"Andrew Crystall" <[EMAIL PROTECTED]> remarked
If they can't make money on it, then they won't be arround to MAKE
the next generation of treatments, ANY treatments.
Drug development is an example of a process with a high initial cost
and a low incremental cost.
Law enforcement and war have the same economics. Interestingly, they
became government actions. Think of ancient China. It covered an
area the size of Europe. The most powerful state beat the others and
established a unified government. The initial cost of creating an
army was high; but after that, the cost of conquering one more city
was low (for the government with the powerful army). In Europe,
however, mountain ranges and the like made it more expensive to
conquer the whole continent, until modern technology was developed.
In `private industry', over the past century, steel, flour milling,
oil refining, railroads, radio broadcasting, and automobile building
had the same economics. A century ago, it cost a great deal of money
to build a steel works, but once built, it could produce steel at a
low incremental cost (up to a maximum). The same with railroads. It
cost a great deal to build a railroad from New York to Chicago; but
after it was built, the additional cost of running 100 extra trains
per year was very little, relatively speaking (up to a maximum that
was seldom achieved).
That is why, in the 1880s, the railroad companies asked for and got
the US government to create the `Interstate Commerce Commission' to
regulate railroads. Previous requests, by less powerful groups, had
not got US government regulation. The ICC prevented price wars that
would overly hurt railroads (and as a secondary effect, politically
very popular, reduced railroad companies' price gouging; this
political side effect is why many still think of government regulation
as an anti-capitalist action rather than an anti-competitive market
action).
In the US, steel, flour milling, and auto manufacturing industries
developed into oligopolies. They used oligopolistic pricing
techniques to keep prices high enough for them. (I was taught these
techniques in university. The amazing thing about the `electricity
crisis' in California a couple of years ago is that some laws actually
were broken; the 1995 ban on long term contracts (cleverly called
`deregulation'), meant that high prices and high profits could be made
legally. Only the most greedy would bother to break the law -- but
that happened!)
In Europe before the EU, markets were smaller. So monopolies were
created instead of oligopolies. The monopoly format was different in
different countries: in the UK, `associations' (or whatever the legal
phrase was) became important; in Germany, banks. In Russia, the state
took over, under Lenin, and they did not call the result `capitalism',
except for those who called it `state capitalism'.
Drug development is also expensive; but the cost of manufacturing
incremental doses is low.
On the one hand, you can fund drug development by maintaining a
government enforced high price for incremental doses. This high price
pays for, among many things, development costs.
The doses are paid for either by insurance companies or by taxes
(direct or indirect) that pay for non-insured people to go to
emergency rooms; and, some people do not purchase these drugs and
suffer and die. This is the current method in the US.
On the second hand, you can impose an `official committee' to decide
what to do. This is the method used in the Soviet Union. This
failed.
On the third hand (this is a science fiction reference to a story
about relations with aliens suffering a lack of environmental
resources; also a reference to the Christian Trinity; and, of course,
a reference to the Trinity nuclear bomb test. Nuclear weapons are
example of a high initial cost/low incremental cost weapon): you can
fund drug development by having a government tax people and then pay
the proceeds to large numbers of independent organizations --
universities, for example.
The government needs to have a large number of different funding
agencies, so that instead of one or five or ten `official committees',
you have more. If you have too few `official committees' the process
fails.
With lots of different `official committees', you fund many different
experiments, some of which provide useful drugs. Manufacturers make a
living making and selling drugs, like `generic' drug manufacturers do
now.
In the US, Europe, Japan, and in some other parts of the world, we are
rich enough that enough people can produce certain kinds of high
initial cost items. Aristotle talked about this form of production.
In Aristotle's day, the rich produced plays and government; they
depended on slaves. That is why Aristotle said slavery was a good
idea until `the shuttle could weave by itself' -- which modern
technology enables. (Anyone have the reference? I remember
underlining that phrase when I read Aristotle nearly 40 years ago, but
no longer can find it. I am very certain of the reference, since it
provided a reason to be against slavery that would appeal even to bad
guys.)
Nowadays, software can be created by the relatively rich -- it is
called `commons-based peer-production' -- but not drugs, which require
processes that are much more expensive, such as clinical testing.
Around the world, a CD manufactured with copied info on it,
transported and marketed, sells for the local currency equivalent of
$1.50 - $2.50 in a free and competitive market. Any price higher than
that tells us that the country's law enforcement is effective at
maintaining a higher price.
I don't know what the price of various drugs is. But I do know that
`generic drugs' are less expensive. They do not have
government-enforced high prices and their incremental production cost
is low, and many different manufacturing organizations produce them.
They are not sold in a monopoly or oligopoly capitalism market, but in
a competitive, free capitalism market.
(Incidentally, I talked of manufacturing additional units of software
that is sold on CDs. Note how cheap it is to manufacture additional
units of software on a machine you own -- to manufacture additional
units when you, to use Marx's phrase, `own the means of production'.
Indeed, the cost is so low that wqwe do not use the word
`manufacturing'. We use the word copying. But reduplicating --
copying -- is what happens in manufacturing.)
There has been a huge change in technology over the past 200 years.
In the past, law and war were the best example of high initial/low
incremental cost activities. Now many important activities are like
them.
Over the generation, the struggle will be for what kind of pricing is
used for the products of these technologies.
--
Robert J. Chassell Rattlesnake Enterprises
http://www.rattlesnake.com GnuPG Key ID: 004B4AC8
http://www.teak.cc [EMAIL PROTECTED]
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