The WSJ tells us that the Bush administration (apparently ignoring recent data) believes that high rates of productivity growth will continue unless the country becomes protectionist. Well, as should be clear to anyone who follows the economy at all, the U.S. economy is already highly protectionist. For example, it is very difficult for foreign doctors to practice medicine in the United States (although it is very easy for them to work as dishwashers or cabdrivers -- no protectionism there). That is why doctors in the U.S. earn twice as much as doctors in Europe. Similar protections inflate earnings for other highly educated professionals. We also have an enormously distorted drug market because of patent protection. We spend close to $250 billion a year (close to 1.9 percent of GDP) on prescription drugs. If we didn't give drug companies patent monopolies, we would probably be paying less than $50 billion a year. Think of all the incredible waste associated with dealing with these high drug prices. In addition to all the people who don't get the drugs they need we have huge numbers of people employed in insurance companies, doctors' offices, pharmacies, and elsewhere in the health care sector because drugs are expenseive and therefore we have to regulate their use. If economists cared about efficiency, they would be troubled by this waste.
--Dean Baker
