Prices in markets are information – however much we might not like the lessons being delivered.
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Samizdata quote of the day – Prices in markets are informationSamizdata Illuminatus (Arkham, Massachusetts) · Economics, Business & Globalization · Slogans & Quotations January 14th, 2024 |
 27 comments to Samizdata quote of the day – Prices in markets are informationLeave a Reply |
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And, the lack of pricing and money in a socialist/communist system is the precise reason such hubristic attempts fail so consistently and so hard: They deny that such information exists, let alone making use of it.
Like it or not, money and all the rest of the things that go along with traditional economic systems are there for a reason: They work. The information about what is needed and where it is needed? The information about what your labor is worth? All of that is contained in the pricing/money equations. You can’t deny them any more than you can deny physics, although plenty of fools try.
Note the sudden outrage over high fast food prices here in the US; people complain about how much a Big Mac costs, these days… But, they forget: Not all that long ago, they were demanding that fast food employees get paid a “living wage” of $15.00 an hour. That’s a huge reason these prices have gone up; the cost of labor is now artificially inflated.
So, who do they blame? McDonalds, of course…
Idiots.
One problem though is that although prices are information, they are rather blunt instruments, and they don’t tell us a lot of the information we need. For example, every price has built into it the cost of things like regulations, taxes, patents, corporate cronyism and so forth. These components aren’t broken out in the price and so it is very easy to confuse people claiming that the components of the price are different from what they actually are.
For example, “price gouging” is a price signal, but it is not interpreted correctly as, for example, the high cost and risk of delivering goods to a disaster zone, but is instead interpreted as “greedy capitalist taking advantage of people at their most vulnerable”. Or the cost of medical procedures is interpreted as greedy hospitals or insurance companies gouging sick people (even though, for some reason hospitals and insurance companies are rarely good investments) rather than recognizing the massive costs associated with regulation, patents and monopolistic practices.
It is all packaged up into one simple number that can be spun to make whatever villains you want to create while hiding the real villains from view.
Does price provide as good information in such a hugely government-regulated-and-guaranteed market as the one inhabited by public postal services? (Royal Mail in the OP, the USPS here in the US.) No risk, no competition . . .
Not just idiots but hypocrites as well. Anyone who was in favour of that $15 pay rate should be cheerfully forking over for their more costly McMeal knowing that they are helping out those low paid workers by doing so.
BEV’s, solar panels, wind power, student loans, medical costs, food prices, fuel prices . . . It would be hard to find a consumer market in which state forces have not distorted free-market operation. So, while Tim Worstall’s statement is true in terms of economic theory, it bears less-and-less relation to real-world markets every day.
llater,
llamas
Fraser Orr wrote:
“. . . .the massive costs associated with regulation, patents and monopolistic practices.”
Please define the “massive costs” associated with patents.
llater,
llamas
Llamas, patents are fine in theory but when patent offices allow companies to patent the concept of a single-click checkout process it becomes a race to patent the obvious. Patent trolls are a huge cost to be borne by companies that actually innovate. That is all before considering the negative effects created by companies buying up patents and using them to stifle opponents.
Industries can work around some of these things, for example Gif being problematic, but it does have costs.
@Alex – so what you’re describing is the massive costs associated with abuses of the patent system? For that, you will need to speak (in the US, at least) to the US Congress, which took the 1952 patent law (which would not allow the ‘business methods’ patents you mention) and completely rewrote it, at the behest of tech-company lobbyists, to allow those sorts of things to be patented.
As to your comment about ‘patent(ing) the obvious’, speaking as the inventor of not-a-few US patents, I’ve been told this more-than-once, and my response is ‘Yeah? Well, it wasn’t so bloody obvious until I wrote and published a complete and detailed description of how to do it – was it?’
Every software developer I have ever met always repeats the assertion that all software-related patents are ‘obvious’, and that they could have replicated them.in an hour or two if they’d had a mind to do so, and how it’s a crying shame that evil Microsoft or greedy Intuit makes millions off them – to which my reply is ‘So – What was stopping you?’
llater,
llamas
@Stonyground
Not just idiots but hypocrites as well. Anyone who was in favour of that $15 pay rate
This reminds me of another issue. Imagine if, every year, the government defined one foot to be 5% smaller. We’d have amazing headlines about how the government is making everyone in America taller. Which is a crazy notion, but of course that is what they do with the dollar every year.
I have said this a few times — but if your goal is to get a $15 minimum wage from a current $7.50 minimum wage, one way to do it is to make the dollar be worth half as much.
@llamas
Please define the āmassive costsā associated with patents.
Patents obviously have a massive cost — namely that they enable the patent holder to charge a monopoly price on the patented device. This was so obvious to, for example, Google that they spent ten billion dollars acquiring mobile related patents from its purchase of Motorola’s mobile division.
Argue, if you will, that the costs are offset by the innovation they generate (something that I would vehemently reject) but it is self evident that patents have massive costs associated with them.
@ Fraser Orr – obviously, I mis-understood you. When you referred to the ‘massive costs’ of patents, I thought you were referring to some vast cost, to individuals or to society, which is not recovered and has no benefit. Turns out, you’re just talking about prices. Sure, Google paid massive sums for Motorolas’s patents – and for why? Because they’re Worth It – they create benefits that customers are happy to pay for, even at the unquestionably-higher monopoly price, albeit for a limited time. You may argue that the customer paid more than he might have because of the patent monopoly – I’d argue that, absent the patent monopoly, the benefit would not have been available to the customer at any price because, without the limited monopoly, there’s just no incentive to develop and release wildly-innovative products to market. Why would you, when your competitor can piggy-back on your development for nothing?
I won’t argue that the costs are offset by the innovation they bring. I will argue that a) the costs are freely paid by customers, who willingly pay even the higher monopoly price for the self-evident benefits and b) the higher prices paid for patented products during the monopoly period are more-than offset by the lower prices to consumers when the monopoly ends and anyone can make and sell the identical product. We had an interesting discussion here a few years back about the class of drugs typified by the patented Gleevec, where somebody (not me) linked a study showing that the benefits after a drug like that came off patent exceeded the higher prices charged for it during the monopoly period by orders of magnitude. And that doesn’t even consider the almost self-evident fact that, without the patent monopoly, ther’d be no Gleevec – at any price, for anybody, ever.
llater,
llamas
I have some personal experience with the patent issue. I was working with a major book retailer, moving them over to a Microsoft backend product. As part of my work on that I analyzed and tested most of their site.
I noticed that they had this completely useless interstitial pop-up. When I asked them why, they told me that another major online retailer had patented 1-click checkout. Their own legal department was unsure of whether or not they could be sued for having a one click checkout process; thus the interstitial.
Which is frankly idiotic. You can defend the idea of patents and still recognize that in certain areas, and software in particular, the system is broken.
Microsoft used to pay its employees a pretty sizeable sum to successfully patent anything, on the idea that they could use those patents as weapons to prevent competition.
Just to be clear, I was working for Microsoft at the time. My first job there was to migrate commercial website backends from various platforms to the Microsoft backend platform, which at that time was Commerce Server.
@llamas
Ugh, I really didn’t want to get drawn into a whole thing about patents since I have done so many times in the past on this blog. But… since I am a really big fan of your writing here, I’ll indulge the discussion for a little while.
So let’s get down the the essence of the patent argument. Patents are granted to people for a limited time because doing so, it is claimed, produces more innovation. Without them, people would not invest time and energy into producing new, innovative ideas. So by offering the benefit of monopoly pricing for a while, society gains with more innovation and creation.
This is a claim that is made both in the constitution of the United States and by patent supporters the world over. There is an entirely different claim that patent owners “own” the idea the same way I own my house or car, but you don’t seem to be making that claim, so, unless you do, let’s make sure to put it aside and focus on the utilitarian claim — granting monopolies, while reducing other people’s rights, is a utilitarian benefit. We are better off with patents — despite the cost — than without them.
So where is the evidence to support this claim? It is not a moral claim of rights but a utilitarian claim of “this is better than that”, so surely it is empirical in nature? Given that there are hundreds of thousands of patents being granted every year, surely there are many, many economic studies that demonstrate this claim to be true? To the best of my knowledge there aren’t any, or there may be a few with very weak support for the proposition, some that are neutral, and some that sway against it. This fact alone is just shocking. We are placing a major restriction on people’s right to innovate because of a claim that just has hardly any evidence to support it.
How could that possibly be so? Surely if you grant a monopoly pricing opportunity that allows people a guaranteed ROI on their investment, making them more likely to make the investment. And that is undoubtedly true. However, it forgets that thing that people so often forget in economic discussions — opportunity cost.
Let’s say I develop a drug and put it on the market. Let’s say you then develop a very similar drug that falls within the very overbroad claims that my patent has (since patent claims are always crazily overbroad). My drug has different properties, maybe it works better in women than yours does because the extra methyl group prevents it binding to estrogen, for example. But because I beat you to the PTO, you can’t release your drug, or at the very least you can’t without a license from me that allows me — your competitor — very strong control over you. Who loses? The public loses because it doesn’t have access to the superior properties of your drug. And that is true whether you knew about my drug or not.
Of course you might say “well you might never have developed your drug first”, which might be true, or it might not be true depending on the cost benefit analysis I performed. People make these decisions all the time, and monopoly pricing is only one of the contributing factors. What we have here are two competing benefits, the encouragement with monopoly prices to develop a new drug, and the discouragement for others to develop a different new drug because of your granted control of the market. Which is to say it isn’t all one way, there are downsides to patents, and so, if we are going with a purely utilitarian approach we have to assess where the utility is. But apparently such analyses are rarely if ever done.
On occasion the government imposes restrictions on people’s right to free speech, or right to own a gun and so forth and we set the bar very high before we allow such laws to be passed. But here we have a law that prevents people from making and selling what they will in their own factories from their own raw materials… surely we should demand a very high level of evidence to support the notion that this restriction is worth it? Surely if we rob someone of a right to do as they will with their own property we had better have a VERY convincing case that the public good overrides the right of the individual?
But there is a bigger problem. I understand from your comments that you are a holder of several patents. I don’t know the circumstances of these patents, but we can come back to it if you want to reveal any more information (which of course I certainly don’t expect of you — you are entitled to your privacy.)
However, the general conception of patents is that they protect the little guy from some big corporation stealing someone’s idea. Crazy uncle Tony came up with a way to make an engine that runs on sugar. He’s going to be a millionaire!! This is the public perception but it is entirely different from the reality. Crazy Uncle Tony probably can’t get a good patent because he can’t afford the huge legal fees associated with it. He can’t do it himself for the same reasons you shouldn’t do the legal work yourself when you buy a house or go pro se in your murder trial. Plus the big corporations have a gigantic portfolios of patents many of which will impinge on his idea in some minor way and they will prevent him for making his sugar engine, forcing him, most likely to sell out to them. Is uncle Tony really going to go all out in a legal patent fight with General Motors? Probably better to take a token payment and go back to tinkering in his garage.
That, that is the reality of the patent legal system. It is not at all for the little guy, it is a tool by huge corporations to crush competition, especially from the little guy. And they all have a building full of lawyers cranking out hundreds of patents a month to expand their portfolio. Often not as an tool for attack, but as a tool for defense to protect themselves when their competitions attack them — so they end up in some sort of patent war detente. And, FWIW, that is the reason that Google bought all those patents — to defend themselves against other mobile manufacturers, as far as I can see anyway.
I could write for a month on this subject, because there are a lot of aspects to it, but if you are interested in further information on this topic I’d recommend reading this 25 page paper from the St. Louis Fed the presents the “against patent” position especially well. BTW, by no means am I demanding you read it before commenting, I hate it when people do that. But I have a lot of respect for your comments and obviously sound thinking, so I thought you might be interested in something a bit more in depth.
I have written about this subject extensively in the past here, but I can never manage to search back the history on this blog — probably my fault. But if you are more successful I wrote a piece discussing the nasty case of Claritin and Clarinex that shows how the patent system robs us of new drug inventions rather than giving us more. BTW, I choose drug patents here because they are often cited as the strongest case given the large upfront R&D cost. But obviously you can substitute in software patents, electronics patents or whatever other widget floats your boat. The arguments are the same.
I’d have to say that patents and copyrights as implemented are not necessarily “good” things.
For one thing, they have often been misused to block innovation, by locking up certain ideas for years. The other issue is that all too often, people “game” the system to get around the patent or copyright, screwing over the originating individual.
Frankly, I think the concept is flawed. Fundamentally so, TBH. I think that what ought to happen is that the patent or copyright should not block innovation, but should require payment to the person coming up with the idea for a set period. You want to use the patented idea? Fine; use it, modify it, whatever… But, you pay for the right to do so. If you don’t, penalties accrue up to and including being bankrupted or shut down.
The problem with a lot of things in software, as an example? Consider one of the best word-processing programs I ever used, which was under OS/2, named Describe. It was a wonderful little program, full of excellent features that turned a basic word processer into damn near a full-scale desktop publishing tool. You’d think all the work that went into that program would be available out there, but because of copyright and patent idiocy, it’s a dead program and you can’t even find much about its existence, let alone feature set.
That’s a bad thing, because the basic idea of copyright and patent law is to make human knowledge more available and easily understood. You have all the work that went into that program, and it’s as dead and gone as the library at Alexandria, which is a tragedy to my mind. Things should not work that way, particularly with software. The code should be accessible to anyone, once the company goes out of business or the product is no longer supported.
I’d also be up for saying that copyright should end once a work is no longer affordably available. There should be no case where a work has gone out of publication, yet is still copyrighted, running costs on old copies up into the stratosphere. Again, this does not work to benefit human knowledge, so it should be reworked.
Is this it? I just search with Google, “site:samizdata.net Fraser Clarinex”.
@Colli, yes, thanks, that is the one I was thinking of, thanks. I’ll need to work on my google-fu.
@ Fraser Orr – well, I know you’ve made these arguments before – quite effectively – and you obviously have strong beliefs on the matter. I doubt I’ll do much to change your mind. But let’s try.
Regarding the lack of evidence for the efficacy of patents in spurring innovation, I’d argue that they are, in fact, the subject of a natural experiment which provides its own data. Nations with the strongest patent protections (specifically, the US), produce far-and-away the most innovation, in virtually every field of endeavour.
Your argument about stifling development, illustrated by an example of competing drug development, falls down on its face. You describe how your new drug is different in its composition and action than the patented drug, so, by definition, it is different than the patented drug, and is therefore itself patentable. If the first drug patent has overbroad claims, then your issue is with the Patent Office and its examiners, not with the system. That’s a whole different topic, but maybe for another day.
But dig a little deeper. Say you are the developer of the first patented drug, let’s use the Claritin example you used before. Absent the ability to patent the drug, your only choice to exploit your very-costly development is to hold it as a trade secret, and defend that secret against all comers. Now nobody knows what it is, and nobody knows how it works, and your only hope is to keep it a secret for as long as possible. That secrecy must necessarily stifle any innovation by anyone but you, and it hardly seems in the public interest to allow the sale of drugs that nobody knows what they are or how they work. Public safety demands transparency – which patents provide in abundance, nota bene – and in return provide a formalized and limited monopoly to replace the secrecy and suppression which would be the inevitable result of the alternative. Or, indeed, the complete absence of any such development at all – which is exactly what our real-world experiment shows. All major drug developments occur either in the US, with its strong patent protections, or as a result of state-funded research – paid for with monies taken from citizens by force, who might otherwise have no interest in or need for Claritin, for the alleged greater good of all. Libertarian much?
You used the example of Claritin and Clarinex to illustrate the contention that patent holders sit on their monopoly and delay innovation to maximise the return on their patented products before releasing new products, thus ‘denying’ the public the benefit of newer products. Firstly, of course, timing products to market to maximise benefits (to the shareholders, nota bene) is neither immoral nor illegal. Does Ford ‘deny the benefits’ of their 2024 models to consumers by not selling them before their release date and forcing customers to get by with the 2023 models? And again, you produce no evidence that matters would somehow be different were there not patents on these products. If Claritin is selling well, and there’s no prospect of any competition as long as you can enforce your monopoly by secrecy, why release Clarinex at all? A little thought might suggest the idea that the expiration of the Claritin patent monopoly was the exact reason that Clarinex was made available to the public, not only when it was, but at all, and that it might otherwise not have been made available then, or indeed, ever.
Your assertion that the patent system does not serve the “little guy” but only benefits huge corporate interests is but partly true. The seminal example is Robert Kearns, the protypical “little guy” who defended his patents against all 3 major automakers and won hundreds of millions of 1970s dollars from them because they stole his ideas from him. But the world of arts and sciences is filled with myriad “little guys” who turned their ideas into successes that we all benefit from, solely because of the existence of a strong patent system. Do major corporate interests manipulate the patent system? Sure they do, like they manipulate every other system that touches business. But if they do, your beef is more-likely with the Congress, which is repeatedly lobbied to alter patent law to align with corporate intetests. The Constitutional mandate is clear that patents are to vest in individuals, the Congress has rather lost sight of that. And, of course, patents in themselves are not expensive. What’s expensive may be the amount of development required to reduce a patentable idea to practice – remember, a patent is not just a good idea, it must demonstrate how that good idea is to be implemented and brought to an objective reality. But that expense is independent of the patent – you’d have to spend it anyway to bring Claritin to market, patent or no.
I note that you make the standard libertarian argument that people should be free to make what they will in their own factories with their own materials. Very well. Now, you are J. K. Rowling. You write a book of children’s fantasy which starts to sell rather well. One day, a printer in Hong Kong begins producing vast quantities of perfect facsimiles of your book, and selling them for the same or slightly less than your existing supply chain. No law or contract prevents him from doing so. Your sales end, your income from that book ceases. You already wrote a sequel. Will you publish it? If so, why?
Although not central to your argument, you brought it up, so I will add, free and gratis, that I absolutely believe that patents and the intellectual content they embody are a personal, individual property, that vests in an individual and may be bought and sold like a pair of socks. Just like J. K. Rowling’s writings are her personal, individual intellectual property.
I doubt I’m changing your mind, but I’m happy to keep plugging away if you wish and our gracious host permits.
llater,
llamas
P.S. Fraser Orr refers to the fact that I, of my own self, am an inventor of a number of US patents – which is true – and that I might therefore have biased opinions in the matter, no doubt also partly true. But those are not the only things that form my opinions. For example, I know, personally, a man who started out in life delivering pizzas in downtown Detroit to support his family while he went to school. Solely on the basis of patents which he and his wife filed for and were granted, he developed an entirely-new field of product, never-before seen or thought of, and built a multi-billion dollar enterprise on the back of it. None of which would have happened, for hus family or the product, had he not been able to patent and subsequently license his innovation. So much for ‘not at all for the little guy”.
llater,
llamas
Yes.
Even when prices are horribly distorted Credit Money prices, they are still vitally important. And prices include rents and wages – efforts to “help people” by rigging prices, rents and wages do terrible harm to the very people who the establishment claims to want to help.
@llamas
I’ll try to get to your other comment later, but I did want to address this one. By no means was I suggesting you were biased, I was just curious about your specific experience. A lot of people who hold patents don’t hold them personally, but they are a work for hire assigned to their employer. So, that is a very different experience than crazy uncle Joe (or your billionaire rich pizza friend.) So, that is really what I was alluding too.
That’s a great story, and I am certainly very glad for the guy who had all this success. It is the American dream for sure. But of course there are going to be some success stories. Joe Biden’s “Inflation Reduction Act” no doubt benefited some people greatly and legitimately, even though it hamstrung the rest of the country. As you no doubt know data is not the plural of anecdote. I’m a pretty innovative person myself, but I can think of several ideas I didn’t pursue just because I knew enough to know they wouldn’t have a chance in the patent jungle.
@ Fraser Orr – well, I wasn’t trying to make this about me, however, you have now asked twice so here goes.
I worked 35 years for a salary at a related succession of companies, all in the same field of business, first in the UK and then in the US. My employers were committed (at first) to investment in developing new and innovative solutions for their market segment, to obtain market dominance and earn large profits. My colleagues and I were set to work on developing those solutions, and patents flowed from that work organically – we were breaking new ground, most of what we did was patentable at some level. I applied for my first US Patent in 1987, as part of a team of inventors, and I continued to apply for patents at an average rate of about 1.5 a year until about 2010. As far as I know, every individual application, as well as all divisional and continuation applications stemming from the originals, was granted. We had very good patent lawyers. Our inventions shaped that market segment on many levels, they made large profits for my employers – and I was a stockholder š – and even today, I occasionally see one of the devices I designed, containing our patented content, in use in a US setting.
As an employee, my employers not-unreasonably made it a condition of employment that any inventions and patents related to our work were to become their property, and all may patent rights, issued to me as a individual as the law requires, were contractually-conveyed to my employers. That was absolutely-fine with me – unlike my pizza-delivering friend, who reduced his invention to practice on his kitchen table, our inventions were of a kind that required large investments in research, development and tooling to bring to market, and I had (and have) no wish to become an independent inventor. In addition, some of my employers paid a significant bonus for every issued patent, and between that and my paycheck, I was well-satisfied with the benefits I got for my inventions.
After that, I worked 10 years for a salary in a completely-different field, where the rules about patents are very different, and our inventions, while unquestionably-patentable in the commercial sphere, generally did not result in patent applications.
Nowadays, I no longer work for an employer, but I have interests in a number of development activities, at least one of which will result in one or more patents. As I still have no wish to become an independent inventor, I have negotiated a deal with the commissioning/funding agency to convey any patent rights that will emerge from the development to them, in return for a structured royalty, and, once again, I’m just fine with that.
Reading all that back over, I realize that some readers will form the impression that I’m ‘shooting a line’, and I’m in two minds about whether to post it. However, having respect for your contributions here, and since you asked the question, here you go. If anyone has doubts, I suggest they make application to our ever-generous host – he knows my real name, and where I live, and 5 minutes of searching on Google Patents, or in the USPTO PatFT database, will show the truth of what I have described.
llater,
llamas
Kirk wrote:
“I think that what ought to happen is that the patent or copyright should not block innovation, but should require payment to the person coming up with the idea for a set period. You want to use the patented idea? Fine; use it, modify it, whateverā¦ But, you pay for the right to do so. If you donāt, penalties accrue up to and including being bankrupted or shut down.”
Er – that’s (fundamentally) what happens today. If you patent an idea, but choose not to exploit it yourself then i) you are required to pay periodic and substantial maintenance fees to the USPTO to keep the patent in force
https://www.uspto.gov/learning-and-resources/fees-and-payment/uspto-fee-schedule#Patent%20Maintenance%20Fee
and if you do not pay them timely, your patent will lapse
and ii) anyone is free to approach you with a view to licensing your patent for mutually-agreed payment.
Where your argument falls down is the idea of penalties for not exploiting your idea. If you accept that a patent is a piece of property, then you should be left free to exploit what is yours in whatever way seems to you most-advantageous – and not to be penalized for not sharing it with others, even if they are made to pay for it. After all, it may be in your best interest not to allow others to make use of your property, regardless of what price you could charge for it. It’s no different than forcing a landlord to rent an empty property, or compelling you (let’s say) to hire your car to a stranger when you’re not using it. Sorry. Not going for that.
Kirk also wrote:
“Iād also be up for saying that copyright should end once a work is no longer affordably available. There should be no case where a work has gone out of publication, yet is still copyrighted, running costs on old copies up into the stratosphere.”
That word ‘affordably’ is doing a lot of heavy lifting there. Remember – the price is a market signal. It tells you that the cost of getting you the particular work you happen to desire is quite high, the obvious result of extremely-low demand. Why should the price of rare works, for which there is little or no demand, be held be held at an artificially-low level?
llater,
llamas
Oh, look – a Federal judge just enjoined Apple from selling several versions of its Apple Watches because the court found that Apple stole the patented pulse-oximetry technology of a small California company called Masimo. But I thought patents only benefitted huge corporations, not the “little guy”?
llater,
llamas
As a man with a creative mind, I support patent rights. I have not yet been successful in my inventing projects, but the hope of becoming rich has certainly inspired me. Stephen King, a writer, has also favoured Intellectual Property.
@llamas
I am sorry It took me so long to get back to you. unfortunately sometimes life gets in the way of my interneting…
But there are obvious flaws in this argument. For example, what is the fastest growing economy in the world and what is its view of patents? And obviously also even insofar as you accept the correlation you mention that does not demonstrate causality, especially so since there are so many other obvious candidates for causing any correlation such as stability of government, security of economy, stability of currency, and security of (non IP) property.
I can equally argue that economic success as is found in much of the China and South East Asia demonstrates a huge amount of innovation, and so this “experiment” demonstrates exactly the opposite. But of course we can’t know, since it isn’t really an experiment where the confounding factors have been controlled. However, there have been some attempts to do this (referenced in the paper I sent you before) and they do not come down on the side of patents.
But in my example, which I chose specifically to counter this argument, all YOU did was add a methyl group to the drug I invented. So it is directly derived from it and is therefore not patentable without making a licensing agreement for your patent. Moreover it is perfectly possible that you might have invented the precursor drug at the same time as me and just methylated it to improve it. But because you were so busy saving the lives of women that I got to the patent office first, then you are screwed.
Closely guarded secret is not at all their only option. They have, for example, a huge first mover advantage. It takes ten years to get a drug approved at the FDA, so that is ten years to recover their costs. Moreover, a lot of the complexity of drugs is with regards to the manufacturing process which they can certainly keep secret. Of course the case with drugs is very much confused with its interaction with regulatory bodies, and I have also ranted here at great length about those too. And that extra dimension makes it difficult to get too specific in the realm of drugs.
Nonetheless, I am by no means saying that in a world without patents we would have the same market. We would not. Certainly some drugs would never be invented. However, the elimination of patents would allow other drugs that could not be invented to be invented, and it would drive down the cost of drugs making them more available.
That’s true, but using the law to prevent others from entering the market with a competitive product to fill in the gap most certainly is immoral and should be illegal.
It is funny that you hold him up as a hero, I think he is the opposite of a hero. He invented something fairly obvious — intermediate windshield wipers — and then used the legal system to extract vast tribute from the auto makers. Were it not for patents he would have approached the auto makers in a completely different way. Why didn’t he just invent a conversion kit that could be added to existing cars, or work with some supplier up the line to get a better deal? In what way was him coming up with an idea that would surely have been invented ten minutes after him, entitle him to millions of dollars, subsequently extracted from consumers? I believe there made a movie about this, and I no more rooted for this underdog hero than I did for the loathesome Erin Brockovitch in her movie.
And this here is the key observation. Things are invented pretty much as soon as the precursors of the inventions come along. It is no coincidence that Bell and Grey invented the telephone at the same time, becuase it was at that time that it first became possible to invent it. That’s not to say that inventors don’t work hard to invent their ideas, but what it does do is call into question the premise that patents stir innovation. Innovation happens as a natural consequence of other innovation in an exponentially exploding factor. Do you really think that had Kearns not come up with the intermediate wiper that nobody else would have? That we wouldn’t be able to wipe our windshields intermitently today? In what way did his small consideration bring the tens of millions of dollars the court awarded him? His ability to run faster to the patent office than the next guy?
And this is why patents are different than copyright. At the time of Kearns it is evident that many different people could have come up with his idea because the precursors were all there. It is perfectly reasonable to expect you to come up with a drug similar to mine since both of us had the same precursor situation that produced it. And so putting them together indepdendently is something that we should not only allow for but expect. In the case of Ms. Rowling, nobody could reasonably expect that Hong Kong factory to come up with exactly the same words as she did, it is self evidently a copy by the volume of the duplication. There is VASTLY more pure creative work in Harry Potter than there is in any invention (though considerably less engineering), which is why I, very reluctantly, accept that copyright laws are actually necessary to encourage the production of those works. So I don’t think you should be able to do ANYTHING with your property and factories. For example, I don’t think you should be able to use your gun to propel your bullet through my body. But the bar for such a restriction has to be extremely high. I believe this is the case I made — not that you should be allowed to do anything, but that you’d better have a damn good reason before you stop me. And the utter lack of evidence that patents are a benefit to society means it enrages me that such theft is legally enforceable.
So I am not particularly claiming that patents SHOULD protect the little guy, just that the idea that they do, the dream of every wage slave of his brilliant idea cashing in like winning the lottery, is a myth, or largely a myth. For every Kearns there are a thousand Joe Schomes who end up with nothing except a wasted life and a huge legal bill. The real purpose, or at least the effect, of patents is to keep huge companies huge, exclude competition, and keep “the system” going.
FWIW, I should say for completeness that I also reluctantly agree that Trademarks are a justifiable restriction on free speech, though I think both copyright and trademarks are much too broad in scope and there is a lot about the specifics of the laws that I don’t care for at all.
But you own a pair of socks forever. So if you believe patents are like property, why are they restricted in time? If they were not, surely you accept that that would hinder progress since every new product, including a new pattern of socks or different style of hosiery, would require a million different licenses from the million different inventions that made them possible?
And moreover, if you truly think patents are property in the same way that socks are property, then you must think that patent trolls are a good thing, a free market solution to a terrible waste of resources. After all, a patent troll is simply an innovator who takes unrealized assets and realizes their value. A patent trolls is like an efficiency auditor who comes into a business, finds non productive assets and makes changes to make them productive — often by spinning them off into separate entities. “Hey, Mr CEO, you own this building that isn’t being used for anything, we should sell it off to realize its value”. Patent trolls are simply, by your view, the application of the efficiency of the free market to the use of putative property like patents. So, if patents are like socks, then surely this is a good thing, rather than curse of society that they really are.
That’s funny, because I was thinking EXACTLY the same thing about you!! Though I very much appreciate your energetic and intelligent defense of the indefensible. š
Urg, maybe. I think I have spoken to the point of boring everyone on this matter. I’d probably rather piss everyone off by questioning the utility of the Ukraine war, or banging on about the evils of the FDA, or lamenting the loss of Vivek from the presidential race, or pointing out that, with or without patents, the west in general and America in particular is in for an inevitable (with or without Trump) utter self implosion.
@llamas
January 17, 2024 at 11:10 pm
Oh, look ā a Federal judge just enjoined Apple from selling several versions of its Apple Watches because the court found that Apple stole the patented pulse-oximetry technology of a small California company called Masimo. But I thought patents only benefitted huge corporations, not the ālittle guyā?
By what definition of “little” is Masimo a little guy? It has 2000 employees and a market cap north of $6billion.
FWIW, this is to me a perfect example of what is wrong with the patent system. I have no sympathy for Apple but did they “steal” this technology? Of course not, they had many talented engineers working for a LONG time to develop it. It seems obvious that Apple developed this technology independently and Masimo are simply acting as patent trolls here.
Why don’t they simply make a better product than Apple and compete with them that way?
Is the world better off with this ridiculous judgement? Of course not, everybody who wants to improve their health with an apple watch will be hurt by it. And how will it be resolved? Apple will either buy Masimo, or get some beneficially exclusive license with their ten thousand lawyers, and the patent dĆ©tente will continue as before so that real little guys can’t get into the market. So I’m afraid, to me anyway, your example favoring your case is in fact a perfect example of just how bad and damaging the patent system is.