Shorter patent lives mean shorter lives

People talk about the high price of pharmaceuticals as if high prices lasted forever. In fact, within a year of the expiration of a pharmaceutical’s patents, prices will typically fall by more than 50 percent as generic producers enter the market. Patents nominally last for 20 years but the effective patent life is much lower because patents are typically granted years before a product has cleared FDA review. The effective patent life of the average new pharmaceutical in the 1990s averaged just 12 years (see here for some references). Competition from competing but non-infringing pharmaceuticals makes the de facto patent life even shorter.

Thus, my response to the seniors and others clamoring for lower pharmaceutical prices is to be more patient. Does this sound harsh? Consider this, the people who are demanding price controls are not simply asking for lower drug prices they are asking for lower prices on the newest drugs. Lower prices for drugs introduced 15 years ago are already here. Remember, those drugs were recently considered the very best modern medicine has to offer, so it’s not like I am expecting those who can’t afford the newer medicines to go back to using leeches.

Price controls or other such plans such as reimportation may bring cheaper pharmaceuticals for a short period but we will then have a much smaller supply of new drugs forever. Only the shortsighted would buy that prescription.

Payola II

Following my earlier post, an astute reader pointed me to an excellent analysis of payola:

[Payola] helped new musicians gain airplay. Payola combatted conformism and racism in the music business… Chuck Berry’s “Maybellene,” his first hit and still one of his most popular songs, was given initial airplay because of payola. Leonard Chess of Chess Records went to well-known disk jockey Alan Freed with a large catalog of material. Chess offered Freed partial songwriting credits on any song of his choice, provided that he would play and promote the song. Freed now had a stronger incentive to pick the best song and to promote it. After listening to hundreds of recordings, Freed picked “Maybellene.” Berry became a star, and the Freed estate continues to receive royalties…

The discussion, of course, is from Tyler’s book In Praise of Commercial Culture. (Yup, he’s the astute reader also!). See the book for more, including how racism factored into the payola “scandals.”

The world’s 100 largest economic entities

Fifty-one are corporations, and General Motors comes in at number twenty-three, just ahead of Denmark (the data are from 2000, Wal-Mart should be higher than listed, among other changes).

Here is the full list, courtesy of the ever-interesting

To be sure, these comparisons are problematic. Yearly sales are not strictly comparable to gross domestic product. Furthermore countries “hold” human capital and other forms of wealth in ways that corporations do not. Read Eric Rasmusen on the immense wealth of the United States. So these measures underestimate the economic significance of nations relative to corporations. Still they offer an object lesson in the importance of effective culture and incentives. How should Bangladesh feel, 133 million people strong, with a yearly gdp smaller than the sales of Hewlett-Packard?

Addendum: Here is more detail on why the comparisons are misleading. In a nutshell, gdp figures are based on “value added.”

Markets in everything: marital odds

The betting odds that Jennifer Lopez will divorce Marc Anthony before the end of the year: 3 to 1

The odds that Demi Moore and Ashton Kutcher will marry before the end of the year: 1 to 2

The odds that Justin Timberlake and Cameron Diaz will marry before the end of the year: 5 to 1

Prince Charles and Camilla Parker Bowles? 8 to 1

The odds that David and Victoria Beckham will divorce have gone from 50 to 1 to 2 to 1 to 8 to 1 within the year.

Here is the full story (NYT, registration required). Here is one market site.

Addended Query: Would it help your marriage to have the odds publicly posted?

Government spending: Brad asks me to tell my readers certain truths

Read him, he is correct that counting the number of agency spending cuts does not measure overall fiscal responsibility. My original post, titled “Has Bush Cut Back Government Bureaucracy?,” noted that he is 0-15 in this regard. That relates to my title, conclusion, and what I put in bold face print. I didn’t mean to endorse the data [I wrote “This is a highly imperfect proxy…”] for all other purposes, including for overall measures of fiscal responsibility across Presidents. And I am happy to report that, in my opinion, Clinton had better economic policies than most American Presidents, fiscal policy included.

This issue has come up a few times lately, so I will restate our general policy. There is writing, and there is linking. A link does not itself constitute a specifically inferable opinion on what is being linked to.

While we are on the topic, Brad has another excellent post about government spending under Reagan.

Why is Payola Illegal?

Actually, payola isn’t illegal if it goes to the station, rather than to the DJ, and if it is disclosed. But if radio stations don’t want their DJs profiting from payola they can easily write this into their contracts. Since contract law can handle the DJ issue it seems doubtful that the real intent of the Federal Communications Act was simply to help radio stations from being abused by their employees. Apparently, the requirement of disclosure was a big enough deterrent to prevent the real issue, payola to the stations, although some stations occasionally do play songs “as presented by Arista Records.”

The issue is further complicated by the role of Billboard magazine and other radio charts. Getting on the chart may generate momentum thus

Canadian pop rocker Avril Lavigne’s new song “Don’t Tell Me” aired no fewer than 109 times on Nashville radio station WQZQ-FM.

The heaviest rotation came between midnight and 6 a.m., an on-air no man’s land visited largely by insomniacs, truckers and graveyard shift workers. One Sunday morning, the 3-minute, 24-second song aired 18 times, sometimes as little as 11 minutes apart.

But what many chart watchers may not know is that the predawn saturation in Nashville — and elsewhere — occurred largely because Arista Records paid the station to play the song as an advertisement….The practice is legal as long as the station makes an on-air disclosure of the label’s sponsorship — typically with an introduction such as “And now, Avril Lavigne’s ‘Don’t Tell Me,’ presented by Arista Records.”

Using advertising to bias the charts in this way seems like a relatively new phenomena so I don’t think it explains the animus towards payola. Correcting this problem, say by counting only top-hour plays, doesn’t seem so difficult either.

Should we worry about Mexican remittances?

Our trade deficit has reached a record high, and Mexicans are sending billions of dollars home to their poorer relatives. Is this a problem?

Most importantly, poverty in Mexico declines. Many recipients earn no more than a dollar or two a day. As for America, sending the funds does not damage the U.S. economy. For purposes of comparison, let’s say that Mexicans came to this country, worked to earn money, and then burned the dollar bills. Would this “trade deficit” hurt us? No. Wiring funds to Mexico has similar effects. If the dollars don’t come back, it is as if they have been burned. We have earned seigniorage by trading paper for goods. If the dollars do come back, someone is investing in the U.S. or buying exports.

The level of remittances does mean that we should be less worried about the trade deficit. Think of the remittance as redistributing wealth within Mexico, but without costing the United States real resources.

To some extent our trade deficit may reflect an inadequately low rate of saving. But wiring money abroad is not the central cause of low savings. First, migrant workers often contribute to our capital stock. Second, sending the money to Mexico is probably a substitute for spending it (most senders of remittances are themselves relatively poor, and thus have lower savings rates). So when these people “burn” their money by sending it abroad, they are lowering the real quantity of American resources devoted to consumption. Let’s not confuse sending money with sending real resources.

Read Econopundit for a more negative spin. Randall Parker inclines negatively on remittances as well. I often agree with Randall, but on this issue I am ready to send away…

How to read difficult books

Yes, today is the hundredth anniversary of “Bloomsday,” June 16, 1904, the day on which the adventures of Leopold Bloom (Ulysses) start. The book, long a favorite of mine, is not nearly as difficult as it is sometimes thought to be.

Here are a few tips for reading otherwise difficult works of fiction:

1. Try reading the last chapter first. Don’t obsess over the sequential.

2. Read through the first time, following each voice or character, skipping passages as you need to. Then reread the book as a whole in order. This works especially well for Faulkner.

3. Try reading the first fifty pages three times in a row before proceeding.

4. Don’t be afraid to skip over material and return to it later. This is necessary for the first fifty pages of Nostromo.

5. Read through without stopping, and then try the book again, but with some idea of where things are headed.

6. Read some of the secondary literature first. I don’t like CliffNotes, but in general don’t be afraid to go low when looking for help.

7. Read the book out loud to yourself or to others.

8. Simply give up.

I’ve found that some combination of these tricks almost always works.

By the way, here are some recent writings on Ulysses and the centenary.

The Poles praise Ronald Reagan

The passing of Ronald Reagan was a major event in Poland. It was prominent in the newspapers and in conversation. Lech Walesa recently wrote:

I often wondered why Ronald Reagan did this, taking the risks he did, in supporting us at Solidarity, as well as dissident movements in other countries behind the Iron Curtain, while pushing a defense buildup that pushed the Soviet economy over the brink. Let’s remember that it was a time of recession in the U.S. and a time when the American public was more interested in their own domestic affairs. It took a leader with a vision to convince them that there are greater things worth fighting for. Did he seek any profit in such a policy? Though our freedom movements were in line with the foreign policy of the United States, I doubt it.

Noble sentiments, and I agree. Note that Reagan was far more popular in Poland than here in the United States. Read some horrific criticisms of Reagan.

The irony is that Lech Walesa, author of these words, remains far more popular in the United States than in his native Poland. Taxi drivers told us that the Poles “hated” Walesa, even though we regard him as a hero for world freedom.

Walesa ran for office, and was elected President of Poland in 1990 with 74 percent of the vote. He lost narrowly when he ran again in 1995 (Reagan at least beat Mondale!). When Walesa ran for President in 2000, he received less than one percent of the vote. (Reagan, in contrast, if he could run again today, would win in a landslide.)

Walesa spoke too plainly, promised too much, and maintained unpopular prohibitions against abortion. But when the sad day comes that Walesa passes away, we Americans will stand ready with our unstinting praise.

Thanks to co-blogger Alex for the pointer.

Weak arguments against privatization

Italy is planning to privatize many of its historic museums and buildings:

A portmanteau law affecting all aspects of the Italian artistic, built and environmental heritage was enacted last month. It is the product of three political tendencies. The first dates back to the late 1990s, when a Socialist government wanted to allow the private sector to become involved in a part of Italian life that for 50 years had been dominated by the State, in order to bring greater efficiency and better services to it. The second is the partial devolution of power to regional and local government as result of the electoral reforms of the 1990s, and the third proceeds from a 2001 Finance Act of the current, right wing government that aimed to raise money by the sale of public assets, including historic buildings and State-owned land.

This is a difficult policy issue, as national heritage can be a genuine public good. But the major argument being used against these privatizations is hardly convincing:

The proposal to sell State-owned buildings has been contentious, largely because the State does not know in detail what it owns [emphasis added], and the architectural protection lobbies are afraid that masterpieces may be sold to unsuitable owners.

Here is the full story.

Rebellion against newspaper registration?

If you read blogs, you sometimes get frustrated when the links lead you to newspaper registration. Even if you don’t have to subscribe or pay money, you are asked to provide personal information, such as age, gender, zip code, and perhaps even hobbies. Newspapers have moved increasingly to registration over the last year, read more here.

Not surprisingly, consumers are striking back. Many write in false names, ages, and email addresses. allows readers to bypass registration procedures for most of the major paper sites. In essence they have already registered for you. Just insert the web address you want and you arrive there immediately.

I’m not endorsing this practice, and I haven’t a clue about its legal status. The economics are easier to predict. To the extent that people can bypass registration, newspapers will cut back on their free web offerings. So, whether you like it or not, you are contributing to a public good when you register dutifully.

We bloggers stand on the other side of this equation. I subscribe to USA Today, and link to it frequently, in part because of its on-line archive. It requires no registration and the archives remain available, free of charge. Unfortunately I am not the marginal consumer in this market.

I’ve wondered why hackers don’t reproduce the major newspaper sites, such as New York Times, or The Wall Street Journal, and offer them to the public free of charge. Why can’t you use Kazaa to read these papers, whether or not you have paid for a subscription?

Markets in everything: outsourcing prayer

With Roman Catholic clergy in short supply in the United States, Indian priests are picking up some of their work, saying Mass for special intentions, in a sacred if unusual version of outsourcing.

American, as well as Canadian and European churches, are sending Mass intentions, or requests for services like those to remember deceased relatives and thanksgiving prayers, to clergy in India.

Here is some more detail:

In Kerala, a state on the southwestern coast with one of the largest concentrations of Christians in India, churches often receive intentions from overseas. The Masses are conducted in Malayalam, the native language. The intention – often a prayer for the repose of the soul of a deceased relative, or for a sick family member, thanksgiving for a favor received, or a prayer offering for a newborn – is announced at Mass.

The requests are mostly routed to Kerala’s churches through the Vatican, the bishops or through religious bodies. Rarely, prayer requests come directly to individual priests.

While most requests are made via mail or personally through traveling clergymen, a significant number arrive via e-mail, a sign that technology is expediting this practice.

In Kerala’s churches, memorial and thanksgiving prayers conducted for local residents are said for a donation of 40 rupees (90 cents), whereas a prayer request from the United States typically comes with $5, the Indian priests say.

Bishop Sebastian Adayanthrath, the auxiliary bishop of the Ernakulam-Angamaly diocese in Cochin, a port town in Kerala, said his diocese received an average of 350 Mass intentions a month from overseas. Most were passed to needy priests.

In Kerala, where priests earn $45 a month, the money is a welcome supplement, Bishop Adayanthrath said.

Here is the full story, from The New York Times.

Thanks to the ever-wise David Nishimura for the pointer.

Addendum: We are also told that “unit of account equivalence” holds:

The Rev. Paul Thelakkat, a Cochin-based spokesman for the Synod of Bishops of the Syro-Malabar Church, said, “The prayer is heartfelt, and every prayer is treated as the same whether it is paid for in dollars, euros or in rupees.”

Does marriage raise male income?

It has long been common wisdom that men who marry will work harder, save more, and accumulate more wealth. This has been called the “marriage premium.” However recent research suggests that this picture is incomplete.

Married men do earn more, but often their wives proceed to take lower-paying jobs. Aggregate family income is much less likely to go up:

[Audrey] Light analyzed data collected from 12,686 men and women born between 1957 and 1964 and interviewed more or less annually between 1979 and 2000. By tracking changes in their marital status and living arrangements and matching those to changes in earnings, she was able to examine the effect of marriage and cohabitation on the overall financial status of a household, and not merely on men’s earnings.

When she did that and factored in family size, Light found that the bump up in men’s pay due to the marriage premium was easily matched by increased family spending and a drop in their wives’ earnings. The more modest financial advantage of cohabitation also disappeared. “Single men have the same total family income [per family member], regardless of whether they are single, cohabiting or married,” she wrote, adding that “marriage and cohabitation confer sizable — and identical — financial benefits on women while men break even upon entering either type of union.”

Here is a short home page for the researcher. Here is the original research.