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$30 Billion Taxfunded Innovation Contracts: The “Progressive-Libertarian” Solution

  • Corporation
January 23, 2008

I’ve noted before (2) the disturbing trend of intellectuals–some even libertarian or free marketeers—advocating taxpayer-funded “medical innovation prizes” to supplement or replace the current patent system—e.g., Alex Tabarrok’s support of an $80 billion/year “medical innovation prize fund”, and similar proposals by others, including Joseph Stiglitz and Forbes.com.

Now, on Cato Unbound, one “Dean Baker” has his own proposal:

I do not support a prize system …. A prize system would preserve what I see as some of the worst problems of the patent system, most importantly encouraging secrecy in research. … My ideal system would be a system in which the government allocates a pot of money (@$30 billion a year–approximately equal to private R&D in the pharmaceutical sector) that would be awarded in long-term contracts to a relatively small number of master contractors. For example, there can be 10 master contractors getting grants of roughly $30 billion each spread over 10 years.

Of course this is not a perfect system and there may well be better alternatives, but the point is to get the discussion started. … Perhaps a progressive-libertarian alliance can force economists/policy makers to take this issue seriously.

I think you’ve got the conversation started, buddy. Congratulations! Now, can you leave us the hell alone?

Update: Will Wilkinson, in Dean Baker on Libertarians and the Fight Against Corporatism, discussing the interchange between Dean Baker and Tim Lee, gushes, “the extent of overall agreement really is pretty impressive, and promising.” Dissent!

Update 2: Cato’s Tim Lee writes: “I can’t agree with Baker that all copyright and patent monopolies are illegitimate. Copyright and patent protections have existed since the beginning of the republic, and if properly calibrated they can (as the founders put it) promote the progress of science and the useful arts. Like any government intervention in the economy, they need to be carefully constrained. But if they are so limited, they can be a positive force in the American economy.”

Ah, yes, that’s our job as market liberals–to help the state “properly calibrate” its grants of pattern privilege!

Update 3: On HuffPo, Baker ridicules DC intellectuals who favor the bailout, in How Do You Make a DC Intellectual Look Less Articulate Than Sarah Palin Being Interviewed by Katie Couric? Not a bad piece, but his anti-bailout credibility is undermined a bit by advocating $30B of state funding to promote innovation!

Update 4: As noted in Fritz Machlup, U.S. Senate Subcommittee On Patents, Trademarks & Copyrights, An Economic Review of the Patent System, 85th Cong., 2nd Session, 1958, Study No. 15, , proposals for systems of prizes to innovators and inventors have been around a long time. For example, such systems have been proposed or put into place by James Madison in 1787, Russia in 1834, the Soviet Union in 1931, and by Michael Polanyi, whose views on tacit knowledge and spontaneous order influenced Hayek, in 1944.

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