I watched a response by HowTheWorldWorks to a YouTube video about high-drug prices, and how the market based system is not a good method to deal with drug production. I am not really such a big fan of HTWW because he is a conservative, though his economics are pretty good for a conservative. I thought he had a great response: http://www.youtube.com/watch?v=ZFWTCBjtZa0
When I heard of the criticism that the market based system does not address important diseases, like malaria, instead of hair-baldness, because of the higher profit involved, I thought of an immediate logical conclusion from that. Car companies can earn more money selling expensive cars to rich people. But somehow there are cheap cars and expensive cars, both for rich and poor people. But what kind of a fallacy is this? It feels like this is some sort of comparative advantage law, but I am not able to sort this out. Is there a name for this economic phenomenon (that is, why are products and services produced to poor people even though there is more profit avaliable in producing them for rich) ?
Markets produce the kind of products that are more important, because more important products bring in more profits. The reason that a cure for baldness brings in higher profits than one for Malaria is that the customers of the former are rich, while the customers of the latter are poor. Why are they poor? Because they live in socialism. These people propose more socialism (i.e. the government deciding what drugs should be researched) for a problem that is caused by socialism in the first place. If regions with Malaria had free markets then the market would produce cures for Malaria instead of baldness. Or rather it would produce both because society would be richer.
Any company produces the product that earns them the most profit. There are only so many rich people willing to buy another car, but there are many more poor and middle class people. So even though profits may be lower per unit, car companies make more profits producing for them. Profits are higher because they sell more.
HTWW is obviously not a good economist because the marginalist revolution has apparently passed him by completely. He is substituting his categorical judgement about what diseases should be cured first for everyone else’s marginal judgement on the same topic. By doing that for any subject you can ‘prove’ the market has ‘failed’. There is no guarantee that the market will allocate resources to your or my or his specific liking. It will allocate resources to those ends deemed most important via everyone’s marginal decisions over time. That means in the long run eventually enough capital will accumulate to cure malaria and AIDS and what not, if it’s possible to cure them, but in the short run the reality is at any given moment resources are always limited and scarce, and not everyone agrees with how they should be prioritized, therefore someone is going to do without. Personally I would rather have seen a cure for cancer and AIDS and other such diseases way before we saw a baldness cure or a boner pill. And for all we know if there were a free market in medicine we would have. Calling what we have now a ‘free’ market only bespeaks of a massive ignorance of reality. However, it is perfectly possible that if left alone we still would have seen the development of drugs and treatments as we have to date. Which would mean like it or not, most people are worried first and foremost about their hairlines and their erections. Their priorities are a matter of ethics and morals though, not of market process.
I agree with your point, there is no guarantee that the market will allocate resources to our liking. But I do not understand the relevance to marginal value. What do you mean by “marginal decision”?
I don’t think it is correct to say that a free market will never supply goods for low end consumers, while governments will always supply those goods. Free markets can and do supply goods for consumers who are not able to purchase the products they think they need. We must be careful not to define the free market as the for-profit sector. The for-profit firm is just one of many ways available in the free market to express the preferences of individuals. There is a plethora of possible organisational forms such as nonprofit enterprises, cooperatives, foundations,… that exist just to supply goods that the for-profit firm is unable to.
Some numbers quoted from the 2001 Independent Sector Survey on Giving an Volunteering in the United States:
"Forty-four percent of the U.S. adult population volunteered with a formal organization in the 12 months prior to the survey, representing nearly 84 million individuals.
The volunteer workforce gave approximately 15.5 billion hours, representing the equivalent of over 9 million full-time employees at a value of $239 billion."
If there is a problem, people don’t need the government to fix it. People can fix their own problems, we just need to let them.
Forty-four percent of the U.S. adult population
volunteered with a formal organization in the 12
months prior to the survey, representing nearly 84
million individuals.
The volunteer workforce gave approximately
15.5 billion hours, representing the equivalent of
over 9 million full-time employees at a value of
$239 billion.
In the month prior to the survey, 27 percent volunteered,
averaging 24 hours of volunteer time in
that month.
Thirty percent of past-month volunteers gave
over 30 hours in the past month, with another 14
percent giving between 20 and 30 hours.
Forty-four percent of the U.S. adult population
volunteered with a formal organization in the 12
months prior to the survey, representing nearly 84
million individuals.
The volunteer workforce gave approximately
15.5 billion hours, representing the equivalent of
over 9 million full-time employees at a value of
$239 billion.
In the month prior to the survey, 27 percent volunteered,
averaging 24 hours of volunteer time in
that month.
Thirty percent of past-month volunteers gave
over 30 hours in the past month, with another 14
percent giving between 20 and 30 hours.
There is very little free market process in the production and distribution of drugs. Just count the non-market institutions affecting the business just inside the USA:
FDA-Regulates the business.
Patents and IP.
Medicare-Medicaid and the Insurance Complex.
Prohibitions on foreign drug suppliers.
NIH-granting money for research.
USA Tax code artifically diverting resources.
And this is just the USA, other countries have similar or worse regulatory frameworks.
The truth is that given the amount of interference, it is difficult to speculate what a truely free or much free-er market would look like. We do know one thing, that profits would trend to zero and suppliers would supply ALL sectors of the market place rich-poor-otherwise in an effort to gain customers.
Isn’t that guy a creationist of some sort? (HTWW) Not to say, that his arguments about economy are wrong because he is bad at science, but.. I wouldn’t even bother listening to such people anyway.
I’m no expert, but seems like simple supply and demand. Rich people aren’t the only ones looking to buy stuff. As an example, Henry Ford did not get rich selling his cars only to the wealthy elite. He got rich selling cars that everyone could afford.
“I agree with your point, there is no guarantee that the market will allocate resources to our liking. But I do not understand the relevance to marginal value. What do you mean by “marginal decision”?”
Assume for a moment that what exists now is the result of a totally free market. What that would mean is the combined decisions of everyone in that market over time has lead to the current resource allocations and the products that have been developed. What he’s doing is saying, “I think the sum decisions that everyone else has made are wrong, therefore I substitute my judgement of what I think should have happened for their demonstrated preference, or what did happen, and declare a failure.”
Thinking analogously, suppose you and I are part of small minority of people who really want shit flavored soda. Most people aren’t into it, the market doesn’t deliver it. Do we therefore get to second guess the market and call “Failure” because there is lemon/lime, there is cola, there is this and that flavor, but no manure flavored pop? What people have revealed, at least under current market conditions and allowing for the morass of regulations and laws surrounding the issue, is that they prefer what’s being produced now by the drug companies. The correct criticism is not market failure; the market is doing exactly what it’s supposed to do under the given conditions. The correct criticism is: these people are pricks for wanting boner and happy pills when people are sufferring from far more damaging and life threatening diseases. You can’t get mad at the market for delivering what people want, you can get mad at people for what the market reveals they want if you think it is vacuous or immoral or unethical.
I agree. It is essentially that everyone thinks the market should be producing what they think to be important. What I meant was, why did you bring up marginal value in this context? Why has the marginal revolution passed by people who want to substitute their categorical judgment for everyone else’s marginal judgment? What is a marginal decision? I just didn’t understand that. Do you maybe mean a systemic consequence?
Malaria has already been “cured” - it’s called DDT.
In terms of the central point of the vlogbrothers’ argument, I must agree with the other posters here. First of all, it’s not as if all funding is directed towards male pattern baldness, erectile dysfunction, and other “trivial” rich-people problems, just as not all funding is directed towards luxury cars (as other posters have pionted out). Secondly, and perhaps more importantly, who are you to decide what is a more pertinent problem? If more people are willing to pay more money for a male pattern baldness drug, then clearly the male pattern baldness drug is much more valuable.
And, as a side note, the reason why drugs are so expensive in the United States has a lot to do with the FDA - it costs billions of dollars for drug companies to approve new drugs. In Europe, it’s actually LESS expensive for drug companies to approve new drugs. As some economists have pointed out, the FDA has an incentive to be extremely conservative in which drugs it approves, because if anyone dies from an approved drug, then the FDA is blamed, but if anyone dies from a disease that could’ve been cured by a drug the FDA denied, then the disease is blamed (not the FDA).
In a true Laissez Faire free enterprise system with no government interference the problem would not exist.
If government did not force drug companies to spend one billion dollars before releasing a drug,they would produce all sorts of drugs, expensive ones cheap ones, ones for fat bald people in Timbuktu and some for poor sickly people in Africa.If they were stupid enough not too, some competitor would step up.
As long as they can figure out how to manufacture a malaria drug and make a few million dollars profit they would do it. Or they would decide it was not profitable enough and some small businessman in Cairo will decide its worth his while to produce it for only a few hundred thousand dollars profit.
Or a generic manufacturer in India would step in and sell the generic version.
Or some witchdoctor would make a herbal version in his hut for a few thousand dollar profit.
There is no free market failure in the prescription drug industry. There is no free market in the drug industry, only severe draconian government restrictions sabotaging the free market.
I subscribe to HTWW on Youtube and follow him on Twitter. I don’t think you guys have the best understanding of his background. He calls himself a libertarian, and he’s not a creationist. True, he does call himself a conservative too, but his views are libertarian. He is for a much more limited government, and has praised Austrian economics from time to time. He even cited Hayek in this video. Also, I think when he referred to the free market we have today, he was referring to the part of it that is free. He wasn’t claiming that the whole thing is 100% free.
HTWW is not a creationist. He does not speak about religion ever but he did bring up the fact in an old video that he wrote some sort of research paper defending the theory of evolution. He is not an Austrian, he does support a central bank like a Federal Reserve. He used to be a liberal when he graduated from college but he turned around after studying works by Thomas Sowell.
He is not exactly a libertarian though. For example, he believes that states should vote on gay marriage, not the federal government. A true libertarian position was to abolish state operated marriage altogether. He also seems to believe that if a state (not the federal government) can pass anti-drugs laws then this is okay. A libertarian would object to this as well, though not to the same degree as to the federal government.
Socially he is very liberal. So on social issues we will vote in favor of more social freedom. However, he still thinks these sorts of issues can be voted upon. I know this because I seen a good interview between him and TheAmazingAtheist, where he confessed such a view point. Therefore, HTWW is best described as a traditional conservative. Not so much of a libertarian. Though his economics are generally good, and pro-free market.
He also supports the death-penalty. And he seems to have a more pro-war kind of a view that other peace loving libertarians distance themselves from.
I have a lot of respect for this guy however. I been watching YouTube debates/discussions for a long time (years). When he first came on YouTube he was hated by all the lefty YouTuber’s. They went after him and still do. But he maintained his viewpoints. His audience grew by a lot since I first remember coming across his YouTube channel. Not only that he managed to get to appear on FOX News on his criticism of the “Story of Stuff”. He also had a debate(s) with Cenk Ungar of the liberal show TheYoungTurks. He gave a lot of talks and speeches at different colleges. He does debates. He participated in the tea party rallies, and he even spoke by some of them. In other words, he is a very motivated person who achieved a lot in his life. And he is youngish, I think something like 25 or 26. Nice guy too, spoke with him once in BlogTV. So for these reasons I do have respect for Lee Doren even though I find myself at a some important disagreements with him.
Well, I don’t understand libertarianism the best really but aren’t there such people who classify themselves as constitutionalist libertarians? Maybe that would explain leaving the powers to the state. I remember one time he said he did not support the Iraq War too. And not that I don’t believe you, but when has he supported the federal reserve? I remember one video after the fed did something outrageous he said something like, “this makes me agree with the austrians about the fed” or something like that. One of the people in the comments of this video here asked him if he adheres to a specific school of economics such as austrian. He replied by saying he agrees with most of the stuff the austrians say but doesn’t want to identify with one school. I think he’s generally on the money when defending the market or attacking socialism though.
HTWW said that Ron Paul is 99% on economics, he said Ron Paul is wrong about the Federal Reserve. He main influences are Thomas Sowell and Milton Friedman, which belonged to the Chicago school. So I would guess HTWW is mostly a Chigaco guy. (In fact, I might be mostly a Chigaco guy myself because most of the economics that I learned come from Friedman. Though I think it is foolish to trust the state to control the money supply.)
About constitutional libertarians: I do not like them. They treat the constitution as if it was some sort of infallible document, as if it is a Bible. Their entire argument comes down to, “look at this, the constitution says this, therefore we need to can/cannot do this”. That argument has absolutely no appeal to me. I do think there is a look of good stuff in the constitution, and it is a highly respectable document, but my argument never revolves around the constitution.
I’m not quite sure why this thread seems to have turned into some kind of Lee Doren apologetics thread, but overall, I feel like Lee Doren is an alright guy. I’m subscribed to his channel (HTWW) on youtube. I’m also subscribed to the CEI channel on youtube. In the libertarian world, Lee Doren has his enemies because he took over Bureaucrash and he was much more conservative than what many people involved with Bureaucrash would’ve liked. But overall he’s a good guy, his heart is in the right place, and he wages war successfully against the leftists on youtube. He might be wrong about an issue or two, but all of us disagree with each other on minor issues. As long as we’re heading in the right direction, towards more liberty, there really is no reason to have major disagreements. We can disagree on lesser issues once we get to the point where it makes sense to disagree on those issues.