The Costs of Protectionism: Another Prescription Drug Scandal

The NYT reports on yet another incident in which the pharmaceutical industry has misrepresented research findings in an effort to promote one of its drugs. This is exactly the sort of corruption that economic theory predicts from a situation in which government patent monopolies give drug companies large monopoly rents. Unfortunately, almost no economists pursue this aspect of economic theory. While there is a vast body of research documenting the economic costs associated with 10 percent tariffs on shirts, economists don't believe it is worth their time to examine alternatives to patent protection for drugs that can raise the price above marginal cost by more than 1000 percent. Of course patent monopolies on prescription drugs cost both lives and money. Maybe one day economics will mature to the point where its practioners feel qualified to examine bigger issues than small tariffs.

--Dean Baker