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Pilon on Patents

September 28, 2007

Tags Free MarketsPolitical Theory

I blogged elsewhere the “Palmer on Patents” post below a couple years ago. In the post, I mention a minor scandal back in 2003, when some of Cato’s scholars (Doug Bandow and Michael Krauss) came out in favor of restrictions on free trade based on the notion that reimportation of drugs would allow consumers to avoid some of the monopoly price charged due to the US patent system. Cato’s adjunct scholar (and utilitarian) Richard Epstein has also argued in favor of patents, especially in the field of pharmaceuticals, and on this ground also opposed reimportation. Thus, as I had noted previously, support for intellectual property rights leads once again to the undermining of genuine private property rights, such as the right to trade.

The call for restrictions on free trade caused an outcry in the libertarian community, prompting Ed Crane and Roger Pilon to meekly disavow Bandow’s and Epstein’s protectionism. As I noted previously, it was interesting that this piece apparently endorses ‘the need for drug patents to encourage R&D’. Once again, I am struck that Pilon could author such words. How could Pilon endorse such a utilitarian, wealth-maximization approach to policy, given his principled, deontological, non-utilitarian, rights-based libertarianism? (as evidenced in his 1979 Georgia Law Review article ‘Ordering Rights Consistently: Or What We Do and Do Not Have Rights To’ and his 1979 University of Chicago Ph.D. dissertation, ‘A Theory of Rights: Toward Limited Government.’)Palmer on Patents

Tom Palmer’s recent comments about patents are interesting in view of his previous publications about intellectual property.

First, around 15 years ago, Palmer published two law review articles (Intellectual Property: A Non-Posnerian Law And Economics Approach and Are Patents And Copyrights Morally Justified? The Philosophy Of Property Rights And Ideal Objects) arguing against patent and copyright and also critiquing the wealth-maximization ‘law and economics’ approach of Richard Posner. Note that he opposed patents on principled grounds, and rejected the wealth-maximization approach. E.g., as he noted in the first article (p. 303),

A jurisprudence that claims to be based on “law and economics” but that would constructively assign or rearrange rights as part of a strategy to achieve some pre-determined outcome (maximization of utility or of wealth, for example) overlooks the analogy between the spontaneous order of the market and the spontaneous order of a legal system.

 

I.e., according to Palmer, Posner’s wealth-maximization framework would lead to the rearranging of property rights to try to maximize wealth. Something he presumably opposes.

Anyhoo, back in 2003 some of Cato’s scholars (Doug Bandow and Michael Krauss) came out in favor of restrictions on free trade based on the notion that reimportation of drugs would allow consumers to avoid some of the monopoly price charged due to the US patent system. Cato’s adjunct scholar (and utilitarian) Richard Epstein has also argued in favor of patents, especially in the field of pharmaceuticals, and on this ground also opposed reimportation.  Thus, as I have noted previously, support for intellectual property rights leads once again to the undermining of genuine private property rights, such as the right to trade.

This call for restrictions on free trade caused an outcry in the libertarian community, prompting Ed Crane and Roger Pilon to meekly disavow Bandow’s and Epstein’s protectionism. Interesting, this piece apparently endorses ‘the need for drug patents to encourage R&D’–this apparent endorsement of a utilitarian, wealth-maximization approach to policy seems to conflict with Pilon’s principled, deontological, non-utilitarian, rights-based libertarianism–as shown in his 1979 Georgia Law Review article ‘Ordering Rights Consistently: Or What We Do and Do Not Have Rights To’ and his 1979 University of Chicago Ph.D. dissertation, ‘A Theory of Rights: Toward Limited Government.’

In recent posts Palmer appears to bend over backward to soften his previous principled anti-patent stance so that he does not conflict with other pro-patent Catoites–apparently now including Krauss, Bandow, Epstein, Crane, and Pilon. Writes Palmer:

I’ve been critical of the patent system in the past. Mr. Brady has given me a quiz about whether I conform to his vision of right-thought or have drifted further into thought crime[,] as he defines it. I am not a fan of the patent system and think we could generally live well without it. (I’ve posted a few articles on my web site indicating why.) The one exception to that general hostility to patents, as I have suggested elsewhere, is the system of patents for chemicals, notably pharmaceuticals. Because chemical compounds are relatively easy to reverse-engineer and can be successfully marketed independently of their role in a larger product (unlike, say, innovations in jet engine design, which often are only valuable as part of a kind of engine), patents may indeed generate incentives for innovation that greatly improve human welfare. That’s an argument for them. Since the innovation has the characterstics of public goods (costly to exclude and non-rivalrous in consumption, the latter being the relevant feature here), a good profit maximization strategy ought to be price discrimination, by which those who can pay more do so and others pay less.

 

Re the ‘public goods comment–note in the ‘Non-Posnerian’ above piece Palmer’s sensible criticisms (pp. 284-85) of the coherence of the very notion of public goods.  As for the ‘suggested elsewhere’ comment, he must be referring to this post, where he writes:

Pharmaceuticals and chemicals offer undoubtedly the best cases for patent protection on utilitarian grounds. In my Hamline Law Review article …, p. 301, I quoted from a study by Edwin Mansfield from the American Economic Review in which he pointed out that ‘patent protection was judged to be essential for the development or introduction of one-third or more of the inventions during 1981-1983 in only 2 industries — pharmaceuticals and chemicals.’ That seems not to have changed. The reason is pretty easy to understand: reverse-engineering in the case of chemicals (which broadly includes pharmaceuticals) is quite easy. In the case of pharmaceuticals, at least, R&D costs are very high and would still be high even without some of the very costly efficacy tests imposed by the Food and Drug Administration. Furthermore, the benefits of new pharmaceuticals are enormous. If one were to make a case for patent law, that’s the strongest industry for which to make it.

 

Palmer has elsewhere rejected the wealth-maximization approach, so what does it matter that pharmaceuticals is the ‘best case’ that can be made under this approach? Why does he say the case of patents for pharmaceuticals is ‘one exception to‘ his previous ‘general hostility to patents,’ when this case is utilitarian and wealth-maximization based, an approach he has rejected (and presumably he still maintains that even under the wealth-maximization approach the case fails).

Note how snippy he is to Mark Brady’s questions to him about patents–’Mr. Brady has given me a quiz about whether I conform to his vision of right-thought or have drifted further into thought crime[,] as he defines it.’ It is as if Palmer is annoyed that in response to his seemingly pro-patent comments, his previous principled and anti-patent writings are being waved in his face. Given so many of his colleagues’ utilitarian endorsement of patents, is Palmer now embarrassed by his previous opposition to both? Is he trying to say that he is still principled, and anti-patent, but that the dominant pro-patent, utilitarian approach of prominent Catoites is ‘respectable’–or that he has (sort of?) softened his ‘hostility’ to this approach? It wouldn’t be the first time Palmer’s views have ‘evolved‘.

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