I feel that we are really getting somewhere in this discussion. I have two basic questions here. The first is this: if Megan thinks the Dutch system is fine apart from the price controls on drugs, why don't we adopt the Dutch system but not the price controls on drugs? If Megan's problem with the House insurance reform bill is not the actual House insurance reform bill, but the prospect that it will ultimately lead to price controls on drugs, why doesn't she back the House insurance reform bill and insist that it not adopt price controls on drugs?
The second question I have is this: if the House health insurance reform bill is so bad for drug innovation and research by pharmaceuticals companies, why are the pharmaceuticals companies buying $12 million in ads promoting the House health insurance reform bill?
I think these two questions get at the heart of our misunderstanding--and some of the fundamental differences between liberals and libertarians.
The answer to the first question is simple: we can't. The political logic of pharmaceutical price controls is nearly overwhelming. You have a product that has a very low marginal cost and a very high fixed cost, which means that you can force them to provide it cheaply and eat the fixed costs if you have enough market power. You've got program that is rapidly turning into the sucking chest wound of the US budget. And you've got a big line item supplied by companies that are unpopular--unlike the other major players in the system, like doctors, nurses, assorted health care workers, and the local hospital. This is why most of Europe has turned to some form of price controls.
To put it another way, let me quote from Milton Friedman's Free to Choose, in which he details an exchange he had with a scientist about the various dysfunctions of the FDA:
What would you think of someone who said, "I would like to have a cat provided it barked?" Yet your statement that you favor an FDA provided it behaves as you believe desirable is precisely equivalent. The biological laws that specify the characteristics of cats are no more rigid than the political laws that specify the behavior of governmental agencies once they are established. The way the FDA now behaves, and the adverse consequences, are not an accident, not a result of some easily corrected human mistake, but a consequence of its constitution in precisely the same way that a meow is related to the constitution of a cat. As a natural scientist, you recognize that you cannot assign characteristics at will to chemical and biological entities, cannot demand that cats bark or water burn. Why do you suppose the situation is different in the social sciences?
This is slightly exaggerated. But in this case, I think it holds: price controls are a feature of national health insurance schemes, just as log-rolling is a feature of democracy. We might hold out for a while. But eventually, we'd have a combination of populists in office and a budget problem, and the pharma profits would go.
As for the second question, this is where I realize that liberals often really just do not grok what libertarians are about. For them, this is a battle between people who like health care companies, and want to defend them, and people who like the government. But I don't care about the pharmaceutical companies qua pharmaceutical companies. The pharmaceutical companies are interested in what is good for pharmaceutical companies. I am interest in what is good for society.
I am not under the delusion that those are necessarily the same thing. "What's good for General Motors is good for America" was a Great Society slogan, not a libertarian, or even a conservative one. Right now, pharmaceutical companies spend a great deal of effort on innovation because they have to in order to survive. But if survival means ditching the R&D labs and churning out low-cost copies of things they've already invented, then I'm pretty sure that's what they'll do. To paraphrase Adam Smith, it is not to the benevolence of pharma that I look, but to its self interest. In the current system, that self interest means inventing new drugs.
In other words, I'm not in favor of business. I'm in favor of competition.
Government intervention in markets tends to dampen competition, which is something that executives like; I'm sure that's one reason that they're getting with the program. Too, administration has made it clear that they intend to do this deal with pharma or without them; they're trying to negotiate a surrender on the most favorable possible terms. But while I'm sure this is good for Obama, and I think it may even be good for pharma, I don't think this will be good for us. Companies cut deals with government all the time, and they rarely, in my opinion, redound to the benefit of the American people.
The benefits of competition are, incidentally, why I don't think that the defense model of innovation works very well in the pharmaceutical or medical technology industries. To start with, military procurement is a massive jobs program. Congressmen rarely take much action on behalf of their unemployed chemists.
But more importantly, military spending is competitive--even now, we're mostly doing this because we want to maintain our military primacy. Pharmaceutical technology is just not competitive that way. Nations don't really compete on their health care systems, and anyway, if we develop a drug, it will be patented abroad, and everyone will get it. Also, we're not all that worried that the French health care system will come over here and kill us.
I'm not sure the cognitive gap between liberals and libertarians can be bridged. At the very least, as long as they think of us as defending corporate interests, rather than defending a system that most often aligns corporate interests with ours, everything we say will continue to seem vaguely puzzling.
I think I am in love with you. Your exposition of libertarian views is beautiful.
-Ian
Her explination of libertarian views is just one more reason that I am glad that those who hold libertarian views are a minority.
"... if the House health insurance reform bill is so bad for drug innovation and research by pharmaceuticals companies, why are the pharmaceuticals companies buying $12 million in ads promoting the House health insurance reform bill?"
The answer is that there has been secret negotiations between the White House and Pharma that we haven't been made aware of.
Since that's the case, it is impossible to determine what the motivations of Pharma are with respect to the $12 million in ads. In one sense, $12 million in ads is a pittance. That may be Pharma's way of appearing to support the bill, but in reality doing not much to promote it.
$12 million in ads is one drop in the ocean of advertising availabilities and when you consider that Pharma didn't even fund the total $12 million, this is really good evidence that they don't really support what the President is attempting to do, but playing along for now so they will have input.
Bottom line is that the White House is operating in the shadows - making deals with people in an nontransparent way, so we cannot logically assign motives to Pharma's actions.
An appeal to motive thus fails.
I agree, and comment appropriately, below.
I don't know if the negotiations are/were secret. The fact that Obama met with the CEO's of all of the major Pharma companies is public knowledge. It happened about 6 or 7 weeks ago.
What was said in the meetings, however, was most assuredly confidential.
Given how Obama has acted to date, to think that he strong-armed the CEO's isn't a stretch. See my post, below.
They not only had a discussion, a written deal was done. Several members of the mainstream media have copies of the written deal, but they are hiding it because it's probably illegal.
How do we know that?
I'm not arguing with you, just hadn't seen that story. Where'd you read it?
How did something that the chairman of General Motors didn't actually say in 1953 ("What's good for General Motors is good for America") become a "Great Society slogan"?
Strange how those who declaim themselves to be in favor of comeptition and opposed to government intervention then are so strongly in favor of government intervention in terms of property rights for pharma companies (i.e., patents) but horrors of horros, opposed to it for labor (e.g., employment protection).
You can argue -- aybe reasonably -- that one of these promotes efficiency, the other detracts from it. But that's not quite the same as the strong fundamental principles that libertarians are so vain about saluting themselves for. It's not for nothing that the economic policy mix closest to what libertarians like tends to nbe associated in practice with authoritarian regimes (Pinochet, even Somoza when you actually look at his government's economic policies). Their attempts to disassociate themselves from rightwing dictatorships are about as convincing in practice as the principled dissents of theoretical Marxists from the tyrannical practices of communist regimes.
Point one: there's a big difference between government intervention and government establishing some rules ab initio. Patents fall into the "rules" category and not the intervention category.
Point two: competition drives patenting, and the research that goes into new invention. Without patents, companies can't afford to expend all that R&D money, because the results are just too iffy. Patents are basic to technological advancements because they permit a limited government monopoly (the legal right, for a pre-determined number of years, to prevent others from making, using, or selling the patented invention in the country where the patent was obtained) in exchange for full disclosure of the patented technology.
Pharmas get screwed under the patent system all the time because of the time it takes to get FDA approval for new drugs--there's usually only between 5 and 10 years to enjoy patent exclusivity instead of the average of 17 years for other inventions. If the recoupment of the drug R&D costs could be had over a longer time period, the average price per pill would drop. And as it is now, the recoupment costs are being paid for primarily by Americans, which also keeps our consumer pill costs up.
Noah is correct- libertarians largely reject intellectual property laws as direct violations of real property rights. The case for patents seems to rest entirely on utilitarian grounds- an argument that Megan McArdle has made on many occasions. While I think that argument is entirely logical, I oppose it on principle, while I oppose most progressive proposals on both.
Depends on the libertarian. I've seen many who oppose intellectual property rights entirely, and many who think that they should be absolute and not term-limited. Personally, I grounds by libertarian politics in utilitarian philosophy, so I think they're both crazy, but in any case "most" is too strong a term.
Alsadius,
Yes, there are some libertarians in fairly good standing that do argue for intellectual property rights, but the fact is that they are further from being pure libertarians than not since intellectual property enforcement necessarily impinges on physical property rights. Such libertarians, when they argue for intellectual property as being equivalent to physical property, are, at least, attempting to remain in the libertarian camp. Those that make the utilitarian argument are not really libertarian in my opinion.
Like I said - my politics are generally libertarian, my philosophy is generally not. I'm describing pro-IP libertarians from a distance. That said, just because IP and physical property come into conflict does not mean that they can't be reconciled - all property implies limits to the rights of others, yet libertarians reconcile that all the time - e.g., "My right to keep you off my land is more important than your right to walk on it". Similarly, "My right to have my intellectual property respected is more important than your right to build something I designed for yourself without my permission". It can be reconciled if one chooses to try. Some do, others don't.
There have been many studies and a book recently (Against Intellectual Monopoly) that fairly convincingly debunk the claim that patents are required for, or even accelerate innovation. Patents stifle entry to the market for improved inventions.
The story of James Watt, and the steam engine he didn't invent, but had his buddies over at the patent office give him the rights to is a great example. Watt's patent delayed the industrial revolution 15 years, yet he is credited with being the father of it today. He spent his time suing competitors rather than improving his own patent.
The most rapid growth in computers happened before anyone even know if a patent for a computer programs was legal. Companies competed incrementally to constantly improve slightly better programs. Bill Gates himself has said the computer software would be a decade behind where it is today if patents had been allowed from the start.
If we look at big Pharma, more than 30% of revenues are spent on advertising. Less than 20% on Research and Development. Obvious signs of rent seeking, rather than innovation seeking behavior.
The pragmatic libertarian really has little grounds to stand on with regard to government granted monopolies over imaginary goods.
A great many libertarians (Megan not included) are opposed to patents.
This is because Megan isn't a libertarian. She is a liberBurkean.
Labor can have a government enforced property right in "employment protection". Jsut negotiate what you want as part of your contract. If anyone is willing to take you up on the terms, and you sign the contract, you have the property right, and the governmental apparatus to enforce it.
Libertarians oppose requiring that your preferred labor contract terms be the only allowed labor contract terms.
And usually, BTW, because they hurt the laborers, by reducing their range of options.
How many people here have ever seen the impact that FDA regulation has had on pharmaceuticals?
The cost to develop a drug, even if it is "discovered" 100% by federally funded university research, is staggering primarily because of the FDA and a lack of tort reform.
I'm not saying that this happened, BUT: if Obama just happened to "mention" that the FDA would get particularly obsessed about any pharma company that didn't belly up to the bar and support the plan - including the $ concessions that Obama keeps bragging about - I'm pretty sure everyone would get in line.
The control that Obama *already* has over Pharma is almost complete, as long as he's willing to use the FDA as a weapon.
Not that a Chicago politician would even THINK along those lines.
Of course not...
Of course not...
I agree 100%. If Obama's willing to take actions like this we'd have seen it already. For example, the financial crisis would certainly have brought out such tactics. Surely somewhere there would be one single report of, say, a CEO being strongarmed into an action adverse to the interests of his organization by an Obama appointee.
The other reason why we can't just "adopt the Dutch system but not the price controls on drugs" is that the Dutch system isn't what's being proposed at all. If a system involving vouchers or tax credits for high deductible but high catastrophic coverage insurance was on the table, then yes, I'd be in favor of it. But President Obama savagely attacked such a plan when Senator McCain mentioned it during the election, and some progressives and liberals seem ready to boycott Whole Foods for its CEO suggesting policies to move us in that direction.
Nothing with a serious chance of being passed right now is similar to these proposals.
Fascinating, how the second comment to your post validates your last sentence so neatly. I am still trying to figure out how support for patent laws is somehow inconsistent with "opposing employment protection." Nice ad hominem about how libertarian policy preferences supposedly align with right wing authoritarian regimes, too.
Well, our hostess did note that she's not sure that the cognitive gap between liberals and libertarians could be bridged.
Liberals are only libertarian on social issues. On economic issues they are complete authoritarians.
They're not very libertarian on some social issues, either. They don't like freedom of speech if the speech is something they don't like. They don't like the 2nd Amendment either, but that's really an urban/rural dichotomy that's morphed into liberal/conservative because liberals tend to cluster in cities. They don't like freedom of association, and insist that we associate with some we don't want to be with. And because I view property rights as a social issue in addition to being an economic issue, liberals and I don't agree on that either.
I'm not a Texan, but the saying is, the best thing about being a Texan is that you can do anything you want on your own land, and the worst thing about being a Texan is, so can your neighbor.
To explain, patent laws and employment rights are both statements by government about property rights. The former establishes that the inventor [however defined] has exclusive rights to her/his intellectual property for a period of time. The latter establishes that a worker has a property right is her/his job and that the employer can only terminate employment if certain conditions are met. You can support one and oppose the other, but they both fall under the purvieww of government establishing property rights (which Friedman argued was one of the fundamnental functions of government).
As for your other point, you've mischaracterized what I wrote. I didn't state that libertarian policies align with authoritarian regimes in general (Peron, Franco, S. Korea and Brazil under the generals and a host of others), rather that a few particular authoritarian regimes seem to be the ones that have economic policies closest to ones favored by some libertarians.
As for Megan's final point and your support of it, they both encapsulate the stance of some of the libertarians that I personally have known: "we can understand your points, but you can't understand our's." Conservatives and liberals tend simply to tell each other that they're stupid and/or full of shit. Hard core leftists adn right wingers attack dissenters' motives. Libertarians have a tendency to preen that they're more intellectually rigorous and that disagreement with their positions comes from inability to understand them. It's a lot like the higher level of consciousness crap that the self-proclaimed intelligentsia as vanguard of the masses used to spout in order to explain why the masses weren't interested in following.
Oops. Make that the _third_ comment, not the second...
"What's good for General Motors is good for the country" is not what MM thinks it is. It was not a product of the Great Society, and it didn't go quite like that or mean what it commonly supposed to mean.
The quotation in question was said in 1953 by Charles Wilson, then the head of GM whom Eisenhower had nominated as Secretary of Defense.
It came in response to the question asked during his confirmation that, if, as secretary of defense, he could make a decision adverse to the interests of General Motors.
And his reply was 'yes' but added that he could not conceive of such a situation "because for years I thought what was good for the country was good for General Motors and vice versa."
You can make what you will of that, but it ain't what it's been said to be.
At that time, for years it was true.
Yes, a government bill outlawing Ford and Chrysler would have been good for America, why do you ask?
The benefits of competition are, incidentally, why I don't think that the defense model of innovation works very well in the pharmaceutical or medical technology industries
It was just a few weeks ago that you were taking the position that defense procurement is a good analogy to make and that the return we've gotten on our defense spending in terms of innovative technology has been poor:
I'm glad to see that you've reconsidered (perhaps at my urging; perhaps not).
I haven't reconsidered. I'm arguing that pharmaceutical will be even worse than our incredibly inefficient military procurement process.
Well, OK, but you do seem to have conceded in this post that (however inefficiently purchased) there's been a good amount of innovation in defense technology over the decades. It wasn't clear that you were even admitting that in your earlier reference to defense.
Megan, Gene already beat me to it by informing you that "What's Good For General Motors is Good For the America" is actually from a quote that Charlie Wilson, who in 1953 President Eisenhower had nominated be Secretary of Defense. This was the 3rd year of the Korean War and the 4th year of Truman's rearmanent program under the doctrine of NSC-68 and GM was a big defense contractor at the time. So Senators in the confirmation process were probing for possible conflicts of interest between Charlie Wilson, the CEO for GM, and his new job and he said something that got him in some hot water along the lines that "what is good for GM is for good for America." I could also note that the strong state is intimately involved in the Imperial role the U.S. has had since the 1890s, something I at least give Ron Paul credit for recognizing.
Also, raising Milton Friedman's argument against the FDA is not of his, yours, or libertarians in general strongest one. Friedman as I understand it, believe that the FDA was unnecessry for saftey reasons because no drug company would risk its long term reputation by putting out unsafe drugs or ineffective drugs. In the real world, historically, both in the pre-FDA world and even in the post FDA world, there are many examples ("patent" medicine, Phen-Phen, VIOX, thalidomide, etc.) that demonstrate that Drug Companies view their reputation as something they can always repair if a dubious drug could make a lot of money for the drug maker for this quarter's earnings. After all cleaning up such messes are what the PR departments are paid to do. There is asymmetry of information here between the company and the ultimate consumer, with physicians often corrupted as part of the deliberage business model of the drug companies to urge a particular drug on a patient even if the evidence for its effectiveness is fairly weak. Hence, the liberal belief that Government regulation and the FDA are necessary to correct this market dysfunction and protect consumers and the general public interest.
I would also like to note that Libertarians do not seem to mind a strong state as long as that state is used to defend property rights or to create novel property rights in intangibles such as Patent and Copyright or unusual protections for property against liability such as the joint stock corporation and limited partnerships. None of these things would exist without a strong, centralized state. It is also a curiouis fact that the most libertarian modern states have been authortarian states such as the Crown Colony of Hong Kong, the one party state of Singapore (and even they have universal health care), and Pinochet's Chile. I don't think of "Freedom" when I think of these places.
Finally, your whole point goes to your Hayekian doctrine that any state intervention (other than to defend and expand property rights) is really "socialism" and a "a slippery slope" away from "Freedom" to "slavery" and hence all "Liberals" are really socialists in disguised. This is really a wicked and sophistic arguement. " If I wanted to be a socialist, I would be a socialist. As a Liberal I do believe that as many economic decisions as possible should be left in private hands a possible. But I also believe that markets have unintended and negative consequences, that there exists asymmetry of information and power between those in the market, and that men/women are not angels, nor are the perfectly rational, all-knowing creatures of EMH theory, and hence they need to be policed and the suffering caused by the market ameliorated.
And it is a fact that the current American system causes more unnecessary suffing then any of the comparative systems in the OECD countries with higher costs to boot. http://www.commonwealthfund.org/~/media/Files/Surveys/2008/The%202008%20Commonwealth%20Fund%20International%20Health%20Policy%20Survey%20of%20Sicker%20Adults/Surveypg_2008_Intl_Survey_Press_Release_FINAL_11%207%2008_rev%20pdf.pdf. I know you like being data free, but I thought I would introduce some to the conversation.
What is being proposed is not an National Health Service for America or even a single payor like France, Japan, or Canada. Instead, like Germany, Switzerland, the Netherlands, and Austria we are retaining the private system with regulation. It is liberal, not a socialist proposal and a typically messy one at that, but in democracies they often are messy.
In the real world, historically, both in the pre-FDA world and even in the post FDA world, there are many examples ("patent" medicine, Phen-Phen, VIOX, thalidomide, etc.) that demonstrate that Drug Companies view their reputation as something they can always repair if a dubious drug could make a lot of money for the drug maker for this quarter's earnings.
Vioxx was approved by the FDA and was reportedly effective at its target application, with the increased cardiovascular risk later being found as common to all COX-2 inhibitors. It was voluntarily recalled by Merck over safety concerns that arose as this side effect (rare enough that it passed by the clinicals and FDA) became more apparent. Subsequent investigation indicated that Merck's management had acted in good faith, although some of the sales and marketing people had been overzealous.
Now how did you manage to shoehorn this into a narrative about greedy, abusive drug companies? Do the rest of your claims and research meet similar standards for depth and integrity?
I note that some bloggers refer to the connection that Gene and I made between the the countries or places that have most closely approximated the Friedman, Hayekian, Randite ideal of John Galt have also been authoritarian entities with very little democratic input as an "ad hominen" argument. Folks, you need to look up what "ad hominem" means. Calling the President of the United States' health care plans bad because he usurping non-citizen, born-in-Kenaya, Muslim, socialist, Nazi is an "ad hominem" arguement. What Gene and I have done is just note a curious fact that appears to contradict the Libertarian argument that your economic policies are not only the most efficient but also lead to greater Freedom for all the people living in such a regime and thereby justify any individual suffering resulting from misfortune as a necessary price to pay for "Freedom."
Yeah, ad hominem is the wrong fallacy - he should have said post hoc ergo propter hoc ;)
More seriously(since I hope you intended it as an observation, not an argument), it depends on what freedoms you value. Is a nation where individuals are free in their personal lives but have no political power better or worse than a nation where citizens are overregulated in every regard, but free to vote? For myself, I'd probably prefer the former in the short run - I value democracy because it leads to the best outcomes, but it's not a good in its own right. I know most of those regimes hardly fit the first description, and ours don't fit the second(much as we may like to grumble as if they did), but still. And in any case, even if I'd rather not live under Pinochet, I'd still prefer he allow economic liberty with his political repression rather than being repressive in both fields.
Finally, your long posts start off on price controls, and price controls are specifically not being considered by the Administration or the Senate. Well, you argue, even if they are not being proposed if we do this bill then they will have to be proposed down the line to control costs. This is pretty weak stuff.
Instead, you should just argue that for purity's sake we should continue to have the worst health care system in the developed world or why we should migrate to an even worse one where only the top 5% of income earners could get decent care by eliminating employer based health care and going to a completely "pay your own way" medical care with insurance companies writing plans like banks write credit card contracts (e.g. consumer pays, bank wins.)because it advances "Freedom" and coincidently makes the CEOs that run these companies even more money.
I like this post; it says something that I've been trying to convey, but much more effectively.
But the truth is that this point applies to many liberal/conservative divides. Liberals very often tend to be entirely unaware of the conservative point of view. "He says A, but can't mean that, so he must want B. How could a decent person want B??!" An instantaneous translation takes place, to the liberal version of the conservative point. The result is that conservatives must either be evil, or stupid victims of the evil.
Why would conservatives oppose national health care? - Because we think it will be an awful government program. - Naw, they don't believe that, look at France, it will be wonderful. They must not want poor Americans to have health insurance.
Why would conservatives not want women to have control of their bodies?
Why would conservatives not want blacks to have a fair chance at advancement in this country? They are racists.
Why would conservatives want global warming to wreck the world's environment? And (conversely) why would they want the nuclear power industry to grow, indifferent to the unsolvable problem of nuclear waste disposal? They care more about their profits than about humanity.
Why would conservatives let big oil destroy Iraq for money?
Why would conservatives support tax breaks for business? They care more about their profits...
Why would conservatives hate the Department of Education? Doesn't any decent person care about education?
It is hard for me to find an issue where my liberal family members can even describe my point of view. Whereas I (think that I) understand their points of view and could describe them on most issues.
While true, half of this is the divide between intellectuals who care about politics, and normal people who couldn't care less. I've heard plenty of conservatives talk about how liberals want to coddle terrorists, for example, when I think the average liberal is far more concerned about screwing up countries and starting wars they feel to be needless(which is why the "Why are we in Iraq? Let's use those troops to kill Osama!" rhetoric is so popular even among more extreme Democrats).
I'd like to think I don't fall into those kinds of traps too often, but I know that many of my ideological allies tend to.
Drug companies are the ENEMY. They are greedy pigs sucking out our hard earned dollars and putting those dollars in their greedy pockets.
No! That's not how I feel. That is an impression that liberals have chosen to convey so as to push their agenda. Unfortunately, as this message has been relentlessly pushed, more people believe it.
On Saturday evening I had dinner at a relative's home. He just happens to be one of the big muckity muck finance guys at one of those big pharmaceutical companies. He was telling me that they had hired consultants to study the image of drug companies. The results they got back was that the image of drug companies was in the same category as tobacco companies - EVIL. Needless to say, they were pretty taken aback. That is one reason
That image was created. It's been pushed on the public for a very long time, little by little harming the image. The reason is that liberals need an ENEMY in order to push their agenda, and they decided that "big pharma was a good target because almost everybody has had to buy prescription meds at one time or another and had to pay for them - usually at a point when they're feeling awful do to their malady. Lately, especially since the push for Obamacare, the liberals have added health insurance companies to the enemies list. Who doesn't want to "get" some "greedy evil" company that is robbing you of your money?
Of course, it's all bullshit used to push an agenda. It's based on the simple psychological fact that people willingly piss away money on what they want, but resent paying for what they need. Notice how people will bitch and moan about forking out $300 or $500 for a prescription that may save their life, or reduce suffering, or shorten the length of sickness. Those same people will spend infinitely more than that on a few nights at a resort hotel and sing the praises of their visit. Many will choose to fork out $350 or more per month to lease a car and brag about what a wonderful car it is. Then they'll repeat the whole exercise when the lease runs out. Another McArdle article mentions Whole Foods. How much do people willingly spend there rather than going to Stop & Shop? How many choose to fork out a few hundred bucks for an iPhone and then pay AT&T 70 to 100 and something bucks every month? How many people pay some cable company over a hundred bucks a month to watch TV shows? How much money would people have for meds, if they were not pissing away all that money on things they WANT?
The simple fact is that hospitals and their services, combined with various other procedures cast far, far more than meds. One day in a hospital, with some tests can cost as much as 100 expensive prescriptions. The liberals have chosen to ignore the exorbitant costs there. My guess is because those hospitals employ lots and lots of union people to whom the Dems report. You will also notice that obamacare does nothing about malpractice insurance costs or any tort reform which inflate your doctor bills a lot. My guess is that is also because the shysters are just huge backers of the Dems.
Whoops - made a goof. 3rd paragraph ended with "That is one reason". It was supposed to say ""That is one reason you some of those IF YOU NEeD HELP PAYING ads - to counteract the negative image."
I've often made similar arguments about Medicare Part D. My mother- and father-in-law are very comfortable in their retired years. My father-in-law recevies a pension from his long time employer, General Dynamics. He also prudently saved and has his social security checks. As a benefit to his shrewd planning during his working years, the two are now able to take a couple cruises every year all over the world.
The problem I have is why do I have to pay for their prescriptions? Their daughter and I have two college educations to pay for, a car payment, a mortgage, and our own retirement nest egg that needs constant attention. They could very easily give up one their trips every year to pay for their drug prescriptions...and be content doing so.
To their credit, they never asked for the benefit nor would they complain if it went away. I just think this neatly illustrates the incompetence of our government adding more obligations to a system already going bankrupt.
One would think that with the American people supposedly brainwashed that Big Pharam and Big Insurance are EVIL, Obama would be able to run through his health care package with ease. What happened?
A lot of your argument seems to hinge on the assumption that populist politicians would cut pharma profits to the bone by cutting the prices the government is willing to pay if health care reform results in the government having too much buying power. You claim (maybe accurately) that healthy profit margins are required in order to incentivize pharma companies to innovate and come up with new drugs for the future.
However, the American people clearly understand the concept of funding research (especially medical research) which has payoffs which are uncertain and which will come decades later, if at all. That's why we fund NIH, NSF, etc. What you're saying, I guess, is that political dynamics are such that government is unlikely to be willing to fund the late-stage, bring-a-drug-to-market research which (many people argue) is generally best done by private industry. Government will fail to do this even though doing so is in the long-term interests of its people. I guess this is because the funding mechanism (per-unit profit margins on current drugs which look obscene to some people and which firms use to fund research for new drugs) is too indirect to explain to the average voter? And/or because the public has an inherent distrust of large, highly profitable corporations?
I just don't think this is that difficult a story to explain to the American people:
1) Private industry is good at developing actual, concrete drugs people can use to improve their health
2) Private industry, however, needs an economic incentive to do long-term research which eventually yields new drugs
3) Government spending on drugs needs to provide that incentive
In previous posts, you've indicated that political pressures generally lead to politicians shortsightedly cutting investment in the future for the sake of saving a few bucks today, which is one of the reasons why government would end up paying little for currently-available drugs and killing pharma company research. I think this "shortsightedness/quick buck" argument is significantly overstated. In particular, the left-wing politicians you seem particularly wary of show at least as much concern as more conservative politicians for the impact of policies far in the future. See, for instance, the debate on global warming. I realize the right has their own long-term-future arguments about the impact of environmental restrictions on economic growth, but the point is that conservatives do not have any particular edge when it comes to trading off the present for the future. Also, the current fiscal situation notwithstanding (in which a $1 trillion + deficit was dumped in Obama's lap, and he has admittedly added to it significantly), there has easily been as much concern expressed about the national debt over the last few decades by the left as there has been from the right.
Actually I believe what Megan is saying is: I don't believe that government can do the job that private pharma is currently doing with respect to bringing drugs on-line. This belief is based on the evidence I have gleaned watching government do (or fail to do) certain things, and is not dogmatically set in stone. Please prove me wrong, by setting up a government-run scheme which successfully brings new drugs on-line. Please don't kill the current system which we know actually works, before you actually prove your theories with results.
Anyway, that's how I interpret what she's said on this. Seems pretty sound to me.
Nobody's seriously talking about abolishing private pharma companies and having all drugs developed by government agencies. There may be some talk here and there of having the goverment do a bit more end-to-end drug development, but it's hardly the main story or an important part of the health bills being proposed, as far as I know. So I'm not sure what you mean when you talk about the government doing a good job "bringing drugs on-line".
The main question is whether the government can act intelligently in terms of the long-term interests of the public when the government's (direct or indirect) role as a buyer is increased.
"Nobody's seriously talking about"
Maybe the point that actual consequences matter regardless of good intentions otherwise needs to be made.
Maybe the point that actual consequences matter regardless of good intentions otherwise needs to be made.
If your point is that private pharma research would end up dying out, well, I'm not ignoring that argument. I'm engaging it and arguing government is capable of taking a larger role in the buying of drugs without killing off private pharma research.
Foo Bar:
You're citing the fact that no one intends to kill the pharma industry as evidence it won't die. These don't follow. Virtually all of economic theory rests on unintended consequences.
I don't think the changes discussed now lead to a dead pharma. They might or might not after further evolution. But saying Libs don't intend to hurt pharmas development capability is not evidence of anything.
Except there is no gov't program in the bill that is chartered to do that.
Perhaps you could turn the question around and answer this: do you believe that pharma could do the job government does in funding basic research?
Evidence from other nations suggests these theories work (excluding McArdle's unproven assertion that a government system would necessarily inhibit innovation in pharma).
McArdle's argument is also that "80 percent" of pharma profits would suddenly vanish into thin air if the US gov't acted as a large bargaining unit, a premise that is without support. She also maintains that 300 million people are going to die from diseases we can't cure. That's two totally made-up numbers to deal with right there.
As for theories working, I was referring to other means of delivering health care to a populace, not the pharma innovation theory, which is unproven, since the US market has been a big profit center.
However, we also might ask how that market has grown since WWII? Have pharmaceuticals always been as high priced as they are now relative to "innovation"? What were the expenditures in decades past on R&D and how did they relate to profits? Has the US always represented 80 percent of pharma profits? I don't know. I'd be genuinely interested in seeing some graphs on that data (aside from the "google it" response).
BTW, there's a tendency at times to conflate medical "innovation" (which can mean, for example, a stent or an angioplasty) and pharmaceutical development.
Nobody here is suggesting that pharma take over basic research from government. Furthermore, nobody is positing that political forces will push that into happening even if people right now don't want it.
Evidence from other nations suggests that drug companies will still do research when they can still gouge the Americans. The question is whether the existence of a large market without price controls is necessary to underpin the financial structures of the industry's R+D model or not.
Need, the 300 million is a fairly well-grounded number - the entire population of the US that is alive today will be dead in(say) 200 years, and they will all die because we couldn't fix their last illness/injury. It's not so much "unsupported" as "borderline tautological" - the question is whether it's meaningful, not whether it's true.
Also, medical innovations like stents and angioplasties are also things I'm in favour of, and while the rhetoric for cost controls on them is less intense(since they don't share the same low marginal costs or the same level of hatred towards their providers), I'd be equally opposed to attempts to make them significantly less profitable by government fiat.
Evidence from other nations suggests these theories work (excluding McArdle's unproven assertion that a government system would necessarily inhibit innovation in pharma).
So, Megan's argument doesn't stand up if you exclude the entire basis of her argument? That is logical.
need: What evidence from other countries? Megan's argument is that the the US market is the only market left where profits big enough to encourage continued innovation are available to pharma companies of any nationality. So unless you can point to how there is big innovation going on in countries which do not have access to the US market, there is no evidence that these theories work.
With respect to turning the question around: no one is suggesting we stop government funding of drug research. Everyone who talks about increasing the government's role in health care and using its "increased buying power" to put the heat on the pharma's to sell their products for less, is talking about taking the incentive for them to innovate away. If I (or Megan) was advocating getting government out of the research business, your reverse question would have a point: but we aren't, so it doesn't.
Foo: There are many people talking about 'single payer' (whether or not that's in a bill on the table right now, the on the record stated desires of many of 'reform's' proponents, including President Obama, is to use reform to move the US to a single payer system). That means that the only customer pharma will have will be the US government (and the governments of other countries). Megan has pointed out that defence is the only comparison we have for this situation. And it ain't a good one.
And I have some other, more direct comparisons: other countries. Remember a few years back there was all this fuss about the re-imporatation of drugs from Canada? They could be had for really cheap. That is because Canadian government has used its 'buying power' in its single payer system to force the drug companies to sell their wares for cheap, cheap cheap. Essentially enough for pharma to recover its production of already discovered and proven drugs, but nowhere near enough to pay for developing these things. Can you show me any example, anywhere of a government with universal health coverage, paying market rates for its drugs? The overwhelming evidence is that they don't: that Megan is right and universal health care will mean, inevitably, that populists will force down what government pays for drugs.
I must compliment you on 'audacity' though for your global warming example: leftists will use populist demagoguery in support of massive government regulation of all economic activity; therefore they will support continued high profit-margins for Big-Pharma!! LOL
Megan has pointed out that defence is the only comparison we have for this situation. And it ain't a good one.
Why do you feel the need to point this out to me when I have discussed the defense analogy with her at a more detailed level than "it ain't a good one" upthread?
Because your assertion that there was 'evidence from other nations' which proves that government incentives to innovate when government is the only customer works, missed the whole point of why Megan focused on defence in the first place. Foreign Pharma's who market in the US are not analogous to what the situation will be for American pharma's if Obama gets his way. Defence is the closer (though still flawed) analogy. I stand by my argument that how foreign governments with universal health care (like Canada) treat big-pharma when those governments are the buyers is the best analogy and best evidence of what would happen in the US. The fact that these governments might also create a favourable regulatory/subsidy environment for their own Pharmas to compete in the US is quite irrelevant.
Foo: sorry I confused your and need's comment about defence. My main point to you is the one I just made about how other democratic universal health care governments behave as customers of pharma.
The overwhelming evidence is that they don't: that Megan is right and universal health care will mean, inevitably, that populists will force down what government pays for drugs.
It doesn't follow from the fact that governments which use their bargaining power pay a lot less for drugs right now (while the U.S. pays a ton for drugs because the government has a smaller role) that governments would continue to pay just as little if the U.S. government were to take a stronger bargaining position.
The libertarian argument here seems to be that governments who buy most of the drugs for their populace will not pay enough for pharma to make healthy profits regardless of whether there is any large economy, like the U.S., off of which they can free-ride . I think a more plausible theory is that governments will not pay enough for pharma to make nice profits as long as there is a large economy like the U.S. off of which they can free ride and as long as there appears to be a reasonable rate of progress in the production of new drugs. The idea that governments would just let the private pharma industry die off doesn't make much sense to me.
So you can't point to the prices Canada, etc., pay right now as proof of what they would pay if the government role here in the U.S. would increase. The prices Canada, much of Europe, etc., chooses to pay are arrived at in an environment where the U.S. is mostly funding private research. In a different environment, they would probably behave differently. Megan's argument seems to be that government is so pathetic that governments wouldn't behave differently and would just let the private development of new drugs shrivel and die if we stopped paying through the nose. That's far from obvious.
I mean, the libertarian picture of government administrators and politicans in the scenario libertarians are worried about seems to have government folks as a bunch of total dunces sitting around scratching their heads saying "Why no new drugs? Me no understand. Me dumb, lazy bureaucrat. Me incapable of looking at figures showing huge decline in private drug research". Gimme a break.
If your opinion of what government can accomplish is low enough then it's virtually a tautology in any situation that it's a bad idea to increase the government involvement in anything, but at that point it doesn't end up being a very interesting debate with people who disagree with you.
Foo:
I don't think that either Megan or I are arguing from the notion that government cannot do anything well here. We are saying that spending large sums of money on speculative outcomes that immediately benefit large private and unsympathetic entities (the Pharmas) for the possibility of maybe helping people some day, is one of those things which the government has not shown itself proficient at.
Add the coming baby-boomer crunch (health spending is going to increase as a percentage of gdp, regardless of how it is delivered, for the simple fact that old people are going to increase as a proportion of the pop) there is going to be huge political pressures to lower costs - waiting lists/denial of treatments versus unsustainable budget hell (Canadian provincial governments spend roughly half of their budgets on health care to the detriment of education/roads etc. and that percentage rises every year) versus Big Pharma keeping its profit per share ratio high enough to encourage investors to leave their money in/put more money in.
Add to that the fact that innovation's slowing/stopping won't be apparent. When one pol gets up and says: we need to reduce the 10 month waiting list for hip surgery; and his opponent responds with: the rate that new drugs are coming on the market has slowed down because pharma rate-of-return is too low, so we need to make sure that we pay the full cost for our drugs: what do you honestly think is going to be the response of Joe and Jill voter? In Canada (which is where I live, in case that hasn't been apparent), using government to push down the price of drugs is a big selling feature for single-payer care. Few voters grasp the need to pay for drug innovation, and even fewer are willing to do so in the face of ballooning health care costs and lengthening waiting lists for treatment. I see no evidence that American voters will be any different once their own health care depends on the government's management.
In suggesting that she doesn't favor companies, but rather competition, McArdle seems to cast her lot with competition as the road to maximizing utility. This is likely due to government being a bunch of slobbering bureaucratic nincompoops, as well as perhaps a prize-winning academic theorist or two at Booth who said it must be so.
In attributing such lofty utility-maximizing potential to "competition", McArdle hearkens back to the Skinnerian behaviorists of a few generations ago. To the Skinnerians, anything was possible with the right feedback loop, since of course evolution was an infinitely long process, so perfection could be found in any organism with the right stimulus-response scenario.
50 years on we know that the Skinnerians sadly never were able to teach rats to do very much, because in spite of the infinite millenia of evolution, natural selection never sought perfection, but rather superiority over the next best option. I humbly suggest that 'competing' companies more or less do the same thing.
So while the failure of the Skinnerians to prompt a rat to sing Carmen is a humorous footnote in history, the failure of private drug research to adequately fight the rise of staph-resistant MRSA is quite a bit less funny. Indeed, how some vague faith in oogedy-boogedy "competition" is going to prompt any significant Big Pharma company (or angel investor, for that matter) to pursue next-generation antibiotics, if the financials are not more attractive than the next best research opportunity, is beyond me.
I would extend this argument beyond antibiotics to quite a few other critical related matters, but I'm clearly long past violating a promise to stop banging my head against this wall.
And the government program to find another antibiotic has produced . . . ?
The Skinnerians, like most people, took their argument too far. But they were, AFAICT, more right than any of the other schools of psychology at the time. And systems that ignore incentives, either in training, or in economics, have a 100% record, not of excess, but of utter failure.
Of course Skinner behaviorists made gains, though it is worth noting that those gains were all within the context of whatever a million billion years of natural selection produced in each relevant organism.
If experts are correct that the necessary fight against next-generation MRSA is not an economically attractive one, from where will we find the incentive to fight it? You're right that the government's empirical track record is not much better than private industry. But its certainly possible that private industry has little if any incentive to fight this critical problem.
If so, what shall we do? Give up...and die of staph-resistant MRSA in 2018 or so? Or hold our capitalism-loving noses and introduce some command-type, government-interfering incentivizing?
Like I said below, I love capitalism. But I fear dying of something like MRSA a lot more than I like capitalism. And I don't trust private industry to help me on this, no matter what theories say.
Ummm, Vancomycin, Linezolid, Bactroban -- all invented specifically to treat MRSA, all very profitable for the companies that invented them. I don't know what experts you're looking at but the process of "1. identify a demand (esp. one like MRSA which is rising) 2. Fill the need and 3. PROFIT! seems to be doing pretty well so far.
"50 years on we know that the Skinnerians sadly never were able to teach rats to do very much, because in spite of the infinite millenia of evolution, natural selection never sought perfection, but rather superiority over the next best option. I humbly suggest that 'competing' companies more or less do the same thing."
It seems to me that this 'insight' is what dooms government efforts at innovation. Private competion may induce private entities to invest in high-risk, next generation drugs if they know that is the only way they'll remain competitive as other companies do the same. If, however, they know that government is the only customer (or, if in a more extreme version of what you are advocating, they are abolished and all research is publicly funded), then your "next best option" becomes essentially uniform - the government will determine the price, and that makes in unlikely that there will be any big advantage to being the one company which comes up with the cure for cancer. In a competitive environment like that, logic and experience both show that companies (or government departments) still compete, they just compete with lobbyists to earn the favour of the government.
Pointing to an individual advance that pharma has not accomplished, is pointless, unless you can tell us that the government has conquered the drug-resistant bacteria problem? Or to put it another way: we are not talking about 'maximizing utility' here: there is no evidence that we humans are capable of acheiving in practice the maximum utility that we are capable of dreaming of in theory. Pointing out that competition does not lead to 'maximum utility' is asinine unless you can show us something else with leads to better utility than competition.
The point is simply that private industry is not motivated to maximize your utility, they are motivated to maximize their profits. Sometimes those two things align, sometimes they don't. Its a mistake to assume that consumers will hold out on companies until their interests are maximized; we pretty much take what we can get. Not unlike the rats produced by millions of years of selection.
I am not a big fan of government - indeed, I was one of the guys who was most harshly opposed to Professor Shell's seemingly anti-capitalist stance several days ago - but at the end of the day I care a lot less about theories of commerce than I do about where the MRSA-killing antibiotic is going to come from.
If its true, as several experts suggest, that the economics of antibiotic-development are not favorable, then I am willing to swallow my immense capitalist pride and look for some command-style help to meet my needs. If this makes me a communist, I don't much care; I'm much more interested in living on to fight another day by being ideologically hoisted on my petard - especially if this prevents me from being literally injured by the disincentive of pharma companies to meet my needs.
Pete, I'm not sure what evidence you have that government could possibly do better, but in any case, it seems to me that you are making an argument for government funding of health research.
I don't think that this has much to do with remaking the way health care is provided in the United States.
Can't you advocate for government program to fund those research areas which you and the economists you trust believe are uneconomical and therefore won't happen in the private sphere. By doing this you might find some mechanism by which government can actually invent viable treatments?
As Megan has said, she could possibly be convinced to stop fighting health 'reform' if that type of thing could be demonstrated.
Nevertaken,
I admit that I favor some sort of public/private system with respect to much pharmaceutical research...I could possibly be convinced for health care too. I haven't fleshed it out in my mind too much, rather than to say that pharmaceuticals are one area where I am willing to check my love of capitalism at the door.
If I contribute anything to this conversation, I hope its that competition, like natural selection, doesn't actually optimize anything but simply chooses the best from the available alternatives.
Most of the time we are okay with this. That Nike doesn't sell the best possible shoe or that GM doesn't sell the optimal car is alright. Even if it weren't, the alternative would be to have some omniscient government agent choose a better shoe or better car than the one we get - which obviously creates way more problems than it solves.
Sometimes, though - pharmaceutical research is a gigantic example, arguably health care delivery is too - the best among available choices is not good enough. If you accept my premises, the danger of underresearched staph-resistant MRSA is a great example of this.
As a result, I favor some sort of low-level, Kennedy-esque "we-will-put-a-man-on-the-moon" approach, only in this case for defeating common enemies such as MRSA. And then we'd have to move forward with some admittedly awkward, but best-of-bad-alternatives, public/private R&D program.
The 'cognitive gap' that needs to be bridged between libertarians and the people they call liberal is what constitutes good evidentiary and debate practice. Not imputing all sorts of motivations that probably have little to no relevance to the actual issue.
Libertarians, you're not allowed to simply say that "Americans have the best health care", and then insist that others provide evidence that it isn't. When someone points to a counterfactual, say, life expectancy stats, it's upon the libertarians to show that this is due to lifestyle or population genetics, not upon so-called 'liberals' to show that it isn't.
Nor are libertarians allowed to continually assert things like "price controls that the public option allows will cut profits/revenue" to the pharmaceutical industry with no supporting evidence.
And no, libertarian dialectical analysis is not evidence.
Note, btw, that either or both propositions about health care used above as examples may be true. But that's not the point. Libertarians want us to grant that these things are true, and cavil mightily at the thought that they might actually have to produce evidence for these and other statements before other people accept them. The 'other people' in these instances? Those would be what libertarians would call 'liberals', and I would call evidence-based realists.
That's the cognitive gap that has to be bridged.
OK. Then what, exactly, would you regard as admissible evidence for this proposition, and more generally, for propositions of the type "X will produce Y"?
Aaron,
Give it up. In the two examples SoV provided, the assertions made by libertarians HAVE been proven in other conversations on this web site. Maybe he just wasn't reading them that day, or maybe he wasn't persuaded by the arguments.
But this is typical of his style of arguing. Points and facts that have been thoroughly debated and agreed upon by the libertarians on this site are used as the basis for continuing arguments, and his response is always, "Do you have a cite for that?"
We say, P implies Q, and we know P, therefore Q. SoV always says, "Do you have a cite for P?"
Very few things I've ever read more clearly reflect both the ignorance and pretensions of most liberals. We have an entire empirically based discipline devoted to understanding why policies like price controls have the described effects. The liberal response is simply to ignore the results of such study and demand that everything be proved anew for each topic. Imagine a scientist writing a comment about satellite orbit trajectory being challenged by someone on the grounds that he didn't provide proof of gravity.
And just to prove how deluded they are, the reality deniers call themselves "evidence based realists".
"liberals often really just do not grok what libertarians are about."
Amen to that sister.
I am interested in what is good for society.
Neither of the Players, Govt. or Pharma, share your interest,
for the same reason that cats do not bark. More to the point,
neither do the voters; They want theirs.
Never appeal to a man's better nature, MM, appeal to his
self interest; It gives you more leverage. :) (R.A.H.)
Nations don't really compete on their health care systems, and anyway, if we develop a drug, it will be patented abroad, and everyone will get it.
Hmm...
Say a very rich US citizen funded development of a drug;
Could she keep it as a trade secret, administer it only at
her own facilities, and charge whatever the market would
bear, or would eminent domain apply ?
If China develops an Elixir of Youth, will they share ?
We're not all that worried that the French health care system
will come over here and kill us.
Hmm...again
Say French Moslem extremists want to strike a blow at the
Great Satan; would they rather try to infiltrate a bio-facility
working on flu vaccines, or a nuclear facility producing Pu239 ?
Well, yes, in the real world, what would happen is the French
health care system would fail to prevent an epidemic of measles,
or worse.
We're not all that worried that the French health care system
will come over here and kill us.
Actually, we ARE worried that something will come and kill us. That's the whole point of health care. It isn't the French health system though, it's Swine Flu, and Ebola, and Heart Failure and the like.
Unfortunately, the thing libertarians fail to appreciate is that it is not possible to always have competition. There are cases of market failure, where high barriers to entry, and high fixed costs make any market devolve into an oligarchy. The prescription drug industry is one such market. Given the above, doesn't government intervention make sense?
I think the closest analogy is actually with the school system. There again we have a government option providing basic schooling to the majority of people. Sure, it may not be ideal, especially in urban areas, but can you really argue that those people would be better off if they had no access to education? Because that's the choice we're really talking about. Its not a choice between government-run insurance and private insurance. For a relatively large cohort of people, its a choice between government run insurance and no insurance at all.
The other thing that some libertarians don't get is that in a patented system competition is attenuated and distorted by the grant of the monopoly. In no rational world could an 18 year government grant of an exclusive right be considered a form a competition. It's not. It's something altogether different. Then tie all this in into strange way patents work in a world market and you get this kind of weird argument. The weird argument being, we must not put government pressure on pharmcos because it will reduce their incentive to innovate. The next part of the argument that follows is that this is especially true because foreign countries have implemented price controls or use countervailing government buyer power to limit the profitability of the pharmcos. Which means, we in the united states end up paying for all of the innovation which the rest of the world can free ride on. This makes absolutely no sense.
Well, for starters, it would be nice if there were actually any 'price
controls' in the legislation that will 'slash Pharma's profits by 80%' coming up for a vote. I'm not aware of any, but I could be wrong. Do you have evidence that there is, or will be by the time it comes to the floor for a vote? You could also supply some evidence that would show that expanding the pool of the insured(and thus the number of people buying medication) would cause Pharma to lose money. Not, "as a general principle the possibility exists", but, "using these numbers x_1,x_2,...,x_n culled from these sources, we demonstrate that profits will drop by y%."
As to the general idea of proof, well, that depends on the subject and what's being asserted, yes? If the sum of the digits of a number are evenly divisible by three, then the original number is itself divisible by three is the sort of statement that lends itself nicely to the sort of proof libertarians apparently wish they had access to as a means of validating their ideas. That's a far cry from attempting to prove that if two people read the same amount of material for pleasure, all things being equal, the one who does not read science fiction will be tested as more intelligent.
Finally, you seem to be trying (again) to slip in the idea that libertarian dialectical analysis technique is some sort of proof technique. It isn't. Period. It's not a matter of being 'admissable' at all.
Could you provide an example of a proposition, in economics or any other social science, of the form "X will produce Y," that you regard as true, along with the evidence that led you to conclude that it was true? If you want to make it conditional, help yourself.
I'm not sure, incidentally, what makes you think I regard "libertarian dialectical analysis [as] some sort of proof technique," since I neither stated nor implied any such thing.
@ quanticle:
Govt. as provider of last resort for schooling
When did the role of government change
from investor in the future productivity
of workers to vendor in the marketplace ?
Will the State allow private competitors
to capture any significant share of its
monopoly on the indoctrination of future
voters; What will the Teacher's Unions
have to say.
Milton Friedman, who probably never took a non FDA approved drug in his life, is not a person who I would quote as an authority here. But let that pass. You are arguing that because some time in the future, there may be price controls, there should be no reform of any kind today, despite agreeing that the system is in need of reform. That's just.... bizarre, really. It’s like saying that you can 't risk fixing your broken car because the mechanic might screw up . In the mean time, people are dying because of the screwed up system.
May be you are right. Maybe liberals and libertarians can't understand each other.
Megan's arguments are exactly the same as the arguments made against industrial regulation in the first Progressive Era. Back then, conservatives (or maybe it was libertarians) argued that you could not regulate the meat packing industry because it would decrease the profits of the meat packing industry and drive meat packers out of business, leading to starvation in the streets. Of course, that didn't happen, and only libertarians really think that food purity laws and mandated drug testing are bad, even as they eat only FDA approved food and take only FDA approved drugs. (By the way, Megan, if you liked your last food poisoning episode, you would LOVE a non FDA world) /snark.
Let’s get back to Mr. Friedman. At the time, he wrote “Free to Choose” (around 1980), he lamented that FDA has been strangling innovation in pharmaceutical industry (sound familiar?) Three decades later, innovation in the pharmaceutical industry proceeds apace, and the industry is as healthy as ever. The more things change........
And if the whole world had been Authoritarian we would all be living under Soviet systems marveling at the progress we had made.
Why do liberals so often ignore the central part of Opportunity cost: the loss of the unseen?
I have a nice car, but it doesn't fly or drive itself. Not a very large improvement in 100 years.
The auto industry, of course, is an example of for-profit private enterprise. It certainly does not prove your point.
If we get self-driving cars, it will be as a by-product of the DARPA competition for self-driving vehicles, a government research program set up with the specific objective of creating unmanned, self driving land vehicles. To achieve that objective, it has been setting up competitions and offering prizes to the competitors. A university affiliated team won the most recent prize .
A car driven by an artificial intelligence (AI) that can navigate city streets, obey traffic laws, pass, merge and avoid other vehicles, reroute around blocked streets and above all, not hit anything, sounds almost impossible. But six university-affiliated teams, including one from Cornell, met such rigorous standards at the 2007 DARPA Urban Challenge, Nov. 3, in Victorville, Calif.
Team Cornell's "Skynet," a converted Chevy Tahoe named for the AI in the Terminator movies, was one of only 11 vehicles out 35 initial entries selected for the final test, where cars carried out three simulated military-supply missions in an urban setting. Five of those were eliminated during the first mission.
All six remaining cars performed amazingly, completing about 55 miles on city streets, merging with and passing each other as well as cars driven by actual people.
http://www.news.cornell.edu/stories/Nov07/DarpaUrban.final.ws.html
This, of course, is an excellent example of government fostered innovation-a model that could well work in the pharmaceutical world.
But hey , ignore this. Just close your eyes and keep repeating your libertarian mantra- " Government ALWAYS stifles innovation, Government ALWAYS stifles innovation, Government ALWAYS stifles innovation, Government ALWAYS stifles innovation,............."
I'm sure someone has already said this but it seems a bit silly to assert that nations only compete militarily.
Sure. How about "all other things being equal, children who have greater parental involvement in their education will have greater academic success"(in fact, it's the number one correlate.) And I believe this because there are dozens, hundreds of these studies and meta-analyses. If you want, I can reel off a bunch of these studies from Biddle and Berliner onwards. By the same token, there have been dozens of studies, such as the ones analyzing the Milwaukee voucher experiment that show vouchers of this type do little, if anything, to improve school performance.
Note the similarity in the 'analysis' btw; voucher proponents way back when were arguing by resorting to buzz words like 'choice' and 'competition' and the magic of the free market without ever specifying specifically how this improvement would ever be realized. No one believed them in part because of this lack specificity, the same as what is happening here.
Well, do you? I notice you don't disavow it either. Can you state plainly whether you do or you don't? Because if you do, it would appear that all you're really saying is that I had no grounds for believing something was true, even if in fact it was.
Actually, the recent DC study showed similar results to the 2 year Milwaukee study, noticeably higher parental satisfaction with very little improvements in test score. It wasn't until the third year that students began to show measurable differences from their peers.
I think international test scores bear a similar witness. In 5th grade we are right with Japan. By 12th they are a mile ahead. It's looking like vouchers may take time, with gains being mostly exponential, rather than immediate.
Didn't mean to sound coy. Briefly, I don't think conclusions of this sort are amenable to "proof" at all. Studies and meta-studies don't go very far in the social sciences, mostly because ethics and logistics constrain the experimenter from making ceteris much like paribus. The Milwaukee study, for example, simply compared students who received vouchers with students who did not. Are the groups similar in other relevant respects? Who knows?
Studies have their place. I would not go so far as von Mises, who wished to wall off economics from economic history. But no collection of social science studies has ever persuaded me of any conclusion beyond P = 0.75 or so.
Logic also has its place. What convinces me that the Law of Comparative Advantage is true is a simple thought experiment. If surgery pays $100/hr, and cleaning surgical instruments pays $10/hr, then a surgeon profits most by spending his time on surgery and paying an orderly to clean his instruments, even if he could do the job himself several times as fast. Perhaps you regard this as "libertarian dialectical analysis," though I see nothing especially libertarian or dialectical about it. I don't think this argument "proves" the Law of Comparative Advantage either, but it is a hell of a lot more persuasive than any meta-study I could imagine.
Megan claims that making the government the major purchaser of drugs would lead to price controls. What studies would bear on such a question? I suppose we could examine every comparable case from history, and see if price controls resulted, but how many such cases would we find? Five? Two? Zero? Megan resorts instead to telling a story about how this might happen. The story can be analyzed for coherence and plausibility; literary critics do it all the time. Counter-stories can be proposed. But to rule it out of bounds because it is a story is to willfully discard a valuable tool for understanding the world.
Megan. Several comments.
#1 As noted in the interview of Dr Avorn by Ezra Klein that you bashed, it makes much more sense to pay for drug research, rather than to overpay for drugs in the hope that some profits will end up funding drug research.
#2 This idea that public research does not have parity with private "innovation" in drug development is the lynchpin of your argument. But this might well prove false despite the strength of your convictions. I would feel more convinced if you provided statistics over anecdotes.
#3 It is ironic that you sermonize so much upon the virtues of competition when drug development in our current system is a competition for a government provisioned monopoly(ie patent).
#4 To that end, I can see no reason why a government provisioned competition for drug development would not be a more efficient means of innovating pharmaceuticals.
a. Winners would be paid the equivalent of capital costs + profit that might be incurred under a pharmaceutical endeavor.
b. Government would obtain drug patent and thereby direct, significant social benefits.
c. Developmental savings would obtain from no marketing costs, no distribution costs, lower administrative costs, a higher ratio of profit to investment and a lower risk.
d. R&D efficiency would obtain from better research targeting: long-term targeting, public health targeting, low-profit high benefit drug-targeting, legally impeded drug targeting(under current patent law)
#5 Since drug companies already hold monopolies on distribution, no argument can be made that government would not be an equally effective distributor of drugs, but with significant economies of scale from consolidating distribution from many companies.
#6 Alternatively, government could immediately license patents obtained as generics. Leading to a system where efficiency obtains simply by separating the R&D and distributional components of Pharma.
So please. Tell me. Why is it better to overpay for drugs than to directly fund research?
p.s. Somewhat unrelated. If a slippery slope to drug price controls is inevitable from a larger public system, I'm not sure why we shouldn't be inevitably slipping from the current large public system. Directly; Why would the congress-proposed incremental reform in our healthcare system suddenly put us over the edge of this slope? To me, it seems more likely that we are already on the slope or that there is no slope.(The latter being the case in 99% of slippery slope arguments)
"Winners would be paid the equivalent of capital costs + profit that might be incurred under a pharmaceutical endeavor."
And what of the losers? Remember that in the drug research business, 90% of all compounds tested turn out to be unsuitable for drug production, whether because they don't work, because they have bad side effects, or because they can't be mass-produced. Perfectly competent researchers may go their entire career without discovering a marketable drug.
Drug companies only can handle this because they pool the failure risk. So even under your system, you'd end up with a few large, capital-intensive drug research firms—except instead of earning rewards for delivering actually useful drugs that satisfy the needs of health care consumers, they earn rewards for pleasing a political committee. The rewards the government offered would also have to be far greater than the apparent value of the medicines delivered (to pay for the failed research), and so there would be constant political pressure to reduce these "giveaways"—after all, critics will cry, is yet another painkiller really worth paying 10+ times its development cost?
What your plan ends up doing is replacing incentives to satisfy real demand for treatments with incentives to satisfy a committee that thinks it knows what the demand is—and that's assuming they even get to try.
I find that a very useful mental exercise is "What would my political opponents do with this power if they controlled the government?" I'm assuming you're a Democrat, and so I'll point out what the Republicans would do: they would refuse to fund research into contraceptives and cut rewards for STD drugs. After all, we ought to be abstaining from immoral promiscuous sex, right? They might even try to fund research into "cures" for homosexuality. And you have to assume the Republicans will win an election eventually; after all, Obama can only be President twice.
If you think the see-sawing policies on funding for stem cell research and abortion providing charities are bad, wait until the entire health care system is controlled by a Congressional majority, and when the election swings the wrong way those wingnuts have four years to destroy your health.
If you think that some conditions aren't getting the research they need, there's a simple, low-impact solution to that: subsidize research into those conditions. We already do it for AIDS and breast cancer. Libertarians will still scoff at you, but at least you won't be throwing the baby out with the bathwater.
If you think the see-sawing policies on funding for stem cell research and abortion providing charities are bad, wait until the entire health care system is controlled by a Congressional majority
I call straw-man. Who the hell is calling for a Congressional takeover of the entire health care system? What's on the table is health insurance reform.But hey, i guess your formulation makes for a good Republican talking point, like "death panels".
If you think that some conditions aren't getting the research they need, there's a simple, low-impact solution to that: subsidize research into those conditions. We already do it for AIDS and breast cancer. Libertarians will still scoff at you, but at least you won't be throwing the baby out with the bathwater.
Of course, liberatarians and conservatives will say that's because there is insufficient demand for breast cancer and AIDS drugs, i.e. not enough people want them. Bizarre, but there it is.
"The cost of failure" is not a coherent objection. In the Pharma world today it is a zero sum game. In private Pharma, if I get my patent for drug-X first, my patent locks my competition out of the game and they lose the money they spent researching towards that goal. Also remember, the prize is the revenues that would have been accrued less the distribution costs, so in the same way a company currently pays for its negative R&D results out of its revenue, it could under this model. Thus, In this respect my suggestion could not be any worse than the status quo, and in other respects, it is better.
The rules of the competition could also offer smaller rewards for second, third, etc... to mitigate sunk costs. But I don't think these would be necessary.
Here is how this works. Lets say I would make revenues of $100 off compound-X if I marketed it privately. Lets also say this comes at a cost of $25: R&D, $25 Marketing, $25 Administration/Management. Leaving $25 profit. The proposed research competition will offer $60 reward for the development of compound-X (or something meeting that description).
Now a company can develop with a budget of $10 administration, 0$ marketing, $25 R&D, and $25 profit.
So what has changed?
#1 MUCH larger incentive in my proposal. The return is 71 cents on a dollar spent, versus 33 cents.
#2 Lower barriers to entry. ($35 versus 75$)
#3 Patent goes generic immediately. (meaning better competition in drug distribution)
#4 Negative results get published, so that companies aren't constantly duplicating effort.
One more thought:
R&D gets some of the largest economies of scale. Pharma has a strong incentive not to share results(particularly multitudinous negative results), this leads to gigantic duplication of effort and a behavior contrary to hundreds of years of scientific process and the intent of patent law.
Plus there are the capital intensive fixed costs of things like Scanning Electron Mictroscopes, Positron Emission Tomography.
This is one of the main reasons Pharma is already so consolidated. I really can't fathom how a devotional faith in the motivating power of profit is sufficient to counterbalance these facts.
Actually, under Obama, that the French health care system will come here and kill us is exactly what I'm afraid of! The problem with too many Republicans and one of the reasons we are in this fix is the Party did see itself as pro-business rather than pro-competition. See ethanol.
Steinglass has had enough too:
http://trueslant.com/matthewsteinglass/2009/08/18/i-grok-libertarianism/
"Megan finally tries to characterize our differences as a cultural chasm in ways of thinking that prevents us from understanding each other. She says that liberals don’t “grok” libertarianism. I think this is evasive. I understand Megan’s arguments perfectly fine. More generally, I grok libertarianism. I grok a lot of philosophies I disagree with. The problem, I think, is that Megan is trying to use free-market arguments to oppose a program of reforms that has been designed to specifically take free-market criticisms into account, one that, in fact, was thought up by people who really believe in the free market. In order to do that, she has to cook up increasingly far-fetched harms, way out in future: this will lead inevitable to that which will lead inevitably to serfdom. But nobody who’s not a hard-line libertarian, not even corporate executives in the relevant industries, seem to think that Megan’s litany of woe is likely. If Megan thinks drug price controls are a bad idea, fine, we can have a discussion about that. But they’re not part of the health care reform that’s being proposed, and to argue “ah, but if we pass this, drug price controls must inevitably follow, and they are terrible!” is a style of argument that makes it impossible to have a conversation."
This series is a low point on this blog.
This is rather ironic, given that, while 'liberals' don't as a general rule ignore opportunity costs, libertarians seem more than ready to ignore the very tangible and immediate costs of not giving people health care now in favor of something that may or may not happen in the future.
Note that absolutely no numbers have been attached to these speculations either, so that there is no way we can do cost-benefit analysis, even in theory.
The 'free market arguments' she is making remind me of nothing so much of the 'dialectical analysis' favored by Communists half a century ago. Then as now, they could use these sorts of arguments to show that aglets are the work of Capitalist Running Dog Lackeys, or that the correct way to put on shoes and socks is sock & shoe, sock & shoe, and only Capitalist Running Dog Lackeys did the sock & sock, shoe & shoe thing.
Worse than that, she makes no attempt to back up that line of argument with anything. She asks instead if we can take the chance that she's wrong. Apparently the benefits of future 'innovation' are so great that this outweighs the fact that it's suppression by legislation is unlikely in the extreme. As I've already pointed out, this has the same form as Pascal's Wager, where infinite Heaven vs infinite Hell outweighs any negligibly small but finite chance that God exists. It's also akin to rescuing a freezer full of fertilized ova from a fire as opposed to two living children in the same conflagration, which most people tend to think of as being ridiculous.
Well, one of several, certainly. But I think this marks the point where a formerly sympathetic blogging community decides to drop her as someone to link to as a source of respectable commentary or analysis. I suspect that she'll be relegated to 'entertaining kook' by most of her former associates - Klein, Sullivan, et al.
Looking at the progression of this series, it strikes me that Megan didn't know where she was going when she started them. Instead, it appears that she was chivvied into a series of increasingly untenable positions by tossing off ill-informed and hasty commentary to justify ill-informed and hasty commentary down about three levels.
Any sort of coherency in the progression is ex post facto, imposed by the desire for narrative. If we could do this all over again, a different set of contingent posts might drive her to a different set of increasingly untenable positions. But all along the way, this newly generated set of arguments would show - surprise! - that preserving the status quo is the best option we have.
So I was thinking about this question about whether competition produces a) optimal results or b) the best among reasonable alternatives. This got me thinking about those 1993 Tom Selleck "You Will" ads for AT&T.
You remember the ones. Futuristic mumbo jumbo, at the end of which Tom Selleck says "You will...and the company that will bring it to you is AT&T".
Did we?
Sort of. First here's a montage of four of those You Will's that more or less came true. This is apparently from a promotional CD via Newsweek (via AT&T?)
Then again, here's one that didn't make the montage. What's the difference between the You Will and You Won't?
The "You Will" were a fairly straightforward progression from technology that existed in 1993 (e.g. remote meetings, wireless faxing, etc). The "You Won't" (e.g. scanning an entire cart of groceries all at once) required cooperative innovation that remains in the "nice to have, hard to imagine" category.
To be sure, I am okay with the notion that I will have to scan my groceries individually for the rest of my life. Hopefully however this series provides compelling evidence that competition does not normally generate "nice to have, hard to imagine" breakthroughs.
Assuming critical pharmaceutical innovation is in this "nice to have, hard to imagine" category, we're gonna need some coordinated help to make it so.
Dialectical Materialism, back in the USSR,
where he who says A must be willing to say B,
and it is no coincidence that worse follows bad.
Alan Greenspan testified to Congress that he
considered the economic meltdown a far-fetched harm,
and yet, here we are, because he misjudged the
judgment of the Masters of the Universe.
Congress came this close || to passing Cap-and-Trade,
to save us from AGW, and you want to let them tinker
with a health care system which is good enough for 80%
of its clients ? Better is the enemy of good enough.
P.S. The US is bankrupt, ditto the FDIC, and the 2nd
step down into the 2nd Great Depression is...
a far-fetched harm.
Megan:
It's not a misunderstanding. We liberals (smart ones, anyway) understand libertarianism perfectly. We just think it's a juvenile view of human nature and that social policy grounded wholly in such a view is doomed to failure.
In your related post you asked "What if I'm right?" Well, if I thought you were right I'd be a libertarian/Objectivist/radical individualist. But I'm not. Because I think you're wrong.
You say:
Which is just as stupidly simple-minded as some lefty claiming "I'm in favor of cooperation" and then judging every single aspect of proposed social organization on how much a proposal favors cooperation.
That, dearie, is not the point. Social policy isn't produced to conform with views of how social policy should be produced, i.e., favoring either "competition" or "cooperation." Those are means, not ends. The end being to improve the lives of the members of a society.
Anyone with a view of human nature more sophisticated than your adolescent reading of Ayn Rand knows that humans at times benefit by competition, at times they benefit by cooperation; at times either may be a detriment. Balancing interests, rights, justice and efficiency in a world of actual experience makes that balancing sometimes extremely difficult (possibly impossible in specific cases).
But balancing we try.
Well, there are lots of other studies as well regarding vouchers, just as there are lots of studies involving parental involvement, so taken as a body of evidence, I find them pretty persuasive.
But that doesn't mean that I am as certain about something in the same way in different venues. Mathematical certainty is, well, certain. 100%. If that's what your aiming for outside of math, well, it's just not going to happen. And you go gown the scale from there, with 1-p=0.000005 for some types of physics problems (as stasticians complain frequently, physicists are usually just as clueless as social scientists when it comes to statistical tests and statistical inference. It's just their p-values are order-of-magnitudes smaller, so the misunderstanding doesn't really matter), to 1-p=0.05 for the usual social science, to unknown and unknowable p-values for what Megan likes to talk about. All levels of specific p-values have their place, depending on the venue.
This is something entirely different. Here you're talking about matching a theoretical model to the real world. If, using your example, the physician could always find someone to clean these instruments for just that amount of time, it would be a no-brainer. Do these conditions apply in real world? If it only takes the surgeon fifteen minutes a day to clean his surgical instruments, but he has to pay an aid for 40 hrs/wk, regardless, then your particular example of comparative advantage breaks down - it's $80 vs $25 per day.
Iow, the problem isn't in the model itself; the problem is determining how well it conforms to reality. Which leads to:
Sure, I can go with that; note that I never said anything about other types of evidence, only that what I gave was acceptable: sufficient, but not necessary. But again, you have to go with some way to rate the plausibility(Megan's already been pranged several times on the lack of coherence at several points.) If someone asks how Megan knows that this will lead to price controls, that price controls will lead to lower profits for the pharmaceutical industry, that lower profits will result in lower innovation than otherwise, and that over the long run this will result in more deaths and poorer than otherwise, she can't say, "Because that's what governments do" as her justification. That's just restating the premise. Notice also how many links there are in this chain. Even with what seem to me to be implausibly high probabilities for each one, the end result is rather low. Taking p=0.75 for each of them, your figure, we have then(assuming independent probabilities) an overall p=0.75^4, about 32%. Not very good even in this naive and extremely favorable model.
The bottom line is, Megan hasn't given anything but bare and sometimes contradictory assertions to back up here rather dogmatic claims. She hasn't even - per your other method of proof - explained why her particular set of stories is particularly plausible.
And what's wrong with price controls on drugs? Americans are subsidising the cheap access the rest of the world (people like me) has to life saving drugs due to our national health system. And we love our national health system. It gives us fast, ethical and high quality access to health care without worrying that we can't afford it. I use both the government system and, because I can and I think I should, I top up with private insurance. an independent government appointed arbiter sets prices. yes, it contains pharma profits, but it also bosts productivity and makes massive savings in other areas of the economy