Defenders of intellectual enclosure almost always point to the pharmaceutical industry in order to defend patent laws on consequentialist grounds. The idea is that it’s very risky to invest money into new drugs, since new drugs take years of expensive new research and development, which often fails to pan out a marketable new drug. If the successful avenues of research weren’t so very lucrative, then pharmaceutical companies would not be pursuing nearly as much new research as they do. So, therefore, you shouldn’t undermine the patent restrictions that make successful new drugs so very profitable to develop. Here’s a typical example from Greg Mankiw’s Blog, in light of the election results:
My interpretation: The Dems will likely give us lower drug prices and less research into new drugs. Good news if you plan to be sick soon. Bad news if you plan to be sick in the more distant future.
Whether or not this is empirically true, if Mankiw intends to provide some guide to policy, then it requires you to know somehow or another what the right amount of money to devote to new drug research would be. (It’s silly to claim that a policy will prevent enough money going to new drug research if you have no idea what would count as enough.)
So, here’s the problem, and the open question. The most efficient level of investment in new drug research is probably greater than zero. And it’s certainly less than infinite: my resources aren’t infinite and neither are yours, and each of us needs many things in life besides research into new drugs. But beyond that, patent advocates pretty much never say anything at all about what the right amount of money to spend is, or how they would know what it is.
So—in the absence of free, competitive bargaining by drug-takers with drug-makers over how much the new drugs are worth to the would-be customers—just how do you calculate what the most efficient level of investment in new drug research would be?