Go Socialism!

Einherjar wrote:

Well, I'm not for central planning of the economy either way, I just thought the Soviets messed up more than one would expect just from the limitations of central planning.

I have thought about this, and have run into the problem that I don't know what one would expect just from the limitations of central planning. We have the benefit of hindsight and know what consistently happened to all countries whose constitutions called themselves socialist so far. The only hunch I have comes from Eugen Richter, a 19th century German liberal. In 1891, he wrote a text called Pictures of the Socialistic Future [/i]. Based on socialist principles as expounded by August Bebel, he tells a science fiction story about how these principles would play out in practice. And it turns out that at the end of his story, his futuristic Germany looks remarkably similar to post-1945 East Germany. There could be a selection bias there -- few webmasters would bother mirroring a 1891 misprediction on their server. Still, on the strength of Richter's book, I am inclined to say that the failure of socialism was predictable, and in fact predicted by someone who didn't have hindsight.

Einherjan wrote:

I think I've seen statistics which shows the US healthcaresystem to be rather inefficient though.

I have seen them too, and I admit they do have some merit.

Einherjan wrote:

I don't remember suggesting that medicine is corrupt, what I have suggested is that an obsene amount of money is being wasted on comercials for the stuff.

Yes, and 'corrupt' was my shorthand for this. Actually, I'm not buying that they spend more money on commercials and lobbying than on research. Can you supply evidence of that?

Einherjan wrote:

Also due to the high profitmargin on meds it becomes economical to spend an obscene amount of money on marketing, this could have been spent better in my opinion.

What makes you think the profit margin on meds is that high -- that is, after you account for up-front investments and the risk of developing medications that don't make it into the market?

Einherjan wrote:

My preffered solution is for government to buy and retire patents at slightly higher than market prices. Selling would off course be volountary, but should be profitable.

I don't think that's a terribly bad solution, but the problem is that buying would not be voluntary for those who pay for it with increased their taxes. If you account for that, why is your plan still worth implementing?

Einherjan wrote:

I'll be back to see if I missed anything in an hour or so.

Looking forward to it! Smile

0 Replies

Thomas wrote:

Eugen Richter, a 19th century German liberal.

It should perhaps be noted that Richter is a leading representative of the so-called "Manchester Liberalism" (together with e.g. Richard Cobden and Frédéric Bastiat).

You can find more about him and additional material to what Thomas already excellently summed up in this paper* (PDF-file):

Eugen Richter and Late German Manchester Liberalism: A Reevaluation

*This paper is based on a lecture given at Professor Christian Watrin's Wirtschaftspolitisches Seminar at the University of Cologne, June, 1988.

0 Replies

Thomas wrote:

Based on socialist principles as expounded by August Bebel, ...

Althought Richter was fighting Bismarck like the Social Democrats did, he was opposed to their policy and foght them with great strength (espeially in his constituency Hagen-Schwelm - very successful it must be noted!).

He was opposed any social reforms as well as e.g. the nationalisation of railways, restrictions in commerce and trade ...

I can't really follow where his views showed similarities in post-1945 East Germany (besides your quotes).

0 Replies

Walter Hinteler wrote:

I can't really follow where his views showed similarities in post-1945 East Germany (besides your quotes).

I didn't say his views showed similarities in post 1945 East Germany -- his science fiction version of a socialistic Germany looks a lot like the actual East Germany. But East Germany didn't implement Richter's views. It implemented (its version of) Bebel's views.

0 Replies

That's right - sorry that I misunderstood that.

0 Replies

In either case the central problem of extensive central planning under any political label, socialist, communist, or any other, is that the central authority must ultimately coerce people into the fulfillment of the plan. At its essence this is the antithesis of freedom. Dostoyevski described a slightly different twist on this irony quite well in "Thge Brothers Karamazov" in Ivan's tale of The Grand Inquisitor.

0 Replies

Thomas wrote:

Einherjar wrote:
Well, I'm not for central planning of the economy either way, I just thought the Soviets messed up more than one would expect just from the limitations of central planning.

I have thought about this, and have run into the problem that I don't know what one would expect just from the limitations of central planning. We have the benefit of hindsight and know what consistently happened to all countries whose constitutions called themselves socialist so far. The only hunch I have comes from Eugen Richter, a 19th century German liberal. In 1891, he wrote a text called Pictures of the Socialistic Future [/i]. Based on socialist principles as expounded by August Bebel, he tells a science fiction story about how these principles would play out in practice. And it turns out that at the end of his story, his futuristic Germany looks remarkably similar to post-1945 East Germany. There could be a selection bias there -- few webmasters would bother mirroring a 1891 misprediction on their server. Still, on the strength of Richter's book, I am inclined to say that the failure of socialism was predictable, and in fact predicted by someone who didn't have hindsight.

I'm really just nitpicking here, but I had the impression that the Soviets intentionally set the prices for consumer goods well below production costs, or the costs which would have resulted from suply and demand, so they could look good in price indexes. That they wanted to spew propaganda about how the average wage in the union would buy you more than the average wage in the US, and simply dictated prices to allow this, resulting in suply not keeping up with demand. Stores across the country being continually sold out is quite easily observable, yet the central planners made no attempt to rectify this by raising prices.

I'm not advocating central planning, though I fail to see how a centrally planned system would be precluded from setting storefront prices based on supply and demand.

Thomas wrote:

Einherjan wrote:
I think I've seen statistics which shows the US healthcaresystem to be rather inefficient though.

I have seen them too, and I admit they do have some merit.

Einherjan wrote:
I don't remember suggesting that medicine is corrupt, what I have suggested is that an obsene amount of money is being wasted on comercials for the stuff.

Yes, and 'corrupt' was my shorthand for this. Actually, I'm not buying that they spend more money on commercials and lobbying than on research. Can you supply evidence of that?

website wrote:

There is no question that advertising is an effective vehicle for increasing sales. Since the 1997 relaxation of direct consumer advertising by the FDA, drug companies have increasingly utilized this strategy to gain and retain customers.37 One source estimates that drug companies

spent $2.5 billion on consumer advertising in 2000.38 The same source also estimated that these ads might have brought in as much as $5 to $6 in return for each dollar spent on advertisements.39 While drug companies do not openly disclose marketing expenditures, the

amount is estimated to be much more than what is allocated to research and development.40 While drug companies argue that patent term extensions are necessary to justify large research and development costs, this reasoning falls short when the major cost in new drugs is advertising, rather than research and development.

http://216.239.59.104/search?q=cache:wl7iRf_QYc8J:http://www.okjolt.org/webdox/wdoc/Wirz.doc+Pharmaceuticals%2Bmarketing%2Blobbying%2BResearch%2Bdevelopment
Exerpt is from just below the bolded text in the article.

I've been googling for more, but it seems there aren't a lot of numbers out there. I'll instead try to make a case that it would be logical to expect massive spending on advertising from Pharmaseuticals.

Once a drug has been developed the Pharmaceutical is looking to maximize its profits off of it, its return on investment if you will. Over a period of 20 years the pharmaceutical has a monopoly of the market, and sets prices so that an increase in profits by increasing the price of the drug would be offset by the resulting decrease in consumption. This would leave the pharmaseutical with a huge profitmargin, not accounting for R&D invested it is at this point a fixed investment already made. The sale of one extra unit of the medicine will increase the profits of the pharmaceutical company by an amount equal to the profitmargin on it, not accounting for R&D as R&D costs are not affected by the sale of one extra unit of the drug. There are no R&D costs associated with producing and distributing another unit of a drug which has already been developed.

The return on investment in advertising must therefore be calculated as the profitmargin not accounting for R&D multiplied by increased sales. Since said profitmargin is very high it remains profitable for a pharmaceutical to advertise even when increased sales are very low.

This could be avoided if patents were bought by the state and retired, as regular market forces would take over. One might even pass legislation banning branding of drugs by manufacturers, in effect forcing all aproved manufacturers to sell under the same brand. That would cut marketing expenditures even more.

Thomas wrote:

Einherjan wrote:
Also due to the high profitmargin on meds it becomes economical to spend an obscene amount of money on marketing, this could have been spent better in my opinion.

What makes you think the profit margin on meds is that high -- that is, after you account for up-front investments and the risk of developing medications that don't make it into the market?

See above.

Thomas wrote:

Einherjar wrote:
My preffered solution is for government to buy and retire patents at slightly higher than market prices. Selling would off course be volountary, but should be profitable.

I don't think that's a terribly bad solution, but the problem is that buying would not be voluntary for those who pay for it with increased their taxes. If you account for that, why is your plan still worth implementing?

Because it would reduce 'wasted' marketing expenditures, and because it would allow customers who would be willing to pay for the production of the drug, but not for the development of it, would also benefit from the drug. Funding R&D by increased costs of that which is patented introduces what I think is an unhealthy distortion to the market, reducing the desireability of implementing/purchasing it.

Quote:

Einherjan wrote:
I'll be back to see if I missed anything in an hour or so.

Looking forward to it!

I couldn't log on from my home computer yesterday. Internet trouble, sorry.

0 Replies

Einherjar wrote:

I've been googling for more, but it seems there aren't a lot of numbers out there. I'll instead try to make a case that it would be logical to expect massive spending on advertising from Pharmaseuticals.

You might try the income statements of major pharmaceutical companies. I just tried it for Novartis, Johnson & Johnson, Merck, and Pfizer. All those companies spend about twice as much on "selling general and administration" than they do for "Research and Development". So what you're saying could be true. Then again, if you compare it to the figures your source gives on consumer advertizing for the whole industry, their R&D expenses seem much larger.

Einherjar wrote:

Once a drug has been developed the Pharmaceutical is looking to maximize its profits off of it, its return on investment if you will. Over a period of 20 years the pharmaceutical has a monopoly of the market, and sets prices so that an increase in profits by increasing the price of the drug would be offset by the resulting decrease in consumption.

I basically agree. But 1) I think your 20 years, while not literally false, are a bit misleading. The clock starts ticking when the drug is patented, not when it is introduced to the market. Typically the patent is filed before the company knows whether the drug can be mass produced, before animal experiments and clinical trials, and before approval by the FDA or its equivalent in other countries. According to my father, who works in the pharmaceutical industry and has brought new medications to market there, the time between introduction to the market and the expiration of the patent is typically about 8 years. Moreover, 2), patents expire after 18 years, which means any medication ever patented before 1987 is now free to copy. I remember 1987. We had decent pharmaceuticals then. So the loss from the premium we have to pay on medication patented after that doesn't strike me as a big deal.

Besides these two points, I agree with your discussion of R&D as a sunk cost for the purpose of setting the marketing budget.

Einherjar wrote:

One might even pass legislation banning branding of drugs by manufacturers, in effect forcing all aproved manufacturers to sell under the same brand. That would cut marketing expenditures even more.

It would certainly make the sellers of obsolete drugs happy. If the new drugs can't be advertized for, nobody will ever know the old drugs have been obsoleted.

Einherjar wrote:

Funding R&D by increased costs of that which is patented introduces what I think is an unhealthy distortion to the market, reducing the desireability of implementing/purchasing it.

I don't understand. Why is it a distortion if the consumer of a drug, who gets the benefits of taking it, also pays for the research that brought the drug into existence? This looks to me like a market working as it's supposed to. Why do you want a consumer to get a free ride on research other people have paid for?

0 Replies

I wish I'd found this thread a little earlier. The original piece was unworthy of someone with academic pretensions, although funny in parts.

"Many NPR stations are now airing the BBC in part to further propagandize Americans in the socialist way of thinking. (Most Americans do not realize the government-owned BBC is increasingly monopolizing the broadcast media in Britain and, particularly, news to the benefit of the left.)"

I am truly sorry. I will immediately cancel my license subscription on the grounds that the BBC is corrupting vulnerable young minds in the United States.

Is the BBC only pushing left wing propaganda when we have a Labour government here? Or does its output tothe US change radically in tone when we have a Conservative government? As a matter of fact, the BBC is not government owned and has its independence guaranteed by Royal Charter. Of course that didnt stop it broadcasting anti strike propaganda during the general strike of 1929, the miners strike of 1984, and it didnt stop it broadcasting reports about the build up to the Iraq war which so incensed Tony Blair that he forced the resignation of its Governor and Chairman.

"The democratic socialists gained control in England in 1945 under Clement Attlee. As a result, the British economy was run into the ground."

...of course this had nothing to do with Britain fighting two catastrophic world wars in just over 30 years. The country was exhausted. And we did not benefit in the same way as continental europe did from the Marshall aid plan.

"Hence the British people voted to reprivatize their economy under Margaret Thatcher beginning in 1979."

Smile

Hang on, Clem Atlee to Maggie in two sentences. What happened in between? Ever heard of Churchill? He wasn't a socialist. Neither was Edward Heath or...oh never mind.

"Surveys in the U.S. and elsewhere show the overwhelming majority of professors and public school teachers are on the left side of the political spectrum, so one should not be shocked they hesitate to teach history and theory that show their self-interested ideology is a failure."

Of course I'm quite willing to believe that American academia is teeming with Maoists, but history in England is taught according to the National Curriculum. (or so I'm told...)

"Most reporters have been fed a steady diet of leftist and socialist propaganda from both their schools and from government agencies, and too few are willing to do the independent study and research to discover and, in turn, report the truth."

And what, as someone said, IS TRUTH?

Walter, feel free to quote from the Labour Party website any time... Smile

0 Replies

Very interesting dialogue between Einher and Thomas concerning the costs for R & D and marketing pharmaceutical drugs. I agree that it is a bit difficult to see the social benefits of the advertising of pharmaceuticals. The idea of reducing those costs - to the producer, and ultimately to the consumers - through some government action, such as the government purchase of patents, is appealing.

However I believe this is an illusion that ignores important elements of reality. First, as Thomas noted, the R & D expenditure is made long before the drug is tested, (possibly) approved and sold. The decision to make that investment and persist in the development through the inevitable difficulties is made by the pharmaceutical company based on its expectations of future profit. An important element of that process is the confidence it has in its ability to predict future economic outcomes with respect to its sale of the drug during the patent period. While it is possible to estimate the demand for a certain drug based on its medical properties, and to increase the reliability of that forecast through advertising the costs and benefits of which can be readily estimated, it is quite impossible to forecast the future behavior of an entity as powerful as government in these matters. Without advertising, confidence in sales estimates is decreased. Government is a particularly intrusive buyer of goods and services. It demands objective "proofs" of the value of things it buys and often detailed accounting of the costs of producing it. It is capable of unpredictable demands if given the power to make them. The uncertainty in estimating the future value of a Patent sold to government is so great that it would quite effectively deter the pharmaceutical company from making the investment in the first place.

A demonstration of this phenomenon can be seen in the fact that no nuclear powerplant has been licensed and constructed in this country for more than 25 years, despite huge increases in our consumption of electrical power and accompanying huge increases in the prices of the fossil fuels that supply the alternative sources of that power - and the environmental compliance costs attendant to their use.

During this period there have been significant improvements in the design of nuclear plants that increase their already high safety, extend the life of the plants, and reduce their operating costs. In the face of all this it seems quite inexplicable that no one has even attempted to build such a plant here. The reason, however, is clear. The potential for litigation by environmentalists during the licensing process has made it quite impossible to even predict how long it might take or how much the effort might cost. In such a situation investment decisions are effectively deterred because it is impossible to reliably estimate the potential economic return. Even a known but very high initial cost will result in investment. However in a free market capital will not long stay in situations in which it is impossible to estimate a return on it.

Thomas wrote:

You might try the income statements of major pharmaceutical companies. I just tried it for Novartis, Johnson & Johnson, Merck, and Pfizer. All those companies spend about twice as much on "selling general and administration" than they do for "Research and Development". So what you're saying could be true. Then again, if you compare it to the figures your source gives on consumer advertizing for the whole industry, their R&D expenses seem much larger.

I have not taken the trouble to consult the cited financial statements, but I note that, from a public accounting perspective, the category of "selling, general and administrative" includes not only marketing, but also the costs of governance, security, insurance and liability, and the costs of compliance with public accounting rules. For a pharmacutical firm these costs should be quite high, even without advertising - probably well over 18% of total revenue.

Certainly their advertising costs are high, but the return on these costs, particularly its effect on the reliability of investment decisions, is also high. We have seen a great deal of investment in the development of pharmaceuticals over the last several decades, and significant benefits have resulted from it. It is important not to kill the goose that lays the golden eggs, particularly through well-intended, but ultimately foolish, meddling in a not-perfectly-understood process that already yields good results.

0 Replies

Thomas wrote:

You might try the income statements of major pharmaceutical companies. I just tried it for Novartis, Johnson & Johnson, Merck, and Pfizer. All those companies spend about twice as much on "selling general and administration" than they do for "Research and Development". So what you're saying could be true. Then again, if you compare it to the figures your source gives on consumer advertizing for the whole industry, their R&D expenses seem much larger.

Thanks for the links. I have read on several occasions that pharmaceuticals spend a lot on marketing, and since this seems logical to me I have never really questioned the premise. I found it hard to come up with numbers, but I found a source making unsubstantiated claims. It said the pharmaceuticals weren't disclosing marketing-expenditures, so I argued that it would make sense for them to do so instead.

I didn't know pharmaceuticals took ten years to get their products approved, that's a lot of testing. Perhaps it is due to determining long term effects in clinical trials?

Thomas wrote:

Einherjar wrote:
One might even pass legislation banning branding of drugs by manufacturers, in effect forcing all aproved manufacturers to sell under the same brand. That would cut marketing expenditures even more.

It would certainly make the sellers of obsolete drugs happy. If the new drugs can't be advertised for, nobody will ever know the old drugs have been obsoleted.

I figured it would still allow for producers of a given drug to advertise jointly to further their shared interests. I'm not really sure about this though.

Thomas wrote:

Einherjar wrote:
Funding R&D by increased costs of that which is patented introduces what I think is an unhealthy distortion to the market, reducing the desireability of implementing/purchasing it.

I don't understand. Why is it a distortion if the consumer of a drug, who gets the benefits of taking it, also pays for the research that brought the drug into existence? This looks to me like a market working as it's supposed to. Why do you want a consumer to get a free ride on research other people have paid for?

Well as a general rule I would like for research costs to be considered sunk costs for the purpose of determining wether or not it would be worth the cost to implement it / purchase it. If it would have been cost effective at production price I would like to see it used.

I am under the impression that most countries, the industrialized ones at least, already have arrangements in place intended to alleviate the burden on those who require medication, and I think the reduction in marketing expenses that would follow from my approach makes it worth implementing instead of those other mechanisms.

I think the philosophy behind the various forms of healthcare-subsidies is that some people incur great expenses trough sheer bad luck, and some sort of insurance scheme is in order.

0 Replies

Having established that capital veers away from uncertainty georgeob1 goes on to say:

georgeob1 wrote:

Certainly their advertising costs are high, but the return on these costs, particularly its effect on the reliability of investment decisions, is also high. We have seen a great deal of investment in the development of pharmaceuticals over the last several decades, and significant benefits have resulted from it. It is important not to kill the goose that lays the golden eggs, particularly through well-intended, but ultimately foolish, meddling in a not-perfectly-understood process that already yields good results.

I have suggested only that pharmaceuticals be given the additional option of selling their patents to government which would then retire them. I can not se how this would deter investment as the pharmaceuticals would still have the option of turning down the offer.

Any side effects of subsidising pharmaceuticals/drug purchasers would not rival the magnitude of measures in effect today aimed at doing precicely this.

0 Replies

Einherjar wrote:

Well as a general rule I would like for research costs to be considered sunk costs for the purpose of determining wether or not it would be worth the cost to implement it / purchase it.

It may be a sunk cost at the time the state considers purchasing it. It is not a sunk cost at the point the firm considers starting research in the first place. And if it knows that it won't be able to charge anyone for the cost of the research, it will conclude that research is a bad investment. Your approach works for Norway, where companies aren't doing much research. For Norway, it is a viable option to free-ride on the research financed by American, French, Swiss, and German consumers. But it is not an option for the world at large.

Einherjar wrote:

If it would have been cost effective at production price I would like to see it used.

How about if it's not cost effective at production cost, but cost effective at production cost plus capital cost on research and development? Do you want to see it used, or do you prefer to reject this opportunity for mutual advantage?

Einherjar wrote:

I think the philosophy behind the various forms of healthcare-subsidies is that some people incur great expenses trough sheer bad luck, and some sort of insurance scheme is in order.

I agree, but this philosophy is independent of who should finance pharmaceutical research, and of the international free-rider problem.

0 Replies

Alright you've misunderstood. I would like for busineses to consider research a sunk cost, meaning that if installing a new feature will be worth the cost of installing it, it should be installed. I would not like implementation of a new feature to be restricted to areas where the feature would also be cost effective after factoring in the development premium.

My outlook on medicine is similar to my outlook on industrial developments.

I am not looking to reduce incentive to research or develop, after all I would not restrict the right of companies to keep their patents and go about the market as a temporary monopoly. I'm just proposing that government makes favorable offers to buy and retire them. I think this would benefit the society as a whole.

Quote:

How about if it's not cost effective at production cost, but cost effective at production cost plus capital cost on research and development?

If it's cost effective at production costs pluss development costs it will also be cost effective at productioncosts alone.

Let's go over this again:

I would have the government pay for the development of a feature by buying the patent of it at slightly above market value, IF the patentholder agrees to sell. Traditional monopoly would remain an option, but governments offer should be more profitable to the developer.

With development costs covered industry would only consider the actual costs of installing the application, thus in no event would a business, in which installing the feature at production cost would be profitable, be forced not install it because the feature would not be profitable for that particular business after factoring in the research premium. Also businesses would be quicker to implement a new feature if the profitability of it was not reduced by added premiums not associated with production.

Edited for clarity

0 Replies

Einherjar wrote:

Let's go over this again:

I would have the government pay for the development of a feature by buying the patent of it at slightly above market value, IF the patentholder agrees to sell. Traditional monopoly would remain an option, but governments offer should be more profitable to the developer.

I would have no objection to that at all. The crucial thing for me would be the right of the patent holder to retain his patent if he chooses. This is crucial for the establishment of a "market price".

Governments however generally act as though the option to buy the property of private owners is equivalent to the right to do so. Moreover, the extent of government's power to punish, through the powers to regulate and tax, those who refuse or otherwise disagree is so great as to invite abuse. This makes me skeptical of such things.

0 Replies

georgeob1 wrote:

Governments however generally act as though the option to buy the property of private owners is equivalent to the right to do so. Moreover, the extent of government's power to punish, through the powers to regulate and tax, those who refuse or otherwise disagree is so great as to invite abuse. This makes me skeptical of such things.

I haven't thought about that, would leaving the buying of patents separate from elected alleviate the problem?

I think the behavior you are referring to has more to do with government buying land for highways and such, one old gizar refusing to sell could cause a lot of trouble for such a project. I think the purchasing of patents would be less problematic, as the failure to buy a patent wouldn't serve as a dealbreaker for a much larger project.

0 Replies

You may well be correct in that.

I will confess to a deep skepticism of the bureaucratic elements of government, and probably am biased to excessively doubt their ability to avoid corrupting such policy options.

0 Replies

Einherjar wrote:

I am not looking to reduce incentive to research or develop, after all I would not restrict the right of companies to keep their patents and go about the market as a temporary monopoly. I'm just proposing that government makes favorable offers to buy and retire them. I think this would benefit the society as a whole.

I understand that, I just suspect that a variant of the socialistic calculation problem makes the approach self-defeating. If the government buys only a few patents (say 10% of those filed), the policy doesn't make much of a dent in the problem you want to solve. If it buys lots of patents (say 90% of those filed), firms will have a strong incentive to patent lots of junk for the sole purpose of selling the patent to the government. They will get away with this because it is very hard to assess the quality of a pharmaceutical patent early in the development process, and because few people have an incentive to assess it realistically. There might be an intermediate percentage of patents filed where your policy does more good than harm. But I'm very very skeptical about it.

0 Replies

I think in the case of pharmaseuticals at least a buy and retire policy for patents would be helpful. Massive marketingbudgets would be freed for other purposes.

You wouldn't need to purchase the patent early on, you'ld be able to wait until it was ready to hit the market. In the case of medication you could even afford to wait for the product to prove itself on the market before making an offer, because nobody who needed the medication would delay purchasing it to see if the patent would be retired by government anyway. The government offer could be calculated by some formula based on first year profits and time remaining until expiration. Aiming at say 110% of market value one would expect to get at least a majority of patents purchased.

For industrial equipment the problem bothers me more. I guess one could leave the product on the market for a year, and reimburse the R&D premium paid by businesses that implemented the feature before the patent was retired, if indeed it was retired. I'm not quite sure how the suspense would effect the market though. One could also make the offer just before the product vent into production, and just tolerate a bit of inaccuracy in the asessment. Corruption might be a problem though.

While I enjoy toying with this idea I am open for suggestions of alternate ways to go about the issue.

0 Replies

Einherjar wrote:

You wouldn't need to purchase the patent early on, you'ld be able to wait until it was ready to hit the market. In the case of medication you could even afford to wait for the product to prove itself on the market before making an offer, because nobody who needed the medication would delay purchasing it to see if the patent would be retired by government anyway. The government offer could be calculated by some formula based on first year profits and time remaining until expiration. Aiming at say 110% of market value one would expect to get at least a majority of patents purchased.

There just may be a few devils lurking in these details. Whatever the formula used the, government 'offer' would have to be just that, an offer which the company could freely reject with no penalty from the government, either through regulatory or tax retaliation or even through public scolding. How likely is that? Second, recognize that the monies paid to the patentholder would be paid through taxation - no free lunch here. Finally the government would become the patentholder, and if it licensed widespread production, the reduced price would be available to consumers throughout the world - an that is an element that would have been included in the lost profit/market price paid for the patent. . The taxpayers would in effect be subsidizing the whole world.

Quote:

For industrial equipment the problem bothers me more. I guess one could leave the product on the market for a year, and reimburse the R&D premium paid by businesses that implemented the feature before the patent was retired, if indeed it was retired. I'm not quite sure how the suspense would effect the market though. One could also make the offer just before the product vent into production, and just tolerate a bit of inaccuracy in the asessment. Corruption might be a problem though.

Bothers me too. Mostly because I see little benefit to anyone for doing this. There is no shortage of investment on industrial (or even agricultural or biotechnical) innovation. (Indeed goverrnments often actively, and foolishly, block such applications) This may be a solution in search of a problem.

0 Replies

Related Topics

Quick Links

My Account

able2know