Monday, February 28, 2005

Free Market - why won't the Republicans give it to us?

It's always noteworthy when the party NOT associated with the "free market" - who also happens to be the minority party - is demanding "free market" reforms. But that is exactly what is happening. Select Democrats are calling for market forces to be unleashed, allowing cheaper Canadian presciption drugs to be sold in the United States. This from CNN:
Montana's Democratic governor thinks it "makes no sense" that the United States can import "cattle, hogs and logs" from Canada -- but not cheaper prescription drugs.

Speaking in the weekly Democratic radio address Saturday from Helena, Montana, Gov. Brian Schweitzer said "local pharmacists should be allowed to reimport safe, affordable prescription drugs from Canada, where American-made, U.S. taxpayer-subsidized medicine is sold for as little as half the U.S. retail price."
I agree: it makes no sense. Unless, that it is, you are trying to protect the pharmaceutical industry's profits at the expense of all the American people that need presciption drugs. To borrow a line from one of my favorite movies, "Why Ike, whatever do you mean?"


At 8:21 PM, Blogger DLW said...

here's a dirty little secret. There is no such thing as free markets. All markets are products of legal institutions. To remove all barriers to trade inevitably subverts the ability of countries to have different policies, like whether or not one funds pharmaceutical R&D through subsidies or through granting the companies monopoly power on existing products.


At 9:23 PM, Blogger jrl20 said...

I agree. So let's actually talk about those policy choices.

Subdizing R&D or even abandoning R&D altogether is, I contend, infinitely better than granting companies monopoly power.

Better to distribute the medical technology we already have than to develop more that only the rich have access to.

At 10:16 PM, Blogger DLW said...

yeah, its considered more efficient to subsidize the R&D directly, since the higher monopoly prices lower the optimal level of consumption of the pharmaceutical goods. However, since demand for these products is highly inelastic, its no surprise the pharm companies want the higher prices. Plus, that gives them the autonomy/say-so over what sort of R&D they do, rather than gov't providers of subsidies. One can rightly anticipate that they won't be doing much R&D for the many diseases of the under-developed world.


At 6:36 PM, Blogger donzelion said...

DLW - not technically correct. There have been 'perfectly free' markets. It's just that people move out of them as quickly as they possibly can - e.g., blackmarket Somalia, and opium market in Afghanistan. They can even function with a 'reasonable' degree of predictability - and some folks profit tremendously in both cases. The closest the West has ever come to 'free market with perfect competition' was in agriculture during the 19th-early 20th centuries - unlimited vendors selling unlimited, undifferentiated product at pure market prices. But again, farmers fled the market in droves (to the cities).


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