> So at the moment we are stuck: we (mostly) do basic research at the
> public level, believing that the benefits of widespread free
> distribution outweigh the costs of bureaucratic centralization; and
> we (mostly) do applied development at the firm level, believing that
> the benefits of entrepreneurship, enterprise, and "hard incentives"
> outweigh the costs of granting the drug company a
> temporary--temporary--monopoly over the products developed.
>
> But how about other institutional forms?
.
Brad, I think this is more a political problem than an economic one.
If you gave NIH/NIM an extra $50 billion a year and told them to come up with some life-saving drugs, I suspect they'd do an excellent job. If they licensed private manufacturers to make the drugs near cost, they would end up extremely cheap. And health insurance companies would be more than happy to pay for these cheap drugs. All of this would be no problem.
But if Prof. J. Bradford DeLong walked into the campaign policy-development meeting of the next Democratic presidential nominee and pitched this idea, I think he would be met with embarrassed silence if not derisive jeers.
Seth