Baker on IP

William S. Lear rael at
Mon Aug 23 16:24:51 PDT 1999

On Tuesday, August 17, 1999 at 11:28:24 (-0400) Doug Henwood posts:
>In These Times - August 22, 1999
>by Dean Baker
>The most basic principle in economic theory is that goods should sell
>at their marginal cost of production (including a normal profit). In
>the case of patented drugs, prescriptions that are produced for as
>little as $1 each can sell for hundreds of dollars as a result of
>patent protection. The rationale for this gap is that the firm has to
>be able to recover its research costs, which are often quite

I've always wondered how one stipulates "normal profit". Is it some percentage of cost?

>However, at the point the drug is being produced, the research costs
>are history. According to economic theory, it is inefficient to try
>to roll these costs into the price of the drugs. ...

I don't understand how appealing to "economic theory" is supposed to convince us that this is somehow "inefficient". I would like to know *why* this is so. Anybody have a good answer?

The rest of this article was damned good. Baker is a fine debunker of myths.


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