Adapted from a FB post:
I’ve mentioned before that Cato scholars have inexplicably come out in FAVOR of the horrendous, fascist, IP-pushing TPP, in an article by Daniel Ikenson.
People have told me that just because Cato has one scholar in favor of something does not mean it’s an institutional position. MMhhmm.
Check out this Democracy Now “debate” about the TPP, between Bill Watson, a trade policy analyst at the Cato Institute, and Lori Wallach, director of Public Citizen’s Global Trade Watch (TPP Exposed: WikiLeaks Publishes Secret Trade Text to Rewrite Copyright Laws, Limit Internet Freedom).
Now what is disheartening for the libertarian listening to this debate (which starts around 11:00) is that almost everything Wallach says is correct and on the libertarian side. She notes that the TPP is not about free trade at all; only a small number of its (still secret) chapters even purport to deal with free trade; the major portion leaked so far is on IP and is pure American company special interest rent-seeking: attempting to lock stronger and longer copyright and patent law into US law via treaty and to export it to the rest of the world; that is, to increase the monopoly privilege of patent and copyright, to reduce internet and artistic freedom, to increase the prices of pharmaceuticals, etc. She is 100% correct to oppose the TPP on her anti-IP grounds, and she is right to condemn patent and copyright as monopolies that benefit special interests and harm the public and consumers. Inexplicably, Cato’s Bill Watson defends the TPP and fast track even though he seems to agree with Wallach that the IP chapter is “problematic” (he nowhere seems to condemn it as monopoly and bad, in as clear terms as she does, however).
Utterly bizarre, when we true free-trade, anti-IP libertarians, find more in common with “Public Citizen’s Global Trade Watch” than with an allegedly free-trade, libertarian organization.
People often tell me that I should not harp on IP so much, or make it a litmus test; that even if I am right about IP, reasonable libertarians can disagree. Well this is an example of why it’s important to get this very important issue right. It is in fact one of the most important libertarian issues, and getting this issue wrong leads people to error on other important issues. As an example, a few years back, several Cato scholars explicitly opposed free trade in drug reimportation in the name of upholding American companies’ pharmaceutical patent monopoly pricing model; unbelievable (see footnote 1 of http://c4sif.org/2011/09/objectivist-worried-obamacare-may-weaken-patent-rights/#footnote_1_2629; footnote 4 of http://c4sif.org/2011/08/pro-ip-libertarians-upset-about-ftc-poaching-patent-turf/#footnote_3_2434).
Cato’s forums on IP are invariably about IP reform. Only one time can I remember someone for IP abolition, which was Tom Bell, and that (IIRC) only on the issue of copyright (not patent). Their former scholar Tom Palmer was one of the early IP abolitionists but his work was never highlighted there and indeed he seemed to back pedal a bit in later years on pharmaceutical patents (as mentioned here: http://mises.org/daily/3682: see: http://tomgpalmer.com/2005/09/19/alive-thanks-to-pharmaceutical-profits/#comment-3642 and http://tomgpalmer.com/2005/06/10/healthy-profits-to-help-sick-people/#comment-2619 ) [See update below for current text/links to these comments]
One wonders if Cato has lots of pro-patent big business/big pharma donors, and the quasi/former Objectivists in their ranks which leads them to continually favor IP and downplay the IP abolition case. Sad when libertarian groups are bad on this issue (http://c4sif.org/2013/09/canadas-free-market-fraser-institute-urges-strengthen-intellectual-property-law/). It’s as bad as being bad on taxes, slavery, free trade, the drug war. Down with IP.
Update: TPP is about to pass, as predicted, and here is Cato’s Daniel Ikenson shilling for it, as predicted. Sad.
Update: Palmer has for some reason deleted his comments linked above, but they are still on the Internet Archive:
I meant what I wrote. If they wanted X, they would do Y. Fostering effective price discrimination would be the most effective means of delivering the drugs to those who need them in poor countries. Creating an internally consistent theory to amaze one’s circle of internet friends is probably not at the top of the list of priorities of the people to whom the advice would be directed.
Pharmaceuticals and chemicals offer undoubtedly the best cases for patent protection on utilitarian grounds. In my Hamline Law Review article (http://www.tomgpalmer.com/pape…..-v12n2.pdf ), p. 301, I quoted from a study by Edwin Mansfield from the American Economic Review in which he pointed out that “patent protection was judged to be essential for the development or introduction of one-third or more of the inventions during 1981-1983 in only 2 industries — pharmaceuticals and chemicals.” That seems not to have changed. The reason is pretty easy to understand: reverse-engineering in the case of chemicals (which broadly includes pharmaceuticals) is quite easy. In the case of pharmaceuticals, at least, R&D costs are very high and would still be high even without some of the very costly efficacy tests imposed by the Food and Drug Administration. Furthermore, the benefits of new pharmaceuticals are enormous. If one were to make a case for patent law, that’s the strongest industry for which to make it. And if one were seeking to help sick people, one would be well advised to seek practical methods, given the parameters of current debate, that would deliver cheap medicines without curtailing innovation. Price discrimination is best suited to that.
I’ll address the patents question, as it was addressed to me and I think that the conversation on the other topics is interesting without my two cents.
I’ve been critical of the patent system in the past. Mr. Brady has given me a quiz about whether I conform to his vision of right-thought or have drifted further into thought crime. as he defines it. I am not a fan of the patent system and think we could generally live well without it. (I’ve posted a few articles on my web site indicating why.) The one exception to that general hostility to patents, as I have suggested elsewhere, is the system of patents for chemicals, notably pharmaceuticals. Because chemical compounds are relatively easy to reverse-engineer and can be successfully marketed independently of their role in a larger product (unlike, say, innovations in jet engine design, which often are only valuable as part of a kind of engine), patents may indeed generate incentives for innovation that greatly improve human welfare. That’s an argument for them. Since the innovation has the characterstics of public goods (costly to exclude and non-rivalrous in consumption, the latter being the relevant feature here), a good profit maximization strategy ought to be price discrimination, by which those who can pay more do so and others pay less. The best strategy forward for sick people in low-income countries is not abolition of patents, but introduction of an effective system of price discrimination that would price the product at marginal cost there and at a high enough price to recoup R&D costs in high income countries.
As to what accounts for the supra-normal rates of return in pharmaceutical countries, I think that a more significant explanatory factor is the response of the demand for life extension and pain and suffering reduction to rising incomes. Supranormal rates of return may be the result of barriers to entry, but patents do not (generally) represent barriers to entry for new firms. So I think we’re seeing an incentive to allocate more resources to the production of more goods and services of which people desire more as their incomes are rising. I am confident, however, that there are people who are far more knowledgeable about such matters who have devoted considerable attention to just those questions.