Okay, it's that time of year when we are all supposed to commit ourselves to performing nearly impossible tasks over the next 12 months. I will play the game. Here is the list of areas where I will try to bring economics into economic policy debates in 2019.
1) Patent and copyright monopolies are government policies:
This one is pretty simple, but that doesn't mean it is easy. It should be pretty obvious that these and other forms of intellectual property are government policies explicitly designed to promote innovation and creative work. We can (and have) make them stronger and longer, or alternatively make them shorter and weaker, or not have them at all. We can also substitute other mechanisms for financing innovation and creative work, including expanding those that already exist. (Anyone hear of the National Institutes of Health?)
Incredibly, most policy debates, especially those on inequality, treat these monopolies as though they were just given to us by the gods. It is endlessly repeated that technology has allowed people like Bill Gates to get incredibly rich, while leaving less-educated workers behind. But that's not true. It is our rules on patents and copyrights that have allowed people to get enormously wealthy from technological developments. With a different set of rules, Bill Gates would still be working for a living.
2) Patent and copyright rents are equivalent to interest payments on government debt:
This is a point that directly follows from the recognition that patent and copyright monopolies are government policies. We can think of granting these monopolies as alternatives to direct government spending.
This is clearest in the case of prescription drugs. Currently the federal government spends roughly $40 billion a year to finance biomedical research through NIH and other government agencies. Suppose it instead spent $100 billion, largely displacing the private pharmaceutical industry. This money would support not only the development and testing of new drugs, but bringing them through the FDA approval process. Then almost all new drugs could be sold at generic prices, which would generally be less than one-tenth the price of a patent protected drug.
In this scenario we would all recognize the $60 billion in additional research spending as an addition to the debt which would lead to interest payments in future years. But we treat the patent rents that the drug industry receives (currently around $360 billion a year or 1.8 percent of GDP) as somehow being free to the country.
Well, fans of economics should see the drain from $360 billion in patent rents to the drug industry as being equivalent to the drain from an additional tax burden of $360 billion. After all, it really doesn't matter to most people whether the government has a tax on drugs that comes to $360 billion annually or the industry can use its patent monopolies to raise prices by this amount.
For some reason this point never comes up in debates on the budget deficit and debt. That makes zero sense.
3) Austerity has costs
It is now widely accepted among economists that governments around the world were overly concerned about budget deficits following the Great Recession. The United States, the euro zone, and the United Kingdom all turned towards deficit reduction in 2011, following an initial period of stimulus. This turn to austerity slowed growth and needlessly kept millions of people from having jobs. It also contributed to an upward redistribution of income, especially in the United States, as high unemployment reduced workers bargaining power and prevented them from securing real wage gains.
Not only did austerity have a large short-term effect, it also had a substantial long-term effect. One result of millions of people being unemployed for long periods of time is that some number will become unemployable, as they no longer have the necessary skills to get work or develop problems with alcoholism and other issues. The children of unemployed workers also tend to do less well in school. And, lower levels of output will lead to less public and private investment, which means the economy will be less productive in the future.
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