Dean Baker: Patents Cost Almost $1 Trillion A Year

Dean Baker is sometimes skeptical of IP excesses,¹ though he’s no abolitionist.²

But as I said, sometimes he has a decent point when criticizing IP. For example, see his “Working Paper: Is Intellectual Property the Root of All Evil? Patents, Copyrights, and Inequality” (2018), which persuasively argues that abolishing patents would save about $827 billion annually, with some products becoming more than 90% cheaper.

See also “Costs of the Patent System Revisited.

Of course, Baker himself proposes an “alternative” to the patent system that would cost even more than the trillion his patent abolition would save:

I do not support a prize system …. A prize system would preserve what I see as some of the worst problems of the patent system, most importantly encouraging secrecy in research. … My ideal system would be a system in which the government allocates a pot of money (@$30 billion a year–approximately equal to private R&D in the pharmaceutical sector) that would be awarded in long-term contracts to a relatively small number of master contractors. For example, there can be 10 master contractors getting grants of roughly $30 billion each spread over 10 years.³

But as I have explained, if this approach were scaled to other areas covered by patents and to other types of IP, it would result in perhaps $3.5 trillion or more per year of additional taxes and spending.⁴ So he’s right that eliminating patents would make us vastly richer, but we should not replace the current patent tax with another type of (perhaps greater) tax. This is the problem with not having a principled opposition to patents and only wanting to tinker and “reform.”

• Libertarian Favors $80 Billion Annual Tax-Funded “Medical Innovation Prize Fund”, Mises Blog (Aug. 12, 2008)

H/t Vincent de Van.⁵

1. Dean Baker, Getting Ready for the Next Pandemic: Can We Get Patent Monopolies on the Table? (“We are still seeing no real debate as to whether we want to rely on these monopolies as a primary mechanism for financing medical innovation in the future.”); The Economist: Copyright Is An Antiquated Relic That Has No Place In The Digital Ages. [↩]
2. On Dean Baker’s inconsistent and confused views on IP policy, see: “$30 Billion Taxfunded Innovation Contracts: The ‘Progressive-Libertarian’ Solution”; Libertarian Favors $80 Billion Annual Tax-Funded “Medical Innovation Prize Fund”. As I noted in The Economist: Copyright Is An Antiquated Relic That Has No Place In The Digital Ages, Baker is not opposed to state-granted intellectual property, though he does toy with the idea of using taxpayer funded multibillion-dollar “artistic freedom vouchers” to promote artistic creation as some kind of improvement on copyright, and $30 billion/year in taxpayer funded subsidies for medical innovation. He’s also bad on §230 reform. Re The “Artistic Freedom Voucher” [sic]:

   As noted by Roderick Long here, “Timothy Lee writes:  ‘I can’t agree with Baker that all copyright and patent monopolies are illegitimate.’ I’m actually not sure that’s Baker’s view (in his original response Baker remarks in passing, ‘there may be areas in which patents are an effective policy for promoting innovation’).” In that exchange, Long rightly criticizes Baker’s proposal for “a system in which the government allocates a pot of money (@$30 billion a year – approximately equal to private R&D in the pharmaceutical sector) that would be awarded in long-term contracts to a relatively small number of master contractors”. I criticize this and related proposals in $30 Billion Taxfunded Innovation Contracts: The “Progressive-Libertarian” Solution. [↩]

3. See “$30 Billion Taxfunded Innovation Contracts: The ‘Progressive-Libertarian’ Solution.” [↩]
4. “Libertarian Favors $80 Billion Annual Tax-Funded “Medical Innovation Prize Fund.” [↩]
5. See Vincent de Van, Why Intellectual Property Isn’t Necessary to Reward Innovation; Vincent de Van, “The Seen and the Unseen of Intellectual Property Laws”. [↩]