Libertarian Favors $80 Billion Annual Tax-Funded “Medical Innovation Prize Fund” (2008)

On Marginal Revolution, Alex Tabarrok reviews Boldrin & Levine’s Against Intellectual Monopoly. According to Tabarrok, the book “is a relentless, pounding, take no prisoners attack on patent and copyright law.  It joins Lessig’s Free Culture and Heller’s The Gridlock Economy as an instant classic and a must-read on these issues. ”

I don’t know much about Tabarrok but as he has published in the libertarian journal Reason Papers, in The Free Market, and has writen some libertarian-ish sounding books published by the libertarian Independent Institute (and positively reviewed in the QJAE). So I assumed he was a libertarian. But here, though he seems to recognize some (practical) problems with patent and copyright, he doesn’t want to abolish the state IP system altogether.

You see, “there is a Laffer curve for innovation – more appropriability increases innovation at first but innovation declines when appropriability extends too far.” So though he agrees “with Boldrin and Levine that rent-seeking has put us on the wrong side of the Laffer curve for innovation,” we should not abolish IP either. We need to try to “optimize” it, I suppose. Alas, “there is no invisible hand theorem which moves us automatically to the top of the curve”. So, though it’s apparently politically impossible ever to “optimize” IP protection, to ensure that we are not “on the wrong side of the Laffer curve for innovation”, and economically impossible to know we had reached this point anyway–nonetheless, wealth-maximizers like Tabarrok soldier on, advocating keeping a state-run IP system. So what should we do? “We need to reduce intellectual monopoly with patent reform, less copyright protection, and a greater use of patent substitutes like prizes.” In the linked post, Tabarrok writes that he “might actually sign on to” The Medical Innovation Prize Fund Act of 2007, introduced by socialist Senator Bernie Sanders … a bill which would not even abolish patents, but which would augment the patent system with a taxpayer-funded “medical innovation prize fund”–starting at “$80 billion per year, and increas[ing] with the growth in GDP“… ! Damn, $80 billion down the drain–puts my own little estimate that the patent system imposes around $28 billion in costs to shame!

Advocating state-funded “prizes” is about as unlibertarian as proposal as you’ll see. And you don’t need to do “marginal analysis” to figure that one out.

***

Update: Tabarrok here advocates using taxpayer funds to pay patentees to give up the patent rights that the federal government grants them. Why not just … refrain from giving them the patent right in the first place? Because that would cause an “underproduction” of “innovation”, by reducing “appropriability.” Whatever. So he has to find a way to keep “appopriability high,” and thus cannot give up a patent monopoly, or a tax-funded “subsitute” for it.

Anyway, note that the annual $80 billion taxpayer-subsidized fund–well, probably at least $82 billion by now, if we account for GDP growth since 2007, as Sanders and Tabarrok want to — is for medical innovation only. This covers only a small slice of all patent innovation–in fact the “prize fund” also covers “non-patented products”–because, due to the patent system, “innovations without property rights are underfunded”. So consider what this means. If we subsidize medical innovation to the tune of $82B a year, there is no reason not to subsidize other patentable–and even non-patentable–inventive areas. Hell, why stop there? Inventions are not the only types of innovation that should be rewarded. What about the copyright fields, like novels, painting, website design? And other areas of innovation, like boat hull designs and databases? And semiconductor maskworks, and trade secrets? And what about more fundamental research in the basic sciences? Let’s see, I think the $82B for medical innovation is at most, say, 10% of all technical innovation. So we need another $820B for other technical fields. And surely the value of the artistic, boat hull design, semiconductor maskwork, and database works are at least on the same order of magnitude as the technicall innovations. So let’s say it’s another $ trillion, for $2 trillion. A year. To start. Now, what about basic science–physics, math, astronomy? Who can put a value on that? Well, I guess we have to–say, another cool $300B. And what about trademarks? My heavens, they are worth at least as much as patent and copyright, so let’s add another trillion. So now we are up to $3.3 trillion. This is in addition to our current $2.5 trillion federal budget. So now the federal budget is, say, $6 trillion, out of about $14 trillion GDP. I’m sure our good marginal economists will assure us that this expenditure will increase appropriability–which will increase innovation, which will have a measurable value–and that this extra value will far exceed the $10 trillion or so that would need to be generated to just break even (assuming 35% of the extra wealth is taxed to replenish the $3.5T annual prize fund). Wow, what a great way to reach a $24 trillion GDP–just increase taxes by $3.5 trillion!! Genius! This never occurred to me. No wonder I’m not an economist.

Update 2:
And get this: according to the text of socialist Sanders’s draft bill, the $80 billion+ taxpayer-funded “Fund for Medical Innovation Prizes” will be administed by a “Board of Trustees for the Fund for Medical
5 Innovation Prizes,” composed of 13 members serving 4-year terms. The 13 members of the Board are:

(1) the Administrator of the Centers for Medicare & Medicaid Services;
(2) the Commissioner of Food and Drugs;
(3) the Director of the National Institutes of Health;
(4) the Director of the Centers for Disease Control and Prevention; and
(5) nine individuals to be appointed by the President, with the advice and consent of the Senate, of which:
(A) three representatives of the business sector;
(B) three representatives of the private medical research and development sector, including at least one representative of the non-profit private medical research and development sector; and
(C) three representatives of consumer and patient interests, including at least one representative of patients suffering from orphan diseases.

Each Board member will be paid at the equivalent of an annual salary of about $140k for daily service. They’ll of course have expenses paid, and a staff, and budget to hire experts and consultants.

And every year, the Fund gets public funding equal to “0.6 percent of the gross 6 domestic product of the United States for the preceding fiscal year.”

Jesus, this is pure evil.

***

Archived comments:

Comments (34)

• Person
• As usual, make sure to check out my reasonable remarks in the Tabarrok thread.Also, keep in mind that there is the same optimization problem with respect to physical property rights (since, you know, every single aspect of IP has an analog in physical property, for obvious reasons I won’t repeat). The optimization problem lies in: how much labor must one mix to own the land? Or, when non-scarce resources become scarce, who has homesteaded rights in how much of the resource (like when the number of fishers starts to exceed the capacity of the lake)? Or what compensation costs for property rights violations are, etc etc etc.

  @Stephan Kinsella: Alex Tabarrok does not want a state-run IP system. He, like you, is an ancap. He’s only advocating those systems *so long as the state exists.*

  And yeah yeah, I know, “But who would enforce IP without the state?!?!”

  Probably whoever enforces regular property is my guess.

  (Btw, I love your little focus on who has published where, all while you ignore the more critical issue of, you know, who’s actually correct.)

• Published: August 12, 2008 5:56 PM

• Inquisitor
• The troll, as usual, here to repeat his empty, dumb criticisms. Ideas are not scarce. So any “optima” involved are irrelevant. Get over it, you utilitarian pansy.

• Published: August 12, 2008 6:30 PM

• doug
• So as a newbie to libertarian thought – the decomposition seems simple. Offering a prize is wrong because it relies on state acquired (theft) property. Is the prize itself immoral? (pardon my limited vocabulary – there is probably a better word) On the surface it seems the answer is “no” – simply how the state acquires the funds.Feel free to flame my answer – I’m trying to learn here. 🙂

• Published: August 12, 2008 8:16 PM

• vlad popovic
• Sanders’ idea is a bad one. If he really wanted more invention in the US, he would propose eliminating corporate taxes, or at least reducing them to less than other industrialized countries. (Currently we are only surpassed in this area by a few third world hellholes)The government has crowded out most R&D; already; they do not need to encourage big business to sit on it’s hands and wait for inventions to come to them (any more than they already do).

  Inquisitor, I agree that ideas are not scarce, but ideas are not inventions.

  Inventions require GOOD ideas (somewhat scarce)
  hard work (scarcer), and significant capital investment (really scarce!) to produce a useful invention and by extension a useful patent.

  If I put my mind, my muscles and my savings into a project, why should that not be protected as property? If an invention is not property, then what on earth could be? What could be more mine than something I already put everything else of mine into?

  We can argue over how inventions should be protected, but saying that it is not even property is a non-starter.

• Published: August 12, 2008 8:18 PM

• David Bratton
• Doug: The problem with the prize idea is that it really is just state directed economic activity in disguise. Think about it. The state decides what is of value and then pays for it. There is no more economic calculation involved in handing out prizes than there is in direct state control.Vlad: Ideas are what get patented. For patent purposes “Invention” is just another word for idea.

   

• Published: August 12, 2008 11:29 PM

• nick gray
• Doug, welcome!
  Ignore the others- my advice is the best!
  Government prizes need not be immoral. I am a minarchist, who would leave roads in the control of the local government. As the owner, Locgov could set any conditions on the use of its’ land, Perhaps people could choose to pay to be citizens- They would get the right to vote in local affairs, and the local powers get the cash. They could then offer the cash for their own purposes as prizes, to encourage research. The British used such a system to encourage development of navigation, which needed accurate clocks. It worked.
  So prize money need not be theft.

• Published: August 13, 2008 1:26 AM

• ktibuk
• “Libertarian favors socialization of property.”Yeah, that sounds even weirder.

• Published: August 13, 2008 2:55 AM

• Haas
• Yea this is getting ridiculous 82 billion and its all borrowed too! if you can’t afford it let the chinese come up with innovation and then you can just steal the idea since it is a free for all world kinsella advocates anyway 🙂

• Published: August 13, 2008 3:00 AM

• Ron
• I have to disagree with Nick on this: “Government prizes need not be immoral.”Government prizes are necessarily immoral, as they constitute the theft of assets from some and transfer to others. Plain and simple. They are thus no different from welfare payments or corporate bailouts.

  Prizes for innovation, in and of themselves, however, need not be immoral. A good example of this is the original Ansari X-Prize, which was a privately funded prize for innovation in commercial space flight. Since the prize money was put up voluntarily, there’s nothing immoral about it, IMHO.

  The effect of prizes for innovation is to redirect innovative efforts away from their natural (profitable) market areas and into areas where there is otherwise too little aggregate demand for a product or service to warrant its development. In the case of the X Prize, the perception was that the market for commercial space flight was sufficiently limited that massive investment was unjustified, so private investors essentially created a market by offering the prize. They basically hired a bunch of teams to create a product. Whether or not it will be profitable remains to be seen, but taxpayers were not coerced into funding it, so only those who invested in the project stand to lose money.

  When government is involved it, too steers innovation toward its own ends, just as a private firm would do. But government isn’t concerned about being profitable, so it is free to use taxpayer funds for whatever it likes. For a good example of taxpayer-funded, government-directed innovation debacles, read up on the Concorde.

• Published: August 13, 2008 9:53 AM

• Michael A. Clem
• if you can’t afford it let the chinese come up with innovation and then you can just steal the idea since it is a free for all world kinsella advocates anyway 🙂Assuming the Chinese DO come up with the innovation, “stealing” the idea is only the first step. Putting the idea into action is what takes all the time, effort and resources.

• Published: August 13, 2008 9:55 AM

• Book ’em Danno
• Mr. Nick Gray:Beware of local government. There is (almost) always one reason and one reason only why business leaders get together with each other and government in these so called “development corporations” and “chambers of commerce”: to collude and maintain the status quo to the chagrin of customers, consumers and tax payers. They know the value of the government sledgehammer. Just ask Mrs. Kelo of New London, CT.

• Published: August 13, 2008 10:16 AM

• Alexandre
• “Assuming the Chinese DO come up with the innovation, “stealing” the idea is only the first step. Putting the idea into action is what takes all the time, effort and resources. “This is exactly why patents are completely uneccessary. Many people say; whitout patent, some corporation will simply copy all winning product and make profit whitout innovation.

  Well, if a product is a winner, then thats because it already made profit for the inventor.

  Look at it this way; in a non-monopolistic fully competitive environment, the normal business profit is about 5%. And it is in fact 5% in almost all fields where there are no patents, restauration, hostels, retails, entertainment, etc, etc etc – all 5% profit. Now look at those fields where patents are abondant – 15-20% in software industry. In the biotech/pharma its 20-25% profit, the most profitable sector in our whole economy and no new competitors are emerging to introduce competition because of patents.

• Published: August 13, 2008 10:31 AM

• Alexandre
• “Assuming the Chinese DO come up with the innovation, “stealing” the idea is only the first step. Putting the idea into action is what takes all the time, effort and resources. “This is exactly why patents are completely uneccessary. Many people say; whitout patent, some corporation will simply copy all winning product and make profit whitout innovation.

  Well, if a product is a winner, then thats because it already made profit for the inventor.

  Look at it this way; in a non-monopolistic fully competitive environment, the normal business profit is about 5%. And it is in fact 5% in almost all fields where there are no patents, restauration, hostels, retails, entertainment, etc, etc etc – all 5% profit. Now look at those fields where patents are abondant – 15-20% in software industry. In the biotech/pharma its 20-25% profit, the most profitable sector in our whole economy and no new competitors are emerging to introduce competition because of patents.

• Published: August 13, 2008 10:32 AM

• Person
• Alexandre: Well, if a product is a winner, then thats because it already made profit for the inventor.Wrong. “A product is a winner” simply means that sold a lot, and will probably sell a lot more. It says nothing about whether the revenues have exceeded initial costs — you know, the expenses to actually *create* that intellectual work, to find that useful idea’s location in the massive search space that is reality.

  And because revenues needn’t exceed costs before others bid away the first mover advantage. So those very valuable ideas … just don’t get made.

  Look at it this way; in a non-monopolistic fully competitive environment, the normal business profit is about 5%. And it is in fact 5% in almost all fields …

  Not a fair comparison: those other fields are lower risk and have steadier revenues. Pharma and software involve making big bets that can blow up.

• Published: August 13, 2008 11:05 AM

• Ron
• Okay, what about this:Joe has a dream one night, about a new invention that will change the world…or at least make gobs of money. That day, he tells his buddy, Dave, about his dream. The next day, Joe has forgotten all about the dream cuz he drank a six-pack of beer before bed that night, but Dave takes the idea, spends some money, develops the invention, and makes gobs of money.

  What happened here? Was Joe the “owner” of the thing Dave made, by virtue of it having been his idea? Even if Joe never did anything with his idea, could he ethically prevent Dave from spending his own money and time building the invention and bringing it to market? Dave might not be a very good buddy, but is he a thief?

• Published: August 13, 2008 4:08 PM

• James
• A little history may be needed here. Patents were “invented” by the state to allow the inventor to profit from his invention, while at the same time place the details of the invention in public view so others can expand upon the invention. Prior to patents inventors would frequently keep the invention secret so as to profit as then only they would know the secret. The innovation would then die with them or take years to become known through their students use of the invention.Patents in general are not the problem. The problem is allowing patents on “ideas” that are so broad that they allow a company to coerce payment from another inventor who creates something even remotely similar. Business process, software and some drug patents are examples of this.

  Allowing a physical object to be patented does not prevent someone from improving the design and creating a new innovation, that is the purpose of patents.

• Published: August 13, 2008 4:11 PM

• Stephan Kinsella
• James: “Allowing a physical object to be patented does not prevent someone from improving the design and creating a new innovation, that is the purpose of patents.”Sure it does. If there is a patent on X and I improve it, in most cases, I cannot practice the improvement for 17 years or so–until the patent for X expires. Even if my improvement is itself patentable and I get a patent on X’. Why do people post so cock-sure on things they obviously know nothing about? This is a recurring habit of IP defenders: they will vociferously defend a system that they evidently do not even understand. Why they are so passionate about something they do not really comprehend is a mystery. Why not just remain agnostic about it, like my grandmother? She knows nothing about IP but does not feel compelled to form or voice an opinion, either?

• Published: August 13, 2008 4:54 PM

• james
• Actually patents can expand upon a prior invention and be patentable and “practiced” long before the prior art patent is expired. The requirement is that the improvement must be substantial. I actually do understand the system though not to the degree of a patent lawyer.However, you missed the point I was attempting to communicate. It was not a specific defense of the current patent system operating in the U. S., but to point out that the purpose of the system in general is for the benefit of the public and therefore the market.

  As I said, prior to patents an inventor would often keep the idea private so he could use it for profit. This would cause others to not be able to improve the invention in the future as they did not know how it worked. While this is not a problem for a consumer good as that could be disassembled. It is a problem for a manufacturer as the machine used to make an item is a secret so a competitor would find it more difficult to enter the market. And if the inventor never reveals the secret the invention dies with him. Patents allow the inventor to publish his secret while still keeping the ability to profit for a period of time. It also allows others to look at the published invention and determine how to improve it. Even if the improvement cannot be used for a period of time it is at least available, unlike if the invention was kept secret by the now dead inventor.

  The current patent system used in the U. S. has problems but the purpose of patents, which is to give the inventor an incentive to publish by allowing him to still profit is valid.

  Without patents, if I publish my design for an invention, it would allow you with your greater capital to take that invention and produce it at a lower cost and faster to market, than I with my more limited capital can produce it. So without patents it is in my best interest to not publish my invention until I have secured enough capital to produce it. And if I am never successful the invention dies with me. Now if that invention were as important as the Gutenberg press it would be a significant loss.

• Published: August 13, 2008 6:02 PM

• Stephan Kinsella
• James,”Actually patents can expand upon a prior invention and be patentable and “practiced” long before the prior art patent is expired. The requirement is that the improvement must be substantial. I actually do understand the system though not to the degree of a patent lawyer.”

  This is completely incorrect.

  There are two things at issue here. 1. Can the improvement be patented? 2. does the improved device or process infringe the “base” patent?

  These are independent questions, and neither turns on any “substantial improvement” test at all.

  The first question turns on whether the improvement is nonobvious or not. It has nothing whatever to do with whether the improvement is “substantial.” In fact a “minor” improvement can of course be patented, so long as it’s non-obvious.

  Whether or not the improvement is patentable or patented does not determine the second question, since receiving a patent does not give the inventor a right to practice it, but only a right to stop others from practicing it. So let’s say you have a VERY “substantial” “improvement” to patented invention X, and you patent your improvement X’. So long as device or process X’ contains all of the claimed elements of X, it infringes the X patent to make, use, or sell X’. It does not matter if X’ represents a substantial improvement over X. It does not matter that X’ has its own patent. This is all irrelevant. You really do not know what you are talking about. This is fine, as you are obviously a layman, but why you think you ought to weigh in on this technical area is a mystery.

• Published: August 13, 2008 6:31 PM

• Oil Shock
• Not a fair comparison: those other fields are lower risk and have steadier revenues. Pharma and software involve making big bets that can blow up.Baloney. I work in software and software is one of the least capital intensive industry. Try Oil exploration for a capital intensive industry. That said, I am not fully convinced about Stephan’s arguments against IP. I just ordered a book from mises.org to get some more facts.

• Published: August 13, 2008 6:57 PM

• Walt D.
• Whatever next?An $80 billion dollar prize for frisbee design?

  The key point is that the state is:

  a) Not capable of determining what it should fund.

  b) Determining how much it should fund.

  Sure we can have Manhattan Projects, NASA put a man on the moon projects, send a man to Mars project. But how do we decide between a man on Mars or a Particle Accelerator, or funding the Arts? I remember the Concorde project when I was younger. It cost the UK government 5 billion pounds. That was 100 pounds each, when the average wage was 1000 pounds a year. Eventually, British Airways paid 1 pound each per plane!

• Published: August 13, 2008 7:30 PM

• Peter
• If I put my mind, my muscles and my savings into a project, why should that not be protected as property?You’re right. If I put my mind, muscles and savings into committing a bank robbery, the loot should be recognized as my legitimate property! What’s with this arrest and imprisonment nonsense?

• Published: August 13, 2008 8:39 PM

• ktibuk
• James has a very good point.That idiotic patent system was designed by socialists just like Kinsella. These people, just like Kinsella, wanted to socialize property. (No wonder then, Kinsella is a patent attorney.)

  They wanted the society to own the invention after all. Only they let the inventor earn a little before they socialized his property. Since no middle of the road policy of these socialists work, patent system doesn’t work either.

  Patent system puts a time limit and forces the owner to give up his property. But since it wants to let the inventor earn some before they socialize the property, they put in a system that ignores the possibility of independent discovery and establish a first come first own system.

  Also this stupid system put in place by socialists, lets other socialists to make the system a scape goat of all IP thus advocating parasitism. Which is internally consistent at least for socialists, since socialism is parasitism.

• Published: August 14, 2008 3:51 AM

• ktibuk
• “If I put my mind, my muscles and my savings into a project, why should that not be protected as property?You’re right. If I put my mind, muscles and savings into committing a bank robbery, the loot should be recognized as my legitimate property! What’s with this arrest and imprisonment nonsense?”

  Good analogy. After all property is theft, according to you isn’t it?

• Published: August 14, 2008 3:55 AM

• Person
• Walt D: Hey, that’s a good point. Government just can’t decide what things to fund! Pesky calculation problem and all. So here’s an idea:Fund new inventions, but *not* with a predetermined prize, but rather, a tax on any first purchase of an implementation of the invention, and then send the money back to the inventor!

  Oh, but wait, the government would have no idea how to set the right tax rate to proportionally deliver the generated consumer surplus to the inventor. So maybe the inventor could set the tax, and the revenues (net of administration) would go to him: then, inventors would pick the revenue maximizing rate, and entrepreneurs would be getting the right signals for how to employ their scarce resources to the creation of inventions (and of what kind) as opposed to other pursuits.

  Brilliant!

  Oh wait, that is the patent system.

• Published: August 14, 2008 9:28 AM

• james
• Stephan Kinsella again you have missed my point entirely. The U. S. System of patents does not matter to the point I’m trying to make. So I’ll simplify it.The purpose of patents is to encourage an inventor to not keep the invention a secret. Without patent protection, publishing an invention allows anyone to build it without the need to pay the inventor for his work. So without patent protection it is in an inventors best interest to keep it a secret so he can be the one to profit from it.

• Published: August 14, 2008 11:37 AM

• Marcello
• James, if that was true they wouldn’t even apply for a patent because then competitors wouldn’t have any plan to start from.

• Published: August 15, 2008 7:12 AM

• JOHN
• dear friend,Wonderful person
  Accept my sincere thanks and appreciation
  John

   

  http://www.dirking.net

• Published: August 17, 2008 4:28 AM

• JOHN
• dear friend,Wonderful person
  Accept my sincere thanks and appreciation
  John

   

  http://www.dirking.net

• Published: August 17, 2008 4:28 AM

• Travis
• This is the sort of silly attack that has made me largely leave Mises.org for more intellectual libertarian outlets.How can Kinsella not know who Tabarrok is?

  And anyone who is willing to post on someone else should at least know the context in what the person is writing. Tabarrok is actually an anarcho-capitalist. What is proposing here- if you will read his previous posts on the subject- is nothing more than a pareto improvement of the current situation. I’ll take it over the status quo any day.

• Published: August 17, 2008 7:17 PM

• Stephan Kinsella
• Travis,”This is the sort of silly attack that has made me largely leave Mises.org for more intellectual libertarian outlets.”

  I was very respectful to Tabarrok. However, I fail to see what is wrong with exposing outrageously unlibertarian schemes, even those advanced by fellow libertarians.

  “How can Kinsella not know who Tabarrok is?”

  I have heard of him here and there, but just don’t know a lot about him. Sorry.

  “And anyone who is willing to post on someone else should at least know the context in what the person is writing. Tabarrok is actually an anarcho-capitalist.”

  An anarcho-capitalist proposing $80B in taxes, or more, if the logic of this proposal were to be carried thru. His comments have to stand on their own. That he is an A-C does not change anything.

  “What is proposing here- if you will read his previous posts on the subject- is nothing more than a pareto improvement of the current situation. I’ll take it over the status quo any day.”

  It’s not a pareto improvement at all. The proposal, first, would not eliminate the patent office. Tabarrok in his comments makes it clear that the $80B prize fund would be in addition to the patent system: “pharmaceutical manufacturers should have the option of the patent or the prize.” So now we have the patent office and at least most of its costs, plus more tax and spend and further detrimental results from this–and who in his right mind thinks they would stop at $80B for pharmaceutical patents? Is that the only innovation worth rewarding? We can reach a trillion or four very easily. And this is anarchist? libertarian? pareto-improvement? Ha!

  Further, he is in favor of using the $80B to subsidize types of innovation not currently covered by the patent system, thus expanding government subsidy/intervention even further: “I like that the funding amounts are serious and would be available to non-patented products (innovations without property rights are underfunded).”

  Tabarrok may be a nice guy and a since libertarian on matters outside IP. But this is madness.

• Published: August 17, 2008 8:26 PM

• Travis
• Stephen-I actually respect your work on the issue of IP greatly. Your writing was not a minor factor in my own conversion on IP.

  But I think you came off as a little harsh to a fellow traveler who is intellectually searching. Tabarrok’s isn’t an all-or-nothing hard liner and does a good amount of pareto improvement searching in his posting. My impression on the prize system wasn’t that he is 100% behind it- but threw it out there as an intellectual probe saying that he “might” sign on to it. He then goes on to explain why he considers this to be an improvement. In fact he says the most important part of it is to avoid a worse government intervention:

  “Most importantly, a prize fund would make clear the tradeoff between pharmaceutical revenues and R&D; and it would reduce the pressure for price controls which I think are a serious threat to future medical innovation”

  If you disagree with this reasoning, I can live with that. But to attack his motives as unlibertarian is the wrong avenue on this one. Tabarrok is clearly worried about worse interventions.

• Published: August 18, 2008 12:05 AM

• Travis
• Stephen-I actually respect your work on the issue of IP greatly. Your writing was not a minor factor in my own conversion on IP.

  But I think you came off as a little harsh to a fellow traveler who is intellectually searching. Tabarrok’s isn’t an all-or-nothing hard liner and does a good amount of pareto improvement searching in his posting. My impression on the prize system wasn’t that he is 100% behind it- but threw it out there as an intellectual probe saying that he “might” sign on to it. He then goes on to explain why he considers this to be an improvement. In fact he says the most important part of it is to avoid a worse government intervention:

  “Most importantly, a prize fund would make clear the tradeoff between pharmaceutical revenues and R&D; and it would reduce the pressure for price controls which I think are a serious threat to future medical innovation”

  If you disagree with this reasoning, I can live with that. But to attack his motives as unlibertarian is the wrong avenue on this one. Tabarrok is clearly worried about worse interventions.

• Published: August 18, 2008 12:06 AM

• Stephan Kinsella
• Travis, thanks.I never attacked Tabarrok’s motives. I just believe what he is proposing is manifestly unlibertarian. He might be concerned about the detrimental effect of price controls on medical innovation. I would be concerned about $82 billion + additional taxes.

  As to whether he’s really behind this bill: in the earlier post, he calls it “a bill that I might actually sign on to”. Doesn’t sound too uncertain to me. Further, he says he likes “that the funding amounts are serious” — i.e., big, and that the funding “would be available to non-patented products”–that is, it’s granting a tax-subsidized award to things that are not even patented now. He says, “I would be reassured if the system were clearly voluntary – that is, pharmaceutical manufacturers should have the option of the patent or the prize.” In other words, we would still have the patent system; this is not even a substitute for a patent system. It’s both: patent system plus prize system, all funded by or imposing costs on the taxpayer and the economy.

  Note also, in his more recent post, he says, “We need to reduce intellectual monopoly with patent reform, less copyright protection, and a greater use of patent substitutes like prizes”–with the latter word “prizes” linking to his previous endorsement of the Sanders plan. So, we “need” “greater use of” “Sanders-plan-like prizes”. Again, I don’t see him as waffling here. He seems to really favor it.

  I don’t doubt he’s sincere. I don’t doubt he’s in favor of this because of some other concern. I don’t doubt he thinks it might actually benefit the economy somehow. I just think he’s wrong. I think this is theft, unjust, and ludicrous, and would do nothing but hamper the economy even further and become yet another corrupt state disaster.

  I also disagree that “price controls” is a serious independent threat–we have subsidized companies, heavily regulated by the FDA and subject to fickle state tort laws, and navigating the patent maze–all this spawned by the state. Sucking $82B+ more from our pockets is hardly going to be an improvement, even if it did “reduce the pressure for price controls” (which I don’t see as a huge, independent problem anyway, nor as one that would be ameliorated by a prize system anyway).

• Published: August 18, 2008 12:48 AM