Antibiotics show free market failure

[Seth]

Think of American corporations as the goose, without which there is no golden egg produced, and which once slaughtered to feed the indolent and useless for one day out of a misguided sense of solidarity and Matrxist equality of misery cannot then generate ongoing taxable wealth which might feed the seething proletarian dependent class in perpetuity.

But again its the golden egg that is important not the corporation, if the corporations employ people at a wage level that is acceptable to society, if they pay taxes, if they generally don't piss off society too much society permits them and if they make a profit well good for them.

Running a business is a privilege that society grants not a right

Chicken-or-egg fallacy. You don't get the egg without the corporation. Without profit (food) the corporation dies and no more golden eggs. Starve the corporation of profits by demanding wages in excess of their market value and the corporation dies, and no more golden egg.

Corporations do not exist or function as social welfare organizations and cannot be required to forgo profits for their investors simply because you think you should get more free stuff from them. They support social welfare programs by being left alone to compete in the free market and make profits, which are then taxed. No profits, no tax, no golden egg, dead goose, dead dependent class.

The Soviet Union tried your model and it didn't work. Neither has it worked in any other Marxist society on earth.

[JimC]

Seth wrote:

The Soviet Union tried your model and it didn't work. Neither has it worked in any other Marxist society on earth.

MrJonno's "model" was a hell of a lot softer than the Soviet model, which I agree, failed because a centrally planned economy cannot develop the innovation and efficiency that a free market provides.

However, a free market is not the perfect answer in every case; it can be myopic in regard to societal needs which don't provide an opportunity to profit.

[Seth]

Free markets aren't social welfare organizations, you see.

Which is their fundamental flaw, the only reason free markets are tolerated is due to tax revenues to pay for social welfare. If they fail to provide then goodbye free market

The current structure of global corporations has many flaws, including the ability to minimise the tax they pay to an unacceptable degree and to have undue influence on governments. However, that doesn't change the fact that the operations of a free market produce both efficiency and innovation far in excess of any centrally planned economy. The point of the OP wasn't to denigrate the concept of a free market, but simply to assert that current antibiotic development is a case where a free market is not doing the required job.

That depends on how you define "required job." You seem to define the "required job" of the free market as an obligation to serve the social engineering desires of the government. That's not the job of the free market. The free market has only one purpose, and that is to serve the needs of consumers by using supply and demand market forces to bring to market things consumers want while removing from the market things they don't want. Free markets, by definition cannot be manipulated to supply things that consumers are not demanding or that they are demanding at a price that the manufacturer cannot provide them for.

If social welfare needs new antibiotics there are two pathways to that goal: first is to let the free market operate as it is designed to operate without unnecessary and harmful regulatory interference so that it can develop and market the antibiotics at a price which is both affordable to consumers and profitable to the manufacturers; or use tax money to develop the antibiotics in government pharmaceutical labs and provide them at no cost to citizens.

The problem with the latter method is that the infrastructure costs of producing such things is enormous and may be wasted money if there are no new antibiotics that will work, which is determined by research, which also has to be paid for by taxes. Now some people like Jonno will insist that we can simply tax our way to new, government provided antibiotics, but this is an ignorant and short-sighted notion because when taxes go up, the market responds with reduced production, which results in reduced workforces, which results in layoffs and firings and company closings, which leaves people unemployed and unable to pay taxes to fund the government sponsored health care it wants to provide.

Funding for new antibiotics comes from allowing companies that are equipped and capable of creating and producing them because they can amortize the costs of research, development and production over an entire spectrum of other products they produce over a long period because they make sufficient profits to make their nut and pay their investors and thereby stay in business.

Tax them too heavily and they will contract or withdraw from the market completely because there is no profit in continuing, at which point all the OTHER drugs they produce stop being produced, and it just gets worse and worse until we end up like the Soviet Union, which had free "health care" that provided no actual care and nothing but bad health.

Collectivists like Jonno seem to think that money grows on trees and can be harvested just by sitting on your ass and waiting for it to grow. Economies don't work that way however. The ultimate end of Marxism is, as we see in Venezuela, people standing in line for everything, including potable water, because nobody's interested in working for free, or at their own expense, to provide stuff to the indolent socialist proletarian masses just because they want stuff.

No profits, no products. It's just exactly that simple. The smaller the profits, the fewer and lower quality goods. Even children can understand this simple concept, but Marxists evidently are so brain-damaged that they cannot.

[Blind groper]

I agree with Jim's comment above.


As I have said before, I have a deep suspicion of extremist views. A balance is needed. In this case, a view of economics and economic policy that is a balance between a totally free market and a totally controlled market, such as we expected from the USSR. Both extremes will fail.

The problem lies in the detail. How much freedom? How much control? How much cut throat capitalism? How much socialism? A blend of all is needed, but the arguments for how much of each will go on forever.

The original article I quoted suggested two possibilities for new antibiotics.
1. A subsidy to assist in the debvelopment, and get the cost down, without compromising quality and safety.
2. Prizes, of the sort that SpaceX used to get business into the space market.

[Seth]

Seth wrote:

The Soviet Union tried your model and it didn't work. Neither has it worked in any other Marxist society on earth.

MrJonno's "model" was a hell of a lot softer than the Soviet model, which I agree, failed because a centrally planned economy cannot develop the innovation and efficiency that a free market provides.

However, a free market is not the perfect answer in every case; it can be myopic in regard to societal needs which don't provide an opportunity to profit.

It's supposed to be myopic. Free markets are designed by nature to be utterly ruthless weeders-out of inefficiency, waste, fraud and government interference. Free markets are the product of billions upon billions of individual transactional decisions made by consumers that tell the producers what to produce, how much to produce and what to charge for it. It is utterly impossible for a central planner to anticipate these demands, as F.A. Hayek demonstrates in "The Road to Serfdom."

The simple fact is that when demand for new antibiotics becomes strong enough in the markets, pharmaceutical companies will engage in the necessary research and development to bring them to the marketplace. What slows them down and prevents them from doing the research is a lack of demand and government regulations that drive the costs up so far that it's no longer economically feasible to develop the new drugs.

Right now antibiotic resistant organisms are a minor market nuisance that are not sufficiently powerful to drive consumer demand. One day they likely will be sufficiently powerful. Like the polio vaccine, once it was developed every child in the US, and almost everywhere else, used it. But kids suffered for millennia with polio before the costs and technology to create a vaccine aligned with the capacity of the economy to absorb the costs without sinking like a stone.

When children start dropping like flies from some Ebola-like infection that's easily spread through casual contact and kills quickly in a horrible manner, the weight of public opinion will shift the balance and people will suddenly be willing to spend what is needed to find a cure. The government can jump-start this often decades-long process and steal a march on such problems by de-regulating the drug companies and allowing them to research and market experimental drugs at much lower costs and in much shorter time-frames than is now required.

Yes, thalidomide was an awful mistake...for pregnant women and some 10,000 deformed babies. But it's still on the market and is used effectively for treating cancer and leprosy.

Ten thousand deformed babies, half of whom died, is a terrible thing, but how many people has thalidomide saved from cancer and leprosy since 1957?

How many children died from reactions to the Salk polio vaccine? Some. Nobody's quite sure how many, although some claim that CDC records indicate that every case of polio in the US after 1979 was caused by the oral vaccine.

But how many people didn't get polio because of the vaccine?

It's a morbid calculation by the FDA as to how many adverse reactions or deaths are "acceptable" for a new drug, versus how many are cured, and it has much to do with politics and public perception, as in the thalidomide scandal. Was it a mistake to give thalidomide to pregnant women? Yes. Was it a mistake to give it to other people? Maybe, maybe not.

What it boils down to is that new antibiotics or therapies will emerge as the demand for them emerges, unfortunately the drugs will lag the demand somewhat, the length of the lag is determined by many factors, not the least of which is how much government gets in the way of research and innovation.

[Seth]

I agree with Jim's comment above.


As I have said before, I have a deep suspicion of extremist views. A balance is needed. In this case, a view of economics and economic policy that is a balance between a totally free market and a totally controlled market, such as we expected from the USSR. Both extremes will fail.

The problem lies in the detail. How much freedom? How much control? How much cut throat capitalism? How much socialism? A blend of all is needed, but the arguments for how much of each will go on forever.

The original article I quoted suggested two possibilities for new antibiotics.
1. A subsidy to assist in the debvelopment, and get the cost down, without compromising quality and safety.
2. Prizes, of the sort that SpaceX used to get business into the space market.

Who pays?

Subsidies are provided by the taxpayers. Taxes inhibit the free market economy. So, for subsidies to be useful the public has to be willing to absorb the costs of the subsidies by way of higher taxes.

Prizes are great if you can find a private benefactor willing to donate the money for the prize.

One thing that's not mentioned is reducing government regulatory overhead, which in the case of drugs is one of the most substantial costs associated with creating and marketing any drug.

[JimC]

I agree with Jim's comment above.


As I have said before, I have a deep suspicion of extremist views. A balance is needed. In this case, a view of economics and economic policy that is a balance between a totally free market and a totally controlled market, such as we expected from the USSR. Both extremes will fail.

The problem lies in the detail. How much freedom? How much control? How much cut throat capitalism? How much socialism? A blend of all is needed, but the arguments for how much of each will go on forever.

The original article I quoted suggested two possibilities for new antibiotics.
1. A subsidy to assist in the debvelopment, and get the cost down, without compromising quality and safety.
2. Prizes, of the sort that SpaceX used to get business into the space market.

Who pays?

Subsidies are provided by the taxpayers. Taxes inhibit the free market economy. So, for subsidies to be useful the public has to be willing to absorb the costs of the subsidies by way of higher taxes.

Prizes are great if you can find a private benefactor willing to donate the money for the prize.

One thing that's not mentioned is reducing government regulatory overhead, which in the case of drugs is one of the most substantial costs associated with creating and marketing any drug.

The key point, which you seem to be forgetting, is that we are facing a major problem, and the current rate of antibiotic research by the major corporations is not going to provide new antibiotics or alternative treatments for drug-resistant bacteria in a timely way unless things change. It's not a matter of blaming the corporations, they are only following their normal commercial rationale. However it happens, some form of government action (not just the US, but world-wide) is required.

There are many options, perhaps including some cautious de-regulation of testing regimes. Incentives of various kinds could be tried, such as providing tax deductions for research in this area, or prizes, as has been suggested. Perhaps charitable foundations, for example the Bill Gates one, could make a contribution.

No-one is suggesting that governments should take over the functions of these corporations, but do some minor nudging to kick-start a process which seems to have stalled, a process that is well and truly needed.

[Seth]

The key point, which you seem to be forgetting, is that we are facing a major problem, and the current rate of antibiotic research by the major corporations is not going to provide new antibiotics or alternative treatments for drug-resistant bacteria in a timely way unless things change.

And why should they if there's no profit in doing so?

It's not a matter of blaming the corporations, they are only following their normal commercial rationale.

Indeed. Free market economics. There is no demand for new drugs and the regulatory environment makes it too expensive to speculate on research and development (although I'm pretty sure they actually are researching and developing because they see a future market).

However it happens, some form of government action (not just the US, but world-wide) is required.

Probably. It's like stocking Cipro in the event of anthrax attacks and iodine in case of radioactive contamination. It's a good idea, but somebody's got to pay for it. Government can do such things, but the taxpayers have to be prepared to pay for it and they don't get to dump the costs on the drug manufacturers just because they are parsimonious pricks.

There are many options, perhaps including some cautious de-regulation of testing regimes. Incentives of various kinds could be tried, such as providing tax deductions for research in this area, or prizes, as has been suggested. Perhaps charitable foundations, for example the Bill Gates one, could make a contribution.

Yup.

No-one is suggesting that governments should take over the functions of these corporations,

Oh, I think you'll find a goodly number of people, including Jonno most certainly and probably rEv and the other Marxist spawn here that would like to do exactly that. They would be quite happy to pull a Chavez on the pharma companies and simply seize them and "nationalize" them and beggar the owners and stockholders without a second's hesitation. That's how Marxists work and think, you see.

but do some minor nudging to kick-start a process which seems to have stalled, a process that is well and truly needed.

I agree. All it takes is money. But pharma is not a perpetual motion machine. You can't tax the pharma companies to pay for paying the pharma companies to do the necessary work. Everybody else has to be willing to pony up to make it worth pharma's time and trouble, and higher taxes are a very hard sell in an environment where there is no pressing need that drives the public to agree to pay those taxes. Taxpayers are fickle and they very much live in the moment, so if it's not threatening them today, they want someone else to pay for it.

As I said, not until schoolchildren are dropping like flies in class will taxpayers figure out they need to come up with the cumshaw to make it happen.

That's just how it works in the minds of the seething proletarian socialist masses.

[pErvinalia]

Personally, I'd lock them all up in gulags.

Anyway, can't we just shoot bacterial infections? Show me a problem an AR-15 can't fix!

[MrJonno]

Bacteria are a threat to the state in the same way as the North Korean ICBM fleet is (in fact more so as we don't know for sure the Korea's have any).

There may be a role for the private sector but overall charge like in the army must be in the public sector

[JimC]

Bacteria are a threat to the state in the same way as the North Korean ICBM fleet is (in fact more so as we don't know for sure the Korea's have any).

There may be a role for the private sector but overall charge like in the army must be in the public sector

There is a role for both. Government health departments need to monitor the situation, and advise government, which then may need to employ a variety of carrot and stick methods to ensure that the industry produces what is vitally needed by the citizens, if market forces are not doing the job.

But state control and/or ownership of antibiotic-producing factories is unnecessary, and, from past experience, would be inefficient.

[Blind groper]

The whole point of this thread is that antibiotics represent a situation in which the free market is not meeting society's needs. People are already dying from infections by bacteria that a few years ago would have been fixed by antibiotics. The numbers of deaths will steadily increase till it is in the millions. There are an awful lot of lives that would be saved if we could overcome this hiccough in the free market approach.

It would not take enormous sums of money. World wide, we are talking of a few billion dollars in subsidies for antibiotic research. A tiny fraction of the money that the USA government spends each year on its military, just so they can go into other people's countries and kill people.

In other words, this is a problem that can be fixed, but not by relying on the free market. The cost of such reliance is millions of human lives.

[Seth]

Personally, I'd lock them all up in gulags.

Anyway, can't we just shoot bacterial infections? Show me a problem an AR-15 can't fix!

You can shoot carriers and the infected...

By the way, did you hear that the camel jockeys are getting SARS from their camels?

[Seth]

Bacteria are a threat to the state in the same way as the North Korean ICBM fleet is (in fact more so as we don't know for sure the Korea's have any).

There may be a role for the private sector but overall charge like in the army must be in the public sector

Control of infectious diseases is one of the most fundamental and earliest powers of government.

I'm fine with a government effort...so long as everybody pay exactly the same amount (not percentage of their income) into the research fund.

[Seth]

The whole point of this thread is that antibiotics represent a situation in which the free market is not meeting society's needs.

The whole point is that free markets are not designed or intended to serve society's "needs," they are designed and operated to serve the demand for goods and services that consumers are prepared to pay market price for.

People are already dying from infections by bacteria that a few years ago would have been fixed by antibiotics.

People have been dying of infections for millions of years. The pathogens have mutated, as they are wont to do, to compensate for our technology, and now people are dying again. Sad for them. Not so bad for the human or bacterial species, which will continue to wage war for genetic survival and victory.

The numbers of deaths will steadily increase till it is in the millions. There are an awful lot of lives that would be saved if we could overcome this hiccough in the free market approach.

You're expecting the free market to fix something it's not intended or designed to fix and then you're blaming it for not fixing the problem. That's like throwing matches at a forest fire and then blaming the match company for not making their matches put flames out rather than starting them.

Pick the right tool for the job.

It would not take enormous sums of money. World wide, we are talking of a few billion dollars in subsidies for antibiotic research. A tiny fraction of the money that the USA government spends each year on its military, just so they can go into other people's countries and kill people.

I agree. Then again we wouldn't want to spread effective antibiotics too widely, you never know when we're going to need to anthrax-dust some aggressor and we don't want them having Cipro.

In other words, this is a problem that can be fixed, but not by relying on the free market. The cost of such reliance is millions of human lives.

Now you've got it! It's not a "free market failure" it's Marxist whiners complaining that the free market isn't doing what they want it to do so they can disparage free markets for not being a universal panacea for fixing all social ills. Resolving public health issues is not a function of the free market and never has been. That's a function of government.

So open your wallet and be prepared to pay higher taxes so your government can protect you.