1. Your professor is an idiot. There may be zero marginal cost, but someone still has to produce the music, and in all probability, he's going to want to be paid.
2. My barber cuts my hair not because he enjoys seeing people with cut and grooomed hair, but because he makes money when he does it. The same is true of the farmer who grows wheat and the contractor who builds houses. Pfizer isn't any different than them.
on the other hand, there are some similarities in the digital music world & the drug. these are both mass produced items where the cost of production has little or no relationship to the selling price. this is different from personal services, haircutting or law. pfizer wants to, and is required to, maximize its profits for its shareholders. when divisions are sold, companies always have the pr spin. why would they sell a profitable unit, unless circumstances forced it? check the business press & let us what the press has concluded.
i believe that we will not really have accountability until companies have a legal responsiblity to employess and communities.
as to madonna, er esther, at least she has banned tv for her kids. so maybe moral and esther can be in the same sentence.
'Your professor is an idiot. There may be zero marginal cost,'
He might not be an idiot, but he does seem to have been brainwashed into the avodah zara cult of thinking that economic theory applies to all problems. Economic theory says that marginal cost pricing is optimal. This post shows why that theory does not work in practice.
Interesting post, but one could argue that the moral imperative is on the buyers, to pay as much as they can to Pfizer so that Pfizer can do more R&D on lifesaving drugs for the world. After all, a grandfather saving $200 on drugs is wonderful, but what he can do with that money vs. what a drug company can do with the $20 million from 10,000 people like that is a huge difference.
My point is simply that we can't factor moral "imperatives" into decisions like this. If a company doesn't make profit, it can't research anything at all. If it's making a ton of profit, hopefully it will plug that money into more R&D. If it makes people rich, maybe that will draw more people to the field, and someone will get lucky and make a huge discovery. Who knows? But we mustn't rush to limit the profits of those who are still providing a great service, even if they're charging a lot for it.
Ezzie -
You must admit, though, that there is a difference between the products that Pfizer (and others) provide and that which the oil companies provide. While the oil companies make record profits during this time while accepting government subsidies might piss people off, but they can't argue that the oil companies have a moral imperative to provide automobile fuel (heating fuel might be different).
But if that grandfather only has $200 to spend per month, and his choice is eat or get life-saving medications, then the answer to what he'll do with that savings is "eat." In that case, the moral imperative is on the owner of the product to provide it (at the very least) at a cost to that person that doesn't generate profit.
Look again at what I wrote. I specifically allowed for a calculation of the costs of research, even of failed products. I understand that the entry cost is astrnomical. And so should revenue. But profit is different. Profit includes the cost factor. In that case, I believe the company has a moral directive to provide the drugs, to those who need it and can't afford it, at the lowest possible price, ie the marginal cost.
Noy- what then do you think is the proper amount of profit a drug company should be able to earn?
Once you artificialy limit how much profit a business can earn you reduce the number of people who will be willing to enter and participate in thet field. Why do you think that rent controls lead to housing shortages?
Once you artificialy limit how much profit a business can earn you reduce the number of people who will be willing to enter and participate in thet field. Why do you think that rent controls lead to housing shortages?
And the other side is that once you artificially inflate (as through the concept of intellectual property) the amount of profit one can earn, you will increase the number of people willing to enter and participate in the field. (although I find the imagry of sharks attacking a carcass to bemore effective.)
Given the dreck produced the the beneficiaries of intellectual properrty (i.e Hollywood and the Music industry), perhaps eliminating intllectual property might not be such a bad idea.
Isn't increasing the number of participants in a field a good thing? Sure there's a lot of dreck out there, but the only other option is to revert back to the days when artists were commisioned by filthy rich people. Intelectual Property is democracy in action.
CWY -
I agree with you about artificial limits. Part of my internal conflict with this is that generally, I am economic libertarian, and a capitalist. I usuallly think people should be able to do what they want with their money.
I don't think it would be possible to place a limit on prescription drug profit.
But it does bother me, and I find it disingenuous of the drug companies to charge such high prices for life-saving drugs under the guise of being necessary to promote research while they are actually enjoying their best profits.
but the only other option is to revert back to the days when artists were commisioned by filthy rich people.
Surely you spend some time on the internet. And if you do, you know that there are plenty of people who are willing to post their creative output for absolutely free use. And alot of it is good stuff, sometimes better than the dreck you pay for.
And musicians et. al used to perform for free. Some still do, or only pass around the hat (e.g. subway buskers). They'd earn their living doing something else.
Lots of great creative art can be produced comepletely free of the model of the professional artist earning aliving from the art.
But then again, most of the more lucrative copyright owners weren't actually the creative geniuses. (Hint: who now owns Mickey Mouse?)
I agree with you about artificial limits.
The whole market system is an "artificial limit." There's no such thing as a "free market." All markets have rules. The question is are the rules rigged so that certain people always come out on top? And should those people always come out on top? And what happens to the people who don't come out on top?
There's you "moral" questions.
Noyam I knew you had liberal tendincies but when did you become a Socialist? If you artificially limit the profitability of the drug companies to produce certain drugs and allow them to make plentiful profits on others - guess what? - they won't produce any of the lower profit drugs. It's Capitalism 101. Look at the state of healthcare in Canada or France and honestly tell me where you would prefer to be treated medically - there or in the US. The answer to the high cost of prescription drugs could be incentives for drug companies to bring prices down (perhaps tax incentives) although as a Capitalist I would prefer to see help from charitable organizations. And of course tort reform would help a ton. Check the financials of any of the big pharm. companies to see what they spend every year on litigation costs. Guess who's paying for that? Me, you and unfortunately not the guy who can't afford the medicine and decides to do without. We need solutions that work within the market economy not ones that artificially impose on it.
Rob
Look at the state of healthcare in Canada or France and honestly tell me where you would prefer to be treated medically - there or in the US.
Actually, given the overall health of the population, I think I would prefer the Canadian or French system. There's more to health care than the availability of elective surgery on demand.
Canada and France are much better at keeping their citizens healthy. After you become sick, though, it depends on the illness. For some treatments I'd want America, but not for all. As CA says, though, medicine is about more than treating the sick.
Other factors that may keep Canadians healthier (less stress, better eating habits etc.) is not what we are discussing in this post. We are discussing the health care system - specifically prescription drugs.
BTW, for what illness would you, God forbid, prefer treatment in France or Canada over the best teaching hospitals in the US?
The only instance I could think of where I would prefer overseas treatment is in the case where there are drugs that are available in Europe that have yet to be approved in the US. This only serves to prove my point that at times government involvement in healthcare (even in the US) has a negative effect on treatment - albeit in this case for an important public protection.
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