High US drug prices as a good shot public good @RobinHoodTax
08 Jun 2016 Leave a comment
in applied price theory, comparative institutional analysis, health economics, law and economics, politics - USA, property rights Tags: best shot public goods, creative destruction, drug prices, game theory, good shot public goods, military alliances, NATO, patterns and copyrights, Warsaw Pact, weakest link public goods, World War I
Much is made of the fact that drug prices are lower in Canada and Western Europe as compared to the USA. Indeed, day trips are made across the Canadian border to buy cheaper drugs as compared to the local pharmacy pricin in a US city.
Instead of what is always the relevant public policy question. What would happen in the USA if attempts were made to seriously reduce the price of drugs. The answer is obvious, the incentive to create new drugs would be severely diminished. There are no free lunches in public policy.
Bringing in new drug to the market is a seriously expensive business these days. That is before you consider the commercial risk of inventing a drug that isn’t much better than its competitors.
Of course, you can always be leapfrogged by another drug company brining on a better drug not long after you have brought yours to market. None of this is getting any cheaper.
Innovation by specific drug company is a form of public good production known as best shot public goods. Under a best-shot rule, the socially available amount is the maximum of the individual quantities. There is is a single prize of overwhelming social importance, such as a major drug breakthrough, with any individual’s effort having a chance of securing the prize.
A specialty drug for a year costs more, on average, than most household incomes wpo.st/0y_q0 https://t.co/uss6ikgkYk—
carolyn johnson (@Carolynyjohnson) November 20, 2015
The amount to be produced of a best shot public good depends on the best contribution rather than the usual situation of any contribution is interchangeable. Another example is a large number of people shooting at an incoming missile. The best shot counts, all the others don’t matter.
High drug prices in the USA could be the price of the weakest shot or weakest link public good. Weakest shot public good is where the socially available amount is the minimum of the quantities individually provided. One example a weakest link public goods are military alliances where the success of the alliance depends upon everyone contributing
In the weakest shot or weakest link theory of public good production, the free riding countries of Europe will bring the whole show down by not making their contribution to drug research by buying at good prices from the US pharmaceutical companies.
Perhaps a better way to look at drug innovation is a good shot public good. Someone has to make a reasonable contribution; that has to be the USA because it is such a large market. Without access to good prices in the USA, there wouldn’t be enough of an incentive for drug innovation.
Military alliances such as NATO and the Warsaw Pact probably are examples of good shot public goods. They depend on a number of large countries making their contribution but I always leaned towards the crucial best shot contribution of the USA and former USSR .
In the case of the start of World War I, Triple Entente against Germany was a weaker shot public good. Its defensive wall depended on the strength of the weakest country defending i.e. the unfortified Belgian border (in both wars). The Tripartite Alliance was a best shot public good depending on the strength of Germany’s attack for ultimate success or failure.
How big are the vice industries?
01 Jun 2016 Leave a comment
in economics of regulation, financial economics, health economics Tags: alcohol regulation, economics of smoking, entrepreneurial alertness, marijuana decriminalisation
Improvements in remaining life expectancy of Australians aged 25 to 29 since 1990
30 May 2016 Leave a comment
in economic history, health economics, population economics Tags: Australia, life expectancies, The Great Escape
The graph shows how many years you have left if aged 25 to 29 in 1990.
Source: Life Expectancy: progress from 1990 to 2013 | Health Intelligence.
How is The Great Escape going in #NewZealand?
30 May 2016 Leave a comment
in economic history, health economics Tags: life expectancies, The Great Escape
Causes of maternal deaths in New Zealand since 1980
30 May 2016 Leave a comment
in health economics Tags: maternal mortality, The Great Escape
“GMO’s are Dangerous!” – Not
28 May 2016 Leave a comment
in economics of regulation, environmental economics, health economics, politics - New Zealand, politics - USA Tags: Anti-Science left, GMOs
Price Plays an Important Role in Smoking
26 May 2016 Leave a comment
in applied price theory, health economics Tags: Ban-it left, economics of smoking, metals and preferences, nanny state, rational addiction, rational irrationality, tobacco taxation
Different forms of tobacco were tax differently in the USA from 2009. Tobacco taxation is the only time that the Ban-it Left left believes in supply-side economics and the economics of rational addiction.
Source: Jason Furman speaking at the World Bank via Incentives in Action – Marginal REVOLUTION.
Share market capitalisation by marijuana industry sector
24 May 2016 Leave a comment
in entrepreneurship, financial economics, health economics Tags: creative destruction, efficient markets hypothesis, entrepreneurial alertness, marijuana decriminalisation, medical marijuana decriminalisation, R&D
The Great Escape in one picture of fertility and infant mortality
24 May 2016 Leave a comment
in development economics, economics of education, growth disasters, growth miracles, health economics Tags: child mortality, economics of fertility, infant mortality, The Great Escape
If Meat Eaters Acted Like Vegans
20 May 2016 Leave a comment
in health economics Tags: vegans, vegetarians
HT: Whale Oil
How Measles Made a Comeback
17 May 2016 Leave a comment
in economics, health economics Tags: anti-vaccination movement, measles, Quacks, vaccination, vaccines
Extreme poverty in Uganda, Swaziland and Botswana @jasonhickel @Carolyn_nth
17 May 2016 Leave a comment
in development economics, economic history, growth disasters, growth miracles, health economics Tags: antimarket bias, Botswana, economics of AIDS, life expectancies, reactionary left, Swaziland, The Great Escape, Uganda
Since 1985, extreme poverty has halved in Botswana and dropped by a 3rd in Swaziland and Uganda.
Source: World Poverty – Our World In Data.
Life expectancies are increasing again in Swaziland and Botswana after the HIV epidemic has come under more control.
Source: Life Expectancy by Age in selected Country from 1990 to 2013 | Health Intelligence
Source: Life Expectancy by Age in selected Country from 1990 to 2013 | Health Intelligence
Closer to achieving #foodsecurity in #WestAfrica w/ 60% decline in under-nourished since 90s bit.ly/1M1Fzvt https://t.co/ezPM05lbEo—
(@OECD) October 28, 2015
The battle against Polio in Africa http://t.co/LYB2nGZlAB—
Amazing Maps™ (@amazingmap) June 30, 2015
"Freedom is making gradual progress in Africa…the trends are in the right direction" @bill_easterly #hayek15 https://t.co/Ua1GON7ha2—
IEA (@iealondon) December 02, 2015
Recent Comments