For Americans, paying for the discovery and development of new drugs rests on our shoulders. If we pay, we get new lifesaving medicines. If we don’t, we don’t.
Almost all new drugs are developed for the U.S. market, no matter where the company’s headquarters are. Why? America is a large, rich country with an advanced medical system. America’s gross domestic product per capita is 65% higher than Britain’s, 57% higher than Germany’s and 87% higher than France’s. There are four Americans for every German and nine Americans for every Canadian. We have many wealthy people. The Food and Drug Administration, which moves slowly, is still often faster at approving new drugs than regulatory bodies in other countries. While far from a free market, our medical system is freer than in many other nations. Countries with single-payer systems often take one to two years to negotiate the price of a new drug. If a patent is granted for 20 years but the first 13 years are dedicated to development and approval, then only seven years of patent-protected sales remain. If two years are added to that timeline for reimbursement negotiations, the interval drops to five years.
If new drugs can make it in America, they are developed. If they can’t, they aren’t. Other countries are considered secondarily. They are the cherry on top; we’re the sundae.
…..
No one in this country is happy that Americans pay for drug R&D while the rest of the world free-rides off our investment. But we don’t run the world. If we try to free-ride too, there won’t be a ride. When we look at our situation as it is, not how we wish it were, we can see what a good investment drug R&D is and how cheap-drug schemes such as importing drugs from Canada and “negotiating” Medicare drug prices generally won’t work. If they do, we’ll wish they hadn’t.
Brian Albrecht reveals many of the errors of Trump’s and his minions’ pronouncements on trade – errors made manifest by basic economics, others by the artful application of basic economics to real-world complexities. (HT David Levey) A slice:
One former advisor to Trump said on Twitter, “Tariffs are taxes on FOREIGN producers, not American.” This led to an absolute roasting by economists across the political spectrum. My favorite response was from Michael Strain: “Sales taxes are taxes on GROCERY STORES, not on the customers buying groceries in grocery stores.” The grocery store comparison perfectly explains why the advisor was wrong.
Literally, the first thing we teach about taxes is the difference between the statutory incidence (who pays the money to the government) and the economic incidence (who bears the burden). Even if foreign producers write the check, the economic costs get passed on via higher prices that fall on domestic consumers and companies dependent on imports. This textbook case of misleading use of statutory incidence reveals how underrated Econ 101 insights are.
…..
Modern supply chains transit multiple countries with components and materials combined to manufacture final items. In reality, a lot of international trade is less about Americans buying things from foreigners than it is about firms with large American presence optimizing their production processes to best serve American households.
On a recent podcast with Microsoft founder Bill Gates, two-time OpenAI CEO Sam Altman suggested that a “global regulatory body” was needed to monitor artificial intelligence. This is a colossally dumb idea. But Mr. Gates doubled down: “If the key is to stop the entire world from doing something dangerous, you’d almost want global government.” Wait, global what? Mr. Altman responded, “That feels possible to me.” Oh no. In fact, of his 2023 world tour meeting heads of state, Mr. Altman noted, “there was almost universal support for it.” Well of course there was. Demand for power is insatiable. (Microsoft is a major investor in OpenAI.)
Governments don’t like to govern, but they like to control. Human freedom always takes a back seat. I’m reminded of something P.J. O’Rourketold me in 2009: “Think about the kid-has-to-put-a-hockey-helmet-on-to-answer-the-phone society we live in now. Government is filled with people who come and tell you that everything you do is bad for you, bad for other people, insensitive, divisive, harms the climate, unsustainable, leaves too large a carbon footprint, tangles things in the tuna nets that shouldn’t be tangled in them. Whatever. They’ve always got some reason to tell you what to do.”
Why? “Government is just a form of bullying for weaklings,” O’Rourke said. “Politics is the art of achieving power and prestige without merit.” Bingo.
Adam Smith wrote in “The Theory of Moral Sentiments” (1759) that government bureaucrats think they “can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chessboard.” But Smith notes on “the great chessboard of human society, every single piece has a principle of motion of its own.” Freedom.
Sanjai Bhagat and Henry Laurion draw lessons from the demise of Silicon Valley Bank.
Arnold Kling continues to pour forth wisdom. A slice:
I still see the government as a supplier of paper wealth, via deficits, not backed by any real output. If this does not generate a resurgence of inflation, it won’t be for lack of trying.
My GMU Econ colleague Bryan Caplan shares an important insight from GMU Econ alum Brian Goff.
Peter Suderman details “the bankruptcy of Bidenomics.” A slice:
Bidenomics was, at heart, a philosophy of throwing money at programs, people, political allies, and favored constituencies. That spending contributed directly and significantly to the rapid rise in inflation that helped fuel voter dissatisfaction with the state of affairs. Thanks to misallocation, poor implementation, and self-contradictory regulatory requirements, the substantive public payoffs to that spending have been weak at best and counterproductive at worst.
Lockdown support made hypocrites of left & right. The left abandoned its traditional support for civil rights and policies to protect the vulnerable. The right abandoned limited government & freedom.
Now the public wonders whether either side was ever serious in its commitments.
