Economics Nobel Laureate attacks drug patents

Joseph Stiglitz is well known not just for his Nobel prize in economics but also for standing up to mainstream economics and speaking his mind openly (perhaps also in an exaggerated manner, sometimes, as in his book Globalization and Its Discontents).
His latest provocation is in
Stiglitz on patents in health sciences
The article is short and well written, worth a serious reading. In it, Stiglitz proposes the increased use of prizes to reward research in the medical fields, instead of using patents to offer monopoly protections as rewards, with their associated economic distortions, which in the case of medicine can mean the death of millions of people.
Many (mostly citing economics naively) would argue that patents are necessary to spur innovation. Stiglitz points out (he’s not the first to notice, but he has a very visible pulpit to say it from) that drug patents simply do nothing to spur the development of drugs for the poor of the planet.
It seems to me the only way patents can work for the poor is by enriching individuals such as Bill Gates, and then hoping that, just as Bill Gates, they will then put their money towards helping the poor. The natural question is: why should we wait for the whims of billionaires to do the ethically right thing? Instead, we can push our society to do the right thing for the poor independently of the opinions of billionaires (or dime-a-dozen economic policy commentators who chew over the “private property” cud in their attempt to extend monopoly power to more and more companies in the name of creating “incentives for innovation”).
At the very least, Stiglitz’s argument should remind us that patents have no track record of motivating innovation in new drugs. See also my previous post
Drug patents hold back innovation
So what do I think? I agree with Stiglitz on this issue. I would love to see more prizes to reward innovation in many fields, with the condition that prize winners must make their winning innovation publicly available. I know there are economic models that attempt to find circumstances in which the prize method is better than patents for encouraging innovation. Given the evidence I see, I estimate that these models overestimate the effectiveness of patents.
Is this because there is so much more money in being a consultant for a big monopoly, defending the monopoly’s worth to society with arguments as sophistical as necessary? Well, what cynical-minded economist (is there any other kind?) wouldn’t suspect so?
I do need to nitpick on Stiglitz on one point: it’s one thing to advocate prizes. How are they to be funded? (Stiglitz says: ” The prizes could be funded by governments in advanced industrial countries.”) Are we to wait for private benefactors to do it? If we really wait for the electorate in rich countries to do it, what makes us think they will care enough?
Perhaps it’s unfair to expect concrete policy proposals from an editorial in the British Medical Journal, but it’s not unfair to expect it from Professor Stiglitz. Maybe he has such a proposal published elsewhere. It would have to consider seriously the political economy question: “how can a medical prize fund be proposed to attract enough politically powerful supporters to become reality?” Then, one would have to consider whether such a prize fund should be one big international institution or whether there should be many national ones based in rich countries.

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