Anyone who has ever sat through an intro economics class should know that economists believe that having the price of a product set equal to the marginal cost of production is the basic condition for economic efficiency. In general, economists get really excited about interventions, such as tariffs on trade or rent or price controls, that cause prices to diverge from marginal cost. However, for some reason, they are remarkably unconcerned about the huge divergences caused by patent and copyright protection. I was struck by this fact once again when I was reading an NYT article on a new study that seems to show that heart stents provide no medical benefit. The article concluded by noting how some experts may question the results of the study: "Examples of how the results might be questioned emerged even before the data. Dr. Kandzari of Cordis noted that the nearly 2,300 patients in the trial were largely from veterans� hospitals in the United States and Canada. Those patients receive many medicines free and are more likely to take them as prescribed." This would appear to be both an incredibly obvious and damning point. Many people, even in the United States, do not take the medically optimal mix of drugs because they are expensive. They often do without drugs that are needed, or don't take them in the proper dosage. This leads to substantial inefficiencies in the form of sickness and unnecessary death. As I have written here and elsewhere, there are alternative mechanisms for financing prescription drug research. What I can't understand is, given the enormous stakes involved, why isn't half of the economics profession examining this issue?
--Dean Baker
