Friday, September 04, 2009

Government Interference Helps Innovation

In my last post, I quoted Megan McArdle saying "I'm not defending Big Pharma--I could care less if Pfizer stays in business. I'm defending market pricing for drugs."

Yet, this only showcases what a complete nimrod she is. Because there IS no proper market price for new drugs. And that's because the government grants a temporary monopoly to drug manufactures as a reward for making new drugs; as a way of spurring more innovation.

And were it not for this government-based intrusion into the free market, anyone would copy their drugs, thus lowering the price to the point that you could never make a profit if you were the one who created it. Your competition could always under sell you, because they didn't need to pay research costs. And so that's why drug makers have such large profits: Because the government gives them a monopoly which basically allows them to set their prices. And as we all know, the government interferes with the free-market like this in countless ways, and conservatives never complain about patents, copyrights, and trademarks either. Yet they're very anti-competitive.

And the solution to this is for the government to essentially negotiatate drug prices on our behalf, thus using their vast buying power to force these drug companies to sell their drugs for less. In other words, they're using a market-based mechanism to offset the monopoly-power they gave to the companies; thus restoring market forces. This is really no different than what Walmart does to hold prices down, and I don't hear conservatives complaining about them stifling the free markets. And hey, if conservatives like Megan McArdle want to support the drug industry by negotatiating directly with the drug manufacturers, nobody's stopping them.

And so free-marketers like Megan McArdle have this entirely backwards. They support the government stifling free-markets by granting government-enforced monopolies, while opposing the government using market forces to keep costs down, and calling this a monopoly. But of course, this all just shows that, for as much as these people love the free market, it's quite obvious they haven't a clue what it really is.

3 comments:

Matt Osborne said...

I came over here on Broadway Carl's recommendation, and by golly I am impressed by the very first post I read.

Anonymous said...

McMegan can see your lips moving but she just doesn't understand what you're saying.

123 said...

It is certainly interesting for me to read this post. Thanx for it. I like such topics and everything connected to them. I would like to read more soon.
Alex
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