the current system of research and design?

    I have no idea. How would I know? Socialist calculation is impossible; that’s a question about the optimal levels of investment that’s best left to entrepreneurs. I’m merely pointing out that there are ways of getting research done that don’t turn on profiting from government idea-tenure on the drugs you develop. What I do know for sure is that when you enforce legislative barriers to entry on the market you force people to spend money on drugs that they would otherwise spend on other things that they also value, and thus forcibly suppress other markets by forcibly propping up the costs sunk into patented drugs. Maybe those other things include non-patented drugs and maybe they don’t; but there’s no policy mandate at all, let alone an absolute and insurmountable policy mandate, to maximize the production of new drugs in the first place. There is a policy mandate not to violently interfere with people’s voluntary exchanges on the free market.

    My suggestion is that if you want to defend intellectual property, you’re going to have to do better than crude protectionist arguments, because protectionism is both morally and economically bankrupt. (You could, for example, try to make the moral case that inventors own the idea for the invention that they produce, and so can enforce their property claims. But that’s a different argument that needs a different basis.)

    Me:

    Because, of course, the world owes a living to people producing information…

    Mike:

    And what makes you think we don’t owe them their asking price for their effort and investment?

    I’m not sure what you’re asking. You owe me my asking price if you agree to buy a good from me at that price. But if you decide to buy from a competitor who is offering at a lower price, you’re not taking from me of anything that I own — because I don’t have an ownership claim over continued business from you — and so you owe me nothing at all. Prices are made by agreements between buyers and sellers, not by the unilateral demands of the sellers.

    If you intend to suggest that when you buy a drug produced with the help of my effort and investment from somebody else, you’re still buying your effort and investment, and so you owe me for that, then I respond that you’re not buying your effort and investment at all; I’m buying drugs. And if that is your suggestion, I would like to suggest that adding a very crude version of the labor theory of value on top of a very crude version of protectionism is not going to advance the idea that economistic arguments for patents ought to be taken seriously.

    If you mean only that inventors deserve to get the compensation they ask for in return for their effort and investment, then there may very well be cases in which that’s true (I expect it depends on the price they are asking and the usefulness of the invention). But even where true, that’s not yet an argument for patent restrictions. It may be an argument that you, morally, ought to pay me the higher price I ask (in order to help me get what I deserve), but it’s not yet an argument that I have the right to make you do so.

    Broadly speaking, people deserve all kinds of things, but deserving something is not the same as being owed it — deserts are not always debts — and establishing that Jones deserves such-and-such doesn’t yet get you to the conclusion that Jones (or someone acting on her behalf) has the right to take such-and-such by force. But in any case, this is a different sort of argument for intellectual enclosure, and I’ll have more to say about it anon.

· April 2006 ·

  1. fattomato

    Dear Rad Geek,

    Youve rather missed the point of patents.The generic drug industry only exists because the research industry tells them what to produce.The patent holders are legally obligated to describe their inventions, and make that information available to the public, including their potential competititors. So if you take away the patent system, ie the publication obligations and the related exclusion rights, the generic manufacturers then have to develop their own drugs, and hence they become pharmaceutical research companies, with the accomponying price structures of the research industry.

    The patent rights are not a reward for invention. They are a legal contract, a trade between inventors and society, owed to inventors not for the act of invention but for the act of publication. SO yes, you do in fact owe them, not for the risks they took, not for the capital investments made, not for the pay cuts, or meager salaries they took, you owe them their patent rights, because that what society said they would get for publishing their know-howAnd since publication of pharamceutical formulations is a legal requirement, the privacy rights of the pharamceutical industry are being infringened in the first instance, with limited patent rights awarded as meager compensation.

    Alternatively; abolish the FDA, and clinical trials, after all they are both anti-freemarket, let consumers decide which drugs to buy ;off which producers, leave the drug producers the same rights of privacy that coca-cola, or pepsi or KFC have. And also forget the demands of generic drug manufacturers, govermnet agencies, or consumers to know the compositions of the products they buy.

  2. Otto Kerner

    If the essence of patent is that it is a contract between inventors and society, does it therefore follow that other societies are not bound to respect it?

  3. Rad Geek

    fattomato, it’s not that I’ve missed the point. It’s that you’re changing the subject.

    There are lots of different arguments that are used to defend the different forms of intellectual property enforcement. Maybe your argument in defense of patents is a better argument than the explicitly protectionist arguments I was considering here. I think that it’s not, but whether it is or not, it’s not the argument that was under discussion. If you think that somebody is missing the point of patents, you might want to direct your concerns to the people who were in the first place making the protectionist argument rather than your own favored argument.

    As it happens, I think your argument is a pretty poor one I never signed a contract to respect patents and I never authorized society to make one on my behalf, so there are no legitimate grounds for enforcing the terms of this contract on me. It’s perfectly possible, under free market principles, to have companies require that people sign non-compete agreements or non-disclosure agreements as a prerequisite for disclosing the composition of a drug to them, but they have no right to place arbitrary demands on third parties who came across the information without ever agreeing to abide by those terms. Since patent privileges are granted by the government to the patent-holders without needing anybody’s consent outside the patent office, all of us are, in fact, in the moral position of those third parties.

    Just as a side note, I also have to say that I got quite a chuckle at your attempt to drum up sympathy for the meager compensation offered by limited patent rights in return for disclosure of the discovery. Pharmaceutical companies make money hand over fist through the monopolistic profits they extract through their patent portfolios. Patent holders are obligated to publish a description of their invention only if they are seeking a patent on it; if the compensation for disclosure were more meager than they could make by neither disclosing nor seeking patent protection, then drug companies would be doing that. They aren’t, and it’s not because they’re stupid. It’s because monopoly profits within the lifespan of the patent allow them to extract more money than they could get through honest free market competition.

    As for abolishing the FDA, I’m for it. However, I deny that abolishing patents should be made contingent on it. Patent restrictions are immoral whether or not the FDA exists, and should be abolished immediately and unconditionally.

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