Pandemics and public goods, and why we are failing at both

by on May 5, 2013 at 3:47 am in Economics, Medicine, Science, Uncategorized | Permalink

Here is my latest New York Times column, which has a specific part on how to address pandemics and a more general section on the evolving role of government in American society.  In neither area are matters running especially well.

Here is one initial point, namely that it is difficult to commit to allow high prices upfront:

Research and development grants are a way to pay potential innovators up front — an important move, as an innovator can’t always charge high-enough prices for the value of its remedies when they’re actually needed.

That will lead to institutional failure, rooted in a mix of government and market failure.  Therefore other rewards are needed, since the prospect of high prices does not adequately motivate.  I thus call for some key drugs to be rewarded with prizes and for government to buy out the patent rights, if need be:

If anyone doubted a government pledge to pay big money for the rights to remedies, the patent’s value could be established by a competitive auction. Michael Kremer, a Harvard economics professor, outlined the procedure for such an auction in his research paper “Patent Buyouts.”

The larger problem is this:

OVER all, the American government seems to be turning its back on its traditional role of producing and investing in national public goods. If there is any consistent tendency in recent government spending, it is that spending on entitlements like Social Security and Medicare — which provide mostly private benefits — is rising and that investment and spending on national public goods is falling.

Do read the whole thing.  I also suggest that (non-paternalistic) public health could be a suitable health care issue for Republicans, who presumably should be looking for alternatives to the status quo.

There are by the way two points which did not make the final cut for reasons of space.  First, the current coronavirus in Saudi Arabia has not gone away as a source of potential problems.  Second, the Bush Administration (43) did take some notable steps to return vaccine capacity to the United States, through both regulatory forbearance and HHS procurement.  These are likely good policies since in a pandemic one cannot expect to rely on free international trade in a remedy but rather export controls are to be expected.

1 Mike May 5, 2013 at 4:10 am

“Government is the problem! Taxation is theft! The public sector produces nothing, it’s just a leech on the job creators in the private sector!”

The idiocy of your politics, which you in part enable, has real and very sad consequences.

2 hattip May 5, 2013 at 5:32 am

Well no, Ile, it is you poltics that ar idiocy. One need only poin t to the real and actual failures of collevtivism in the 20th Century to see this.

You call people “idiots”< yet you offer no reason as to why this is so.

Actually the current state of government is the inevitable outcome of collectivism: A wholesale robbing of the productive to give maintain power by redistributing wealth from the productive to the unproductive.

You do not make your case and neither does Mr. Cowen. This post is full of logical fallacies. Mr. Cown most runs around here begging the question.

His whole argument seems to hinge on the notion of the capitalism hampering a quick response to new medications in the face of "pandemics" and so he would ease the way by subsidies. This completely avoids both the real circumstances of the so-called pandemics and the whole process of R and D. It might work one time, but after that Mr. Tyler would have killed the goose that lays the golden eggs.

It is hard to see how this is a market failure to meet demand. It is a political "success" for one political faction that has deeply damaged the market and individual initiative,

3 Mike May 5, 2013 at 7:08 am

I’ll note that I didn’t call anyone an “idiot”, I called the culture of conservative politics in America idiotic. Other than that you’ll excuse me if I don’t respond further – you are, I fear, part of the problem.

4 yang May 5, 2013 at 9:35 am

Mike, you make the world a worse place. You are a terrible human being. Please try to improve yourself.

5 Andrew' May 5, 2013 at 9:42 am

So Mike, it’s a chicken or egg thing. Tyler Cowen made government suck by saying government sucks?

That little meme might work for certain political groups to squeak out an election or two by fooling moderates, but not for long.

6 Peter Schaeffer May 5, 2013 at 10:27 am


If you actually pay attention to the finances of the U.S. government you will see that the relentless expansion of the welfare state (Social Security, Medicare, Medicaid, TANF, WIC, “disablity”, SSI, etc.) has strangled the ability of the Federal government to do anything else (R&D, public health care, defense, law enforcement, etc.).

A few simple numbers, in 1962 entitlements were 31% of spending and defense was 49.2% of total outlays. That means that discretionary spending (R&D, public health care, defense, law enforcement, etc.). was well about 50% (probably 60%+). in 2012, entitlements were 61.9% of total spending and defense was 18.7% of outlays.

Take a look at The basic fiscal story of the last 50-60 years has been plunging defense outlays, soaring entitlements, and a decline in “other” which includes the CDC, R&D, etc. All of these numbers are stated as a fraction of the Federal budget. However, as a percentage of GDP the results are the same.

7 Andrew' May 5, 2013 at 11:11 am

Peter, you should know better, the government now only does wealth transfers and offensive military belligerence instead of defense because of libertarian critiques (sic).

8 uffy May 5, 2013 at 2:44 pm

Law enforcement is no longer getting funding?

9 John May 5, 2013 at 3:35 pm

That’s an odd take on Tyler’s post — I was actually thinking he’d lost his way and started over promoting government economic planning/policy interventions so solutions to various social issues. No where does Tyler mention taxes but he does mention increased spending on pandemic remedy research. He also points out how the profit mechanism appears to him inadequate for the task. His logic seems little different than other claims for increases government involvement inf various industrial planning or social welfare planning efforts. I fail to see why we should expect better results this time or in this specific niche.

10 dearieme May 5, 2013 at 4:33 am

The proposition that there are some tasks that it would be sensible to have done by government is endlessly undermined by the evident incompetence of government as it undertakes the many tasks that it shouldn’t, and the evident greed of its overmanned workforce.

11 david May 5, 2013 at 5:06 am

The proximity of this and the first comment is amusing.

12 Claudia May 5, 2013 at 8:36 am

The government is not “incompetent” … in many cases it’s trying to do things that are low probability success but high probability social-welfare-enhancing. Why do all the private sector analysts use BEA numbers on the economy if they are so *flawed*? Why did/do we need Social Security? … private citizens and firms had many years to fix elderly poverty on their own. Oh and JP Morgan handled the 1907 crisis, so why did we have a duck hunt to create the Fed Second best outcomes can be a massive improvement over the ‘private market solution’ that came before and yet still be many steps behind the first best.

On the post, I am skeptical that different price signals can overcome the barriers to break through innovations. Maybe go big or go home is not the right model at all? Instead of a prize to the winning lab that makes the drug, maybe there are certain projects that require cross lab collaboration with government contracts to purchase products. The work place culture and organizational structure has a strong pull on the big goals, the price signals are more about relative allocations not shifting the edge of the box. There are lot of differences between my job as an economist at the Fed and my brother’s as an engineer at a biotech start-up but the public-private difference is not the one that looms largest…and yet, I think we’d be both skeptical of a prize pushing us to innovate more. Innovators are happier when the daily hoop jumping and arguing with naysayers gets out of the way … are more grant and prize applications going to make that better?

13 Andrew' May 5, 2013 at 11:20 am

The government is not “incompetent”
Sure it is, in the sense that everyone is incompetent and then requires many years of trial by fire of competition. And by what theory might government be relatively incompetent? The obvious hypothesis that the competition of the government (politics and bureaucracy) is not as effective as market competition.

For one: “private citizens and firms had many years to fix elderly poverty on their own” back when it was a much smaller problem. The government didn’t fix that problem. It took a small alleged problem (what, was it back then 1 recipient per 41 workers or something) and made it into a huge, government-existence threatening problem. Not to mention we still have plenty of poverty.

14 Andrew' May 5, 2013 at 11:23 am

You also probably shouldn’t use The Fed. If there is one area where the government is required it is to manage their monopoly on money. That only argues that they do a good job in THAT, which they haven’t. Sorry.

15 Claudia May 5, 2013 at 11:34 am

don’t talk to me about trial by fire…that was the first few years of my job. markets crashing are a stronger signal than fighting for a bonus … just like finally solving the research puzzle is more rewarding than the line on your CV. of course, incompetence is a human thing, but so is ingenuity. broadly speaking I am no fan of bureaucracy (which is not a private or public thing) but it does have it’s place. in a crisis having an established system and procedure (no matter how second best) is a godsend. if you know what to do when you can’t think, well that’s a great way to get through a crisis. the CDC not the winning research team will be the key to getting through a pandemic…a drug without a network to supply adds insult to injury.

old age poverty was real as was the financial crisis. you may not like the solutions or what got us there, but still. and is it so hard on marginal revolution to think about marginal changes. government and bureaucracy ain’t going anywhere … nor are our pressing problems … so what are the tweaks that make it a bit better? I didn’t agree with the marginal ideas in the op-ed but I thought the spirit of them was great.

16 Andrew' May 5, 2013 at 11:43 am

The “problem” the government fixed was to give 1 beneficiary benefits per 42 workers. That was a small problem. They did not fix a problem of the scope of today’s problem. Now we have a huge problem. You may not like my hypothesis that they made the problem worse, but they did not fix the problem.

As for your personal experience, that is not what I’m talking about. I did not say that individuals are incompetent. The government should have to compete for the PhD’s they cherry-pick. They don’t compete on a level playing field because they just tax us to pay for them via the politics and bureaucracy. Those are just facts.

17 Andrew' May 5, 2013 at 11:48 am

Public goods aren’t public goods because the government is particularly efficient at supplying them, but because the private sector allegedly doesn’t do it at all.

My point about old age insurance is that it has morphed into middle-class to middle-class wealth transfer which has probably doomed the government from of fixing poverty, in my opinion because it violates the kind of natural law of public goods provision because they aren’t doing public goods. Social security is not old age insurance anymore, and that is probably one reason why it is a failure.

My point with The Fed is that financial crises may be a legitimate public good area, probably because the government has deemed itself (through armed threat) the monopoly provider of fiat money. They HAVE to do that job. They don’t do it that well. But that does not argue for other public goods provision even if they are a poison pill like Social Security.

18 Claudia May 5, 2013 at 11:49 am

You clearly know better ….

19 GiT May 5, 2013 at 7:37 pm

” Innovators are happier when the daily hoop jumping and arguing with naysayers gets out of the way … are more grant and prize applications going to make that better?”

This seems like a useful point. “Give people prizes” sounds all well and good in the abstract, but no scientist I know enjoys filling out grant applications and what not. They seem to prefer working on their research.

20 Bender Bending Rodriguez May 5, 2013 at 9:49 pm

I’d certainly like to replace the “go big or go home” model in defense procurement. We’d be much better off if the US government has purchased the winning JSF design from Lockheed Martin. It could then continue to play Lockheed against Boeing on assembly prices. The rest of the world could come out a winner as well: Without the need to cover NRE, Lockheed wouldn’t feel the need to sell the design all over the world.

21 prior_approval May 5, 2013 at 4:57 am

‘for government to buy out the patent rights’

So, it isn’t enough for government to grant and enforce patent rights, if a government determines that patent rights are a danger to public health, they have to pay the patent holder?

Well, thankfully when other goverments were thinking of doing this with cipro a dozen years ago, the U.S. was able to ensure the sanctity of TRIPs – enough so to point out how other governments were not allowed to operate in an unapproved framework for ensuring the health of their citizens.

Like this (from 2001) –

‘The United States opposes a declaration that creates a broad carve-out to TRIPs ostensibly to “protect public health.” Instead of permitting targeted exceptions to TRIPs, this open-ended language would result in commonplace erosion of patent protections – from pharmaceuticals to medical software – and thwart research into medicines to treat life-threatening diseases. Indeed, it could subvert the entire TRIPs Agreement. ‘

And if there is one thing the world cannot afford in a public health crisis is any ‘oen-ended language’ that could be applied to a broader view of a government granted patent. Do note the cipro section of that link – it is full of that special Alice in Wonderland feeling which marks the American approach to public health and patents.

Because if there is one thing that makes the American system of health care truly stand out, it is its commitment to the idea that patents ensure better health – for those able to pay, of course.

22 Cliff May 5, 2013 at 10:12 am

So your argument is that incentives don’t matter and just as many life-saving drugs will be developed regardless of how the inventors are rewarded? Is your view not contradicted by the fact that most life-saving medical innovations come out of the U.S.?

23 john personna May 5, 2013 at 10:23 am

University researchers compete for grants and status, they can do this even when grants require prefer output in the public domain. There is more than one kind of incentive..

24 Urso May 5, 2013 at 12:11 pm

Clearly true. However, the website is called MARGINAL revolution, and you should think about what that implies (ie, motivation is not a binary state).

25 john personna May 5, 2013 at 12:23 pm

Clearly true. However, there is no reason that we should choose a market profit motivator in a non-profit domain. We want public researchers to share their work early and often, and not to hold up for patent application, etc. Again, in that domain, grant money and status seeking are already excellent motivators, at the margin.

26 uffy May 5, 2013 at 2:56 pm

Do “most life-saving medical innovations come out of the U.S.”?

27 GiT May 5, 2013 at 7:49 pm

A relevant question. I don’t know. But here’s a report that seems relevant:

28 john personna May 5, 2013 at 10:16 am

How much less of a problem would there be if research majority-funded by taxpayers was in the public domain? The side-road to IP-owning non-profits just created conflict of interest and the tragedy of the anti-commons. The path to get there is to prefer public domain projects for future funding, and then to fund these kinds of drugs which you think are useful. Then, leave the commercially profitable drugs to profit-motivated researchers. Too simple?

29 Andrew' May 5, 2013 at 11:38 am

A patented technology has a problem of the last holdout of land that is taken by eminent domain to build a highway.

30 john personna May 5, 2013 at 12:02 pm

I am making a distinction between public effort and private effort. To use your metaphor we currently buy small parcels for non-profits with public funds, in high traffic zones, and then seek to license them back again, with public funds. We seek to make research self-funding but by paying twice.

I accept that if a commercial venture, with private funds, creates a property they have, and should have, a right to profit. It’s just that we are badly mixing the paradigms. Tyler’s solution, to repurchase rights seems … well it might be a grant to private companies, and would certainly lead to rent-seeking as profit making companies sought to reduce expenditures and research for the public domain. It would seek to make all research commercial research.

I believe we should have a vibrant “property culture” and a vibrant public domain, at the same time. Both should be funded, one by markets, one by government. It is a clean partition.

31 Rahul May 5, 2013 at 4:58 am

“………and why we are failing at both”

Why are there more articles announcing policy failure than success. And I don’t mean just Tyler’s column, though Tyler is a good archetype of this genre.

Is this pervasive failure story-line a fairly good reflection of the times we live in? Or is there some sort of mood-affiliation, selection or some such bias in play here?

Health policy, Immigration, Employment, Housing, Patents, Taxation, Budgets, R&D, Higher Ed, Schools if all are mostly policy failures (reading NYT, WaPo, or even MR, it sure seems so), then what are our successes? Are there any?

32 prior_approval May 5, 2013 at 5:05 am

I am very confident that in one major area, America has been truly successful on a scale rarely seen in human history.

The truly rich have become even more fabulously rich. Though sometimes, it does seem as if that is a bit of successful American policy has been underreported in the mass media.

33 Cliff May 5, 2013 at 10:15 am

Try over-reported. And God forbid someone should get wealthier if they are already wealthy!

34 Cliff May 5, 2013 at 10:16 am

To the extent this is a problem, the solution is to stop crony-capitalism, which is a huge bipartisan problem.

35 Peter Schaeffer May 5, 2013 at 10:34 am


“………and why we are failing at both”

The problem is… It’s just not true. Type “Crude Death Rate for Infectious Diseases, U.S., 1900 – 2000” into Google and check out the charts. The decline in death rates over the last 100 years is absolutely amazing. A quote from “” should make this point.

“RESULTS: Infectious disease mortality declined during the first 8 decades of the 20th century from 797 deaths per 100000 in 1900 to 36 deaths per 100000 in 1980. From 1981 to 1995, the mortality rate increased to a peak of 63 deaths per 100000 in 1995 and declined to 59 deaths per 100000 in 1996. The decline was interrupted by a sharp spike in mortality caused by the 1918 influenza epidemic. From 1938 to 1952, the decline was particularly rapid, with mortality decreasing 8.2% per year. Pneumonia and influenza were responsible for the largest number of infectious disease deaths throughout the century. Tuberculosis caused almost as many deaths as pneumonia and influenza early in the century, but tuberculosis mortality dropped off sharply after 1945. Infectious disease mortality increased in the 1980s and early 1990s in persons aged 25 years and older and was mainly due to the emergence of the acquired immunodeficiency syndrome (AIDS) in 25- to 64-year-olds and, to a lesser degree, to increases in pneumonia and influenza deaths among persons aged 65 years and older. There was considerable year-to-year variability in infectious disease mortality, especially for the youngest and oldest age groups.”

Do “facts” matter? Does anyone care?

36 Peter Schaeffer May 5, 2013 at 11:05 am


I am no apologist for the problems of the USA. However, if you want a list of success stories, it’s easy to come up with one.

In 1990 (or 2000), the U.S. was out of consumer electronics (in perception at least). Thanks to Apple and Google, the U.S. now dominates the field (in perception at least). Even if you cut away the iPhone hype, the revival is material.

Since 2000, fracking has transformed the U.S. natural gas industry (to say the least) and revived the U.S. oil (liquid petroleum) business. In the last few years, liquid oil production has risen by 2 MBD (still below historic highs to be sure).

In 1960, the average corn yield per acre was 54.7 bushels per acre. In 2009, it was 161.9 bushels per acre. The U.S. is the world’s leader in GMOs (for now) and GMOs will dominate 21st century agriculture. European opposition is doomed.

The long-term trend in electronics miniaturization continues (Moore’s Law). The details are more complex (cores vs. core speed). However, ongoing progress is quite real and the U.S. dominates the field.

It’s not well know (at all), but the U.S. remains a successful exporter of industrial goods on a very large scale (see the Commerce Department export breakdowns). Of course, imports greatly exceed exports. But at least the U.S. has large, viable, export industries.

The U.S. is now a net exporter of refined petroleum products. in other words, the U.S. net imports crude oil, refines it, and ship the finished products abroad. Good work if you can find it. The U.S. has found it.

I am not great fan of the pharmaceutical industry for a long list of reasons. However, a high fraction of global drug innovation occurs in the U.S. The bleeding edge biotech drug used to treat a cancer patient in Peru was probably devised in the U.S.

The U.S. remains a leader in military technology. In just the last 10 years, drones have gone from being a peripheral element to a core fighting strategy. That partially a function of who the U.S. is at war with (no major power enemies) but also a result of huge technological advances. Drones aren’t new. We had them in WWII. In the 1960s, the U.S. built a Mach 6 drone (by spying over China). However, the modern technological synthesis of better machines, sensor technology, remote control, precision guided munitions, broadband data transfer, etc. is quite new. More relevantly it works.

37 Brian Donohue May 6, 2013 at 9:57 am

Sputnik! OH my God, the Commies!!

Watergate! Inflation! Unemployment!

Manufacturing!! Family farmers!!

Japan INC.- we’re doomed!!

Abysmal education!!

Uh-oh, China!!

It’s a GREAT STAGNATION, I tell ya!!

Perhaps the ongoing feeling of imminent decline is our best hope, as long as it doesn’t become defeatism.

38 Peter Schaeffer May 6, 2013 at 5:11 pm


“Perhaps the ongoing feeling of imminent decline is our best hope, as long as it doesn’t become defeatism.”

I agree. Complacence in the face of failure is the greatest threat. Sadly, contemporary America is remarkably complacent. From 2000 to 2008 we ran the largest trade deficits in the history of the world and eviscerated our own economy. Essentially no one noticed.

From 2000 to 2008 America was flooded with illegal aliens who destroyed jobs, wages, schools, health care, increased crime, undermined families, etc. even though the labor market was weak at best. The only people who noticed though the problem was a lack of sufficiently cheap labor.

39 david May 5, 2013 at 5:34 am

Influenza pandemics have the curious property that they punish governments for not being able to, at least potentially, abruptly shut down large parts of society and prevent individuals who deeply desire free movement from violating quarantine. Obviously this is not something you want to do whenever, but you at least need to have the bureaucracy and infrastructure who can organize it.

I’m somewhat surprised the comfortable mid-1990s debate on private provision of policing under anarchy never stumbled across the problem, actually. Our blog host was a contributor back then, arguing against private provision.

40 Andrew' May 5, 2013 at 9:51 am


41 Peter Schaeffer May 5, 2013 at 11:11 am

david and Andrew,

Boston suggests that government is capable of restricting freedom (“rights”) in the public interest. However, AIDS is the compelling counterpoint. Even minimal standard public health measures would have greatly reduced the death toll from AIDS. They were never even seriously considered.

Cuba used traditional public health measures to combat AIDS and was vastly more successful.

In the U.S. the “rights” ideology and PC blocked everything that worked in Cuba.

42 Zach May 5, 2013 at 5:43 am

Paying retrospectively for successes is a bad way to finance research. The researchers (who do not typically have deep pockets) end up having to produce everything on spec, and wait for events to provide them with a windfall. In the case of a pandemic, the very events which result in the windfall will also result in huge political pressures to cheat the researchers out of it.

Prizes and awards have a place in research. But they shouldn’t be a primary funding mechanism.

43 Rahul May 5, 2013 at 6:16 am

Does Tyler’s NYT article address the economic merits of reward versus grants as an effective funding model? I didn’t see any mention.

Is’t that the crux of the choice?

44 Tyler Cowen May 5, 2013 at 6:39 am

The piece comes out for more of both…

45 Rahul May 5, 2013 at 8:38 am

Good. But is there work about when a prize works better and when a grant? Is it based on the difficulty of the problem / investment / number of competitors etc?

Which problems / sectors make good candidates for a funding-by-reward model?

46 Mark Thorson May 5, 2013 at 10:30 am

When have prizes ever resulted in an important technological advancement? Margarine and canned food are the only examples that come to mind, and I could easily do without both.

47 Joe Smith May 5, 2013 at 1:06 pm

Harrison’s development of the marine chronometer is frequently cited as an example. I expect prizes work ok when a single individual or a group of two or three can tackle a problem through “sweat equity” but break down when you need millions or tens of millions or hundreds of millions of dollars in capital to pursue a problem for which there may be no solution.

48 benford1 May 5, 2013 at 7:05 am

Same old fallacious “Public Goods Theory” trotted out yet again.

Some economic activity is suddenly noticed to be of such special nature/importance that it must be managed by government central control. In this case it’s preventing communicable diseases with innovative drugs, etc.

This ‘Catastrophe-Prevention’ version of a “public-good” invents the strawman of a simultaneous failure of all private suppliers of desired medications to justify even greater government intervention in the broad market of medicinal drugs.

The only way for a catastrophic simultaneous failure of all drug developers/suppliers is if there was only one manager of all supplies by a forced monopoly — which is precisely what government introduces.

If there were suddenly no more light bulbs or toilet paper in America — we all would be in big trouble. But that doesn’t mean we should collectivize production/distribution of those items. Free markets protect us from such scarcity problems; so long as each consumer is ready to pay a marginally profitable price for a marginal increment of the product/service– then there will be people ready to provide that stuff for a profit (absent government interference).

Market organization is bottom-up, coordinated by consumer wants through the profit-loss system; government organization is top-down political command with little incentive to satisfy consumer wants or function efficiently.

The OBAMACARE train-wreck speeding towards us will, at least, demonstrate to most people — the disaster of health care collectivism.

49 Mike May 5, 2013 at 7:19 am

This is oddly fascinating, like slowing to watch a car wreck. You’re educated enough to write this long comment, and the theory of public goods is very simple, definitely within your ability to understand. And yet you manage to miss the point entirely.

Are the shibboleths of your tribe so much more comforting than actual thought?

50 Andrew' May 5, 2013 at 9:45 am

Hey Mike, can you say something that means something?

For example, if you are the same Mike from above, is the totality of your theory that government is failing at doing its only legitimate role that libertarians point out when it sucks at that job?

51 Andrew' May 5, 2013 at 9:48 am

(As if Libertarians aren’t (see THIS POST, not to mention my endless reprieve) are not even more critical of the crowding out of public goods by lower middle class self-interested transfer payments.)

52 Leon Kautsky May 5, 2013 at 10:00 am

“This ‘Catastrophe-Prevention’ version of a “public-good” invents the strawman of a simultaneous failure of all private suppliers of desired medications to justify even greater government intervention in the broad market of medicinal drugs.”

LOL, someone needs to back to intermediate public goods econ. Economics isn’t quite an Ayn Rand fantasy.

53 prior_approval May 5, 2013 at 7:18 am

‘If there were suddenly no more light bulbs or toilet paper in America — we all would be in big trouble.’

Just like those Americans in 1773 – imagine how they couldn’t throw a tea party without being able to turn on the light bulbs.

And though it might be hard to imagine, that group of tea party participants didn’t have any toilet paper around, it first being commercially available in the U.S. in 1857. (‘What country was the first to pioneer the sales of toilet paper? United States. When toilet paper made its debut to the public in 1857 it was not sold in rolls, that came later. The toilet paper was sold as flat sheets of paper that were packaged and sold. For fifty cents (US) you got 500 sheets of paper. Now toilet paper is a “modern convenience”, that frankly, no one really wants to do without.’ )

54 Cliff May 5, 2013 at 10:18 am

Depends on your definition of toilet paper, I guess. They used whatever paper they had around.

55 prior_approval May 5, 2013 at 12:38 pm

If you are unaware why literally hundreds of millions people today regarding the left hand as being impolite, it is related to the traditional lack of any paper for them to use in this area.

‘The negative associations and connotations of the use of the left hand among cultures are varied. In some areas, in order to preserve cleanliness where sanitation was an issue, the right hand, as the dominant hand of most individuals, was used for eating, handling food, and social interactions. The left hand would then be used for personal hygiene, specifically after urination and defecation. These rules were imposed on all, no matter their dominant hand. Through these practices, the left hand became known as the “unclean” hand.[20] Currently, amongst Muslims and in some societies including Nepal and India it is still customary to use the left hand for cleaning oneself with water after defecating. The right hand is commonly known in contradistinction from the left, as the hand used for eating.’

Having enough paper around to use for hygiene is a quite recent innovation, though it is certainly true that people will use whatever is available (leaves are probably still taught as a method to Boy Scouts, for example). Unless they don’t – whether in very traditional societies with their own practices (water, for example – obviously a bad idea from a public health perspective), or hyper-modern ones like Japan.

Japanese toilets are something of a topic at this site, for loyal readers (of which I most certainly am not) –

‘The current state of the art for Western-style toilets is the bidet toilet, which, as of March 2010, is installed in 72% of Japanese households.[3][4][5][6] In Japan, these bidets are commonly called washlets, a brand name of Toto Ltd., and include many advanced features rarely seen outside of Asia. The feature set commonly found on washlets are anus washing, bidet washing, seat warming, and deodorization.


The washlet can replace toilet paper completely, but many users opt to use both wash and paper in combination—although use of paper may be omitted for cleaning of the vulva. Some wipe before washing, some wash before wiping, some wash only, and some wipe only—each according to his/her preference. Another frequent feature is a blow drier, often adjustable between 40 °C and 60 °C, used to dry the washed areas.’

I will now leave this subject alone – but it is amusing to read someone think that light bulbs and toilet paper rate as seemingly essential elements of modern life. Essential elements needing to be spared from the evils of collectivization.

56 Urso May 5, 2013 at 12:15 pm

I would suggest that a reversion to 1857 levels of standard of living would be “big trouble” in any meaningful sense of the word.

57 prior_approval May 5, 2013 at 12:19 pm

‘I would suggest that a reversion to 1857 levels of standard of living would be “big trouble” in any meaningful sense of the word.’

And yet, literally hundreds of million people living today would appreciate being able to enjoy that standard of living now.

Light bulbs and toilet paper are pretty far down on the list of people living that way.

58 sort_of_knowledgable May 5, 2013 at 1:09 pm

I just finished The Boy Who Harnessed they Wind. The author is a son of a poor
African farmer who had gone through famine, had roof of thatch and a sheet of plastic and found “having lights at night a remarkable improvement in my family’s life.”

The light bulbs were a big improvement over the smoky kerosene lamp. He put a lot more effort for a windmill to get electricity for lights than to get second pair of shoes to go with his sandals with a worn strap that needed periodic repairs.

59 N W May 5, 2013 at 7:21 am

Well they could start by legalizing weed. People should have to pay through the nose with something that grows anywhere and which has so many legitimate medical uses. There’s still no way to patent nature, so we would just need to encourage children to stay away from the stuff.

Wouldn’t this free medical product provided by nature not count as a public good (if you can see through decades of intense lies and propaganda)?

Yes, I know it sounds crazy to some of you. Open your mind a little.

As for government purchase of medical patents which struggle to get markets to market: very interesting idea indeed. If medical research is stagnating, either we are reaching some sort of threshold or limit, or something needs to change.

As for flu pandemics, washing of hands and coughing into sleeves rather than into hands (i.e. public education on public health) are probably more effective than numerous other expensive efforts. These buy time for vaccines to be developed and production to be ramped up, in particular to buy time between the first and second waves of a pandemic.

Public knowledge of health issues is a public good indeed. Let’s have more of it.

60 N W May 5, 2013 at 7:21 am

First sentence should read “should not have to pay …”

61 Ray Lopez May 5, 2013 at 8:13 am

I’ve read all the comments to date, and I am overwhelmed by how inane they are. I spent part of my career doing patents, and TC’s piece resonated well. A policy of retrospectively rewarding patentees with prizes would indeed spur future innovation by setting a valuable precedent.

But sadly it is unlikely to come to pass if these comments are representative of the educated class. Imagine now trying to explain this complex issue to the ‘hoi polloi’ (Greek for ‘the many’, with a silent ‘h’ in Greek but pronounced with the ‘h’ in English).

Sad, but I feel that the human race really is doomed to a Great Stagnation, at least for a couple of more decades, until the weight of population pressure and Good Samaritan geniuses resulting from the same breaks it, because of the ignorance of the masses, not to mention the educated classes, to appreciate that innovation *can* be engineered by the public sector. Google the history of penicillin, for example.

62 Michael G Heller May 5, 2013 at 9:34 am

I agree. Noisy libertarian objections are probably from people who show their total dumbness by not even exercising their voting rights. Down the ages classical liberalism always made choices about the mixed economy. Today the reasonable agenda includes government support for hard science R&D, and state-designed competition surrogates that simulate market-equivalent incentives in areas where pure economic competition is not technically or politically feasible. I would add compulsory private health insurance (that would free up funds for good public goods), and a mechanism for perpetual redefinition of state natural monopoly. A healthy society and healthy market welcome an intelligent helping hand from government to assist adaption to new carrier technologies and environmental change (including pandemics).

The main challenge people should be worrying about is that of ensuring the choices are made by means off efficient procedures (no cronyism for starters). In my book I quote James Buchanan complaining about the “intellectual failure to distinguish procedural and substantive norms” of government action, an intellectual failure in evidence in some comments here.

Decisions relating to government goods and services tend to be negatively influenced by substantive norms that reflect the *personal* preferences of bureaucrats and politicians about what they claim are social goals or national priorities.

What we should be aiming for instead, said Buchanan, are situations whereby processes of government decision making can be positively “interpreted as a surrogate for a complex of exchange among all citizens in the community . . . [in which] all outcomes that are reached through agreed-on and efficient procedures for decision-making become equally acceptable”. Instead of over-the-top blanket bans on government action or public goods, the real trick is to ensure that the decision reached will be “desirable provided only that the procedural norms are followed”. Tyler is making some sensible suggestions. By following the right procedural rules of decision making, government could also make sensible choices.

63 Claude Emer May 5, 2013 at 8:49 am

There are two underlying assumptions at play here. The first is that medical research is expensive, or rather that it HAS to be. This is actually the result of the medical patent system, which itself derives from the second assumption: people are motivated by money and absent the prospect of making money, no advances will be made. Both assumptions are false. Medical research is unnecessarily complex (think of the history of Intel’s microprocessors for a good analogy), and very inefficient (anyone who’s ever worked in a big public or private organization can attest to how money gets wasted to justify budgets just for the sake of justifying budgets). It’s absolutely possible to make a significant contribution in medicine without big money influx:
It’s also absolutely possible without money as motivation:
Maybe what’s really needed is to start thinking outside the box.

64 Claudia May 5, 2013 at 8:58 am

well said, Claude. maybe it is time to cut the Gordian knot.

65 Rahul May 5, 2013 at 9:08 am

I’m no fan of the patent system but it’s silly to think medical research is going to be cheap and a cottage industry if only patents were abolished.

Your examples are even more of a joke. You really think citronella based soap is in the same league as finding a cure for AIDS?! And I bet programming Foldit wasn’t free.

Advances in medicine are expensive because the problems are different. Lots can be changed to improve the current system but don’t delude yourself that untrained loners with shoestring budgets are going to find the next miracle molecule.

66 Claude Emer May 5, 2013 at 10:46 am

As a matter of fact, that’s what thinking outside the box is. And your reaction is fairly typical. Anti malaria research is a million dollars entreprise spanning years, if not decades, yet no one thought of a 20 cents bar of soap?
The examples show exactly what you claim I’m deluded into thinking.

67 Ray Lopez May 5, 2013 at 11:20 am

Here’s an outside the box suggestion: presently in the USA, unlike in Japan and Germany (for certain cases), employment law makes it legal for employee inventors to be forced to assign to their employers all patent rights to any invention they invent on the job. Compare that in the USA it is illegal to have an unreasonable non-compete clause, by way of analogy. So why not make it so that employee inventors get a government prize? Tim Bernard Lee invented the Internet and got a lousy T-shirt for it (until recently); Cary Mullens invented PCR DNA cloning and got a niggardly $10k until much later, when he became a patent expert and won the Nobel Prize. There are 1000s of lesser known examples. This is another example of how government, by changing the law, can make a marginal revolution in innovation. I can list a dozen other tweaks to the law, and a patent lawyer could probably name a few dozen more.

68 prior_approval May 5, 2013 at 11:58 am

‘Tim Bernard Lee invented the Internet’

That is not true, though he is the considered the creator of World Wide Web, through his specifications involving HTTP, HTML, and URIs ( ). HTML did not come from the blue, either – SGML (which I still work with) is the basis for HTML, XHTML, and XML ( )

Patents have been a clear hindrance in the software industry, but that is only the view of someone who works at a software company, and is also the view of the people that own that company, in a technology region which also happens to host the world’s largest ERP software firm (we have been competing against them for 25 years, though we concentrate on the Mittelstand, an area that SAP is laughably incompetent in). It is very hard to find anyone in the German software industry working for a German software company who wants software patents, or who feels that software patents are necessary for innovation.

And this is not theoretical, of course – they use the U.S. as their negative example.

69 Mark Thorson May 5, 2013 at 12:25 pm

Kary Mullis invented PCR. Tim Berners-Lee invented the World Wide Web.

70 N W May 5, 2013 at 6:37 pm

Employee inventors getting government prizes could be tricky, but I like the idea. Perhaps there could be a way for them to give away the patent to the government (for free public use, or perhaps for use by any company) if the patent was fairly unrelated to what they were already working on with the company? Troublesome, but perhaps worth thinking through.

71 Ray Lopez May 5, 2013 at 11:23 pm

@prior_approval – so, you work for a patent infringer in the software business that is anti-patent since SAP and Oracle have all the good patents in your Enterprise Resource Planning field. Ho-hum, boring. Been there, done that, got the T-shirt to prove it. But hey, thanks for correcting my typos, as I did not Google the two scientists’ names.

72 sort_of_knowledgable May 5, 2013 at 10:55 am

I agree that are a number of intelligent people who will are willing to work hard to make contributions to medicine without significant pay. You claim they are stymied by the medical patent system. I’m not sure of the causation, but I’ll assume that their innovation would be blocked by patent holders. In that case you will also need to get rid of requirement for drugs to go through FDA trials because they add a large part of the cost and maybe the requirement that you have to get a person who has spent almost a million dollars getting medical degree to prescribe the drug. It’s starting to sound rather libertarian. Some how I don’t think this will work as well as you think, but I’ll be quite happy if I’m wrong and significant medical advances that cost little to implement come from Africa or India or somewhere else with many motivated people and few regulatory burdens.

73 Claude Emer May 5, 2013 at 9:17 pm
74 mw May 5, 2013 at 9:16 am

Are you saying that it’s logically inconsistent to support pharma cuts for drugs that are barely any better than what they’re replacing (when the industry already has some of the highest profit margins in business), *while* supporting high pay for pandemic medication? Or *politically* untenable on the assumption that people have prosimian brains?

75 Chuck Curie May 5, 2013 at 10:58 am

So you think the government buying out the patient on Vioxx would have been a good thing. How about Thalidomide.

There in lies the little detail that makes this scheme untenable – what looks good on day one could be a disaster on day one thousand, with all the liability resting on the government.

Besides, when you’re broke, stop buy things.


76 8 May 5, 2013 at 11:16 am

Let’s do something constructive. Bring back monarchy.

77 Carl May 5, 2013 at 11:25 am

Isn’t the whole point of Tyler’s Idea to create incentives to do the research before the product is needed, ie to time shift the incentive to the present? There is a potential pandemic in X disease somepoint in the futures, but right now there is no market for a drug that takes 5 years to develop. If we wait until the pandemic, the drug will be lagging by 5 years, but if we front grant money for it now it will be ready when needed.
Our current corporate profits system does not allow corporations to spend money on something that has no current profit potential, but the government can. I think the idea of NIH grant funded research automatically becoming public domain would be a great way to do this. We pay reasonable amounts of money to provide good research jobs and receive IP to save millions of lives in the future. Researchers rarely are rewarded with windfall profits when their drugs succeed, those go to the investors and business people, so it would be affordable to pay competitive salaries to top researchers for this work especially in today’s economic climate where there are lots of unemployed and under employed potential researchers.

78 Peter N May 5, 2013 at 1:28 pm

First we create a system that makes developing and testing a new chemical entity as expensive as possible, and then we decide that the undertaking is so expensive and difficult that we should subsidize it

First we take research that was funded by the government and transfer it to the private sector with a government monopoly, and then we buy it back.

There’s no shortage of revolutionary medical discoveries. Yet the approval rate for genuinely new drugs is stuck, while the cost of the approval process has exploded. The result is that only non-curative drugs for chronic diseases are profitable. You can’t charge enough for something that is only needed for a short time. The whole system is riddled with perverse incentives. Our myths about the effectiveness of patents as the major driver of innovation are only part of the problem.

NIH funding has tripled in constant dollars since 1990 but:

approved new chemical entities by year:

1990 23
1991 30
1992 26
1993 25
1994 22
1995 28
1996 53
1997 39
1998 30
1999 35
2000 27
2001 24
2002 17
2003 21
2004 36 e
2005 20
2006 22
2007 18
2008 24
2009 26
2010 21
2011 30

e Approvals for 2004 and after include Biologic License Applications for therapeutic biologic products transferred from the Center for Biological Evaluation and Research to the Center for Drug Evaluation and Research..

79 reed May 5, 2013 at 1:34 pm

the point about public goods is important. they should and could be delivered through broadband. The FCC could focus on this. See the e book by Hundt and Levin called “the politics of abundance.”

80 whatsthat May 5, 2013 at 5:12 pm

I’m thoroughly confused by the article.

Isn’t health at least a quasi-public good? My well-being affects everyone else’s and vice versa? No?

81 n w May 5, 2013 at 7:32 pm

Especially true for communicable diseases, yes. That’s why even cold blooded creatures in our political systems should favour pandemic solutions for the poor.

82 jorod May 5, 2013 at 6:00 pm

I’m sure the geniuses in Washington DC can solve this problem. In fact, it is probably already addressed in Obamacare. We just don’t know it. After all, what’s a billion here or there….

83 John May 5, 2013 at 8:22 pm

Typical Tyler quirky tiresome, ingenious anti-government, “pro-market” prejudice run amok.
Readers should see Dean Baker

for a patient dismantling and thoughtful alternative.

84 Claudia May 5, 2013 at 10:22 pm

“patient dismantling and thoughtful alternative” … seriously?

How about this gem from Baker about the patent system: “The result is considerable damage to public health and an enormous economic waste as money is paid to pharmaceutical industry for drugs that are ineffective or possibly even harmful.” Big Pharma and patents are no more enemy than government incompetence, at least Cowen’s piece outlined constructive next steps for both the government and the market. Maybe a mix of their proposals is best: more direct government research and patent buyouts (so private competes against public). Not my area, but I was not impressed with Baker’s response. I agree both were worth reading.

85 Ray Lopez May 5, 2013 at 11:19 pm

Well said Claudia. I was half expecting Baker to cite the UK quack doctor Ben Goldacre when he wrote: “The patent system does provide an incentive to innovate but it also provides an enormous incentive to misrepresent research results and deceive the public and regulators about the quality and safety of drugs” –what bunk! These anti-patent fools don’t know the difference between proprietary information and public information, and, being closet communists, want everything to be shared. It’s no secret that nothing worthy has come out of a government lab save penicillin (which was the kind of basic research TC was advocating) and that the patent-lite NIH spends over $30b USD a year that yields little or nothing in return. An NIH guy would have a fit reading this, but it’s true from what I see, I note fewer than 100 patents since 1976 from various permutations of this search at (by contrast Genentech has over 2000 patents): Results of Search in US Patent Collection db for: AN/”National Institutes of Health”: 67 patents.

86 Peter N May 6, 2013 at 1:13 am

but and all fields search for NIH yields 26892 since 1976
national institute of health yields 5227 and
national institutes of health yields 20777 more

and the NIH doesn’t seek to patent everything it contributes to.

“Whether or not to file for patent protection on a given technology is a policy decision made at the discretion of the agency in which a Federal employee inventor works. Accordingly, the PHS has established the following policy to guide its agencies in the pursuit and maintenance of U.S. and foreign patent protection for PHS-owned biomedical technology.”

note the words “Federal employee inventor” not NIH supported inventor.

“With regard to the patenting of research results arising under a Cooperative Research and Development Agreement (CRADA), NIH will evaluate whether to file for patent protection in accordance with these principles, to the extent consistent with the terms of the CRADA and the collaborative relationship.”

87 Peter N May 6, 2013 at 1:35 am

” patents are no more enemy than government incompetence”

Perhaps if the patent system hadn’t suffered regulatory capture by patent lawyers (largely the doing of the CAFC), but it has. Most patent applications are approved. If they are rejected, the applicant can modify and refile as many times as it takes. Examiners are given ridiculously little time per patent, and the incentive is to approve since rejection involves more work, and there is a de facto quota.

Defending against a patent lawsuit is hideously expensive (I saw a recent estimate of $650,000, if the amount involved was under a few million dollars, otherwise more), so most people facing a claim of infringement are advised by their lawyers to settle, as long as the requested licensing fee is less than the cost of defense.

Nor does a patent necessarily protect the inventor against an infringer with deep pockets, since a plaintiff’s case is as expensive as a defendants.

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