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Mutualist Blog: Free Market Anti-Capitalism

To dissolve, submerge, and cause to disappear the political or governmental system in the economic system by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State. --Proudhon, General Idea of the Revolution

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Location: Northwest Arkansas, United States

Sunday, May 21, 2006

Intellectual Property Stifles Innovation

Jonathan Rowe, at On the Commons.

Here in the Philppines, no one owns the idea of pansit which is a kind of noodle dish, or of skewered chicken, or of shucked corn roasted on a street corner. These are part of a food culture; and according to our leading economic lights, they should therefore stagnate into a culinary puddle of lassitude and waste. Who would improve that which they do not own?

Well, it turns out lots of people will. There is pansit and roasted corn and a multitude of soups and stews that I forget the names of on just about every corner -- just as, in the U.S., the common ownership of pizza and moo shu pork has not deterred countless restaurant owners from concocting their own versions of these. To the contrary, it is in the culinary commons that invention is most alive. I can treat you to a lot more varieties of moo shu in San Francisco than I can varieties of a Big Mac. That is because there are no varieties of Big Macs. The corporate property regime has frozen it in place, to change only when a hulking legal and marketing bureaucracy permits.


Anonymous Anonymous said...

This can't be a serious argument. It doesn't take billions in research to come up with a noodle soup formula as opposed to, say, a cancer drug.

- Josh

May 22, 2006 5:27 AM  
Anonymous Anonymous said...

Well, absent the FDA, it wouldn't cost billions to come up with a cancer drug either, if it ever does in the first place.

What generally gets included in the accounting for research costs are some amazing things, that I can't do justice to on a blog - I get surprised everytime I talk to my friends in the industry about how much waste is involved - but it's all invisible to them. It's just "how it needs to be for the FDA to keep track of everything." If you want, I can give you some examples, but I'd rather focus on another point for now -

Namely that what big pharma is researching is cancer meds. It's not. In the rare instances that big pharma produces and markets such medicines, it has purchased them from small start-ups that themselves are the result normally of a university laboratory's work. When big pharma cites to billions of research costs, what it is talking about is the process whereby they literally test millions of very closely related compounds to find out if they have a solid therapeutic window. This type of research is directly related to the patent system, as changing one functional group can get you around most patents, eventually. So you like to bulk up your catalogue and patent all closely related compounds, while choosing only the best among them, or, if you're second to market, one that hasn't yet been patented.

This work is incredibly data intensive, and requires many Ph.D's, assistants, and high powered computers and testing equipment to achieve. But it is hardly necessary in the absence of a patent regime. In the absence of patents, (and of course the FDA), you could just focus on finding a sufficient therapeutic window, and cut out the remaining tests. It would be an issue of marginal costs to determine whether someone would go to the effort to find a "better" therapeutic window, or related parameter.

May 22, 2006 8:45 AM  
Blogger Kevin Carson said...

You two are probably the two best spokesmen among my regular readers for the ends of the IP spectrum.

Josh, drugs are not typical of patented goods, precisely because they're such an extreme case of high R&D costs. F.M. Scherer, in arguing that the vast majority of new goods and industrial processes would have been produced without patents, viewed drugs as an exception.

Quasibill points out just why drug research costs are so high, and suggests that the costs don't result from anything inherent in the nature of the product. I was aware that FDA testing requirements raised costs considerably, but I didn't realize until now that so much of the cost comes from testing a whole range of related "therapeutic windows" to secure patent lockdown.

I should add that Rowe's argument is an unknowing restatement of a similar argument by Rothbard, that patents reduce the incentive for innovation by enabling the holder of a patent to rest on his laurels.

May 22, 2006 12:57 PM  
Anonymous Anonymous said...

IP "privileges," as they are hardly "rights," act to concentrate innovation into fewer hands and rarer occurrence. It causes innovation, if plotted graphically for frequency vs capital intensity to occur as a few rare but very high peaks. In a civil society based on equal freedom (not privilege), innovation would occur as much more frequent but flatter peaks.

Incentives for innovation would remain but they would simply be different incentives. The incentives would be include modest but more immediate and more frequent remuneration distributed to a broader set of folks. They would also include the satisfaction of passion and pride in ones trade/talent/ mission rather than mega-bucks for the elite corporazzi. People who choose drug research as a calling to help humanity might even feel a more rewarding work life as they would be working in a more cooperative, information sharing social fabric network instead of a mercantilist, secretive, monetary maximizing combine. They would believe they would really working to help people instead of just slaving to maximize economic rents for their corporate fiefdom rulers.

Chris Toto

June 04, 2006 12:36 PM  

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