Capping drug prices is a price control.
Jerry
> pharma companies to still make a profit.
That would be a price control. I explained in another message how
price controls cause imbalances between supply and demand.
In this case it would cause demand for drugs to be greater than supply
of drugs. This is elementary economics.
ck
This point assumes no monopoly, or cartels with the capability
to force the price artificacially high.
Ask yourself this, What does it take to manufacture a
particular drug and is it really so much more difficult to
manufacture one drug over another? Rarity of base materials
might be one factor, but after that, what is the cost of a
given pharmaceutical actually based on?
The economics of Supply and demand is only part of the answer.
In your example you might also consider the effectiveness
of a drug to cure a given ailment. If Drug A were an actual
cure, it might be artificially more expensive in order to
be profitable, compared to drug B on which a patient was
dependent upon to relive the symptoms but was no lasting cure.
Beyond the basic formula of economics there is social
manipulation to consider. By that i mean you could use
higher prices to price the poor out of the market, this
would go beyond any simple imperative to make a profit.
Put another way, you can't just assume a level field.
Jerry
Your thinking is confused. Think clearly and express your thoughts
clearly.
Zerkon
However, human health is not a branch of elementary economics but of
elementary human decency.
Jerry
1. Assuming drugs are good for health (which I don't believe), human
health will not be served by creating a shortage of drugs.
2. If you want to help the poor, you can, with your own money.
ck
>> It is possible to cap drug prices in a way that allows
>> pharma companies to still make a profit.
>
> That would be a price control. I explained in another message how
> price controls cause imbalances between supply and demand.
>
> In this case it would cause demand for drugs to be greater than supply
> of drugs. This is elementary economics.
Ok I'll restate my last point.
Your post appears to assumes infinite demand, or at least a demand
which could not be satisfied without curtailing that demand with
higher prices.
Supply and demand, might be better restated as a system by which
you maximize profit, a system whose only restraints is found in
the competition to satisfy demand. I.e the free market.
My point is what happens when the market isn't free? What happens
to your simple equation, when the only thing which sustains the
higher price are the Monopolies which evolve over time to prevent
competition. What happens to this simple rule when cartels of
vested interests are formed out of mutual benefits, seeking to
artificially cultivate prices?
The organic principles of Supply and demand, assumes everything
else to be equal, but we know man doesn't limit himself to what
is right unless he is forced to.
Or to be really cynical, you could ask why should the cost of
medical drugs be any more expensive than the cost of manufacturing
sweets.
Jerry
> My point is what happens when the market isn't free?
I already explained that. Price controls cause imbalances between
supply and demand.
Jerry
> What happens
> to your simple equation, when the only thing which sustains the
> higher price are the Monopolies which evolve over time to prevent
> competition.
What is monopoly?
1. Is competition merely absent (because the company offers a better
deal for customers than anyone else can compete with)?
2. Or is competition forbidden by law (in which case the company does
not need to offer customers a good deal)?
In case #1, I see no problem. They must act as if they have
competition.
In case #2, what we have is government interference with the market.
ck
or 3. Where the major player has grown to a size where it can afford
buy up the competition, and as the only source it alone dictate price...
or 4. As the only player, you not only control the market, you become
a controlling / regulatory factor in the population. So that you
controlled, or are used to control factor beyond simple supply and
demand. Put another way, unbridled success would turn you into a kind
of Big brother, whether you intend it or not. { No names no pack drill.}
As for your response to case #1. Well that's easier said than done.
ck
or 3. Where the major player has grown to a size where it can afford
buy up the competition, and as the only source, it dictates price...
or 4. As the only player, you not only control the market, you become
a controlling / regulatory factor in the population. so that you
controlled, or were used to control factors beyond simple supply and
tg
And case 2 is exactly what exists now in the case of pharmaceuticals,
since the government enforces patents by threat of force. Therefore,
the proper solution is to establish a monopsony by having that same
government be the sole purchaser----then the market will still operate
with a proper balance of market power. Econ 101.
-tg
Jerry
> > What is monopoly?
>
> > 1. Is competition merely absent (because the company offers a better
> > deal for customers than anyone else can compete with)?
>
> > 2. Or is competition forbidden by law (in which case the company does
> > not need to offer customers a good deal)?
>
> > In case #1, I see no problem. They must act as if they have
> > competition.
>
> > In case #2, what we have is government interference with the market.
My point here, which you didn't get, was that there is a difference
between being better than the competitors (both real and potential)
and prohibiting competitors by force of law. The first case is not a
true monopoly. Monopoly does not mean merely absence of competition;
it means competition is not allowed.
> or 3. Where the major player has grown to a size where it can afford
> buy up the competition, and as the only source, it dictates price...
In this case, competition is permitted. While the major player is
recovering from its expenses, it is vulnerable to new competitors. #3
comes under #1.
> or 4. As the only player, you not only control the market, you become
> a controlling / regulatory factor in the population. so that you
> controlled, or were used to control factors beyond simple supply and
> demand. Put another way, unbridled success would turn you into a kind
> of Big brother, whether you intend it or not. { No names no pack drill.}
#4 comes under #2. When a company gets large enough, it tends to
acquire the ability to influence government in its favor.
> As for your response to case #1. Well that's easier said than done.
Agreed. I don't see this case as a true monopoly, because competition
is permitted. To me monopoly means competition is not permitted.
Jerry
> > 2. Or is competition forbidden by law (in which case the company does
> > not need to offer customers a good deal)?
...
> > In case #2, what we have is government interference with the market.
>
> And case 2 is exactly what exists now in the case of pharmaceuticals,
> since the government enforces patents by threat of force.
I don't know about patents, but I agree that in the drug industry we
have #2 but for a different reason. The Fraud and Deception
Administration, better known as the FDA, does not serve the customers
but the drug companies. There is a war against health. Competition
against drugs (poisons) is discouraged, if not outright prohibited.
Take for example the case of cherries being advertised as having
health benefit. The FDA cracked down on the cherries. But advertising
poisons as good for health is okay with the FDA.
> Therefore,
> the proper solution is to establish a monopsony by having that same
> government be the sole purchaser----then the market will still operate
> with a proper balance of market power. Econ 101.
If that's Econ 101, then I disagree with it. If government is the
sole purchaser, that means government makes decisions for the people
using their own tax money. Obviously that is not freedom of choice.
tg
> On Apr 15, 3:30 am, tg <tgdenn...@earthlink.net> wrote:
>
>
>
> > > 2. Or is competition forbidden by law (in which case the company does
> > > not need to offer customers a good deal)?
> ...
> > > In case #2, what we have is government interference with the market.
>
> > And case 2 is exactly what exists now in the case of pharmaceuticals,
> > since the government enforces patents by threat of force.
>
> I don't know about patents,
Why not? Did you go to one of those religious schools? Anyway, you can
just google it.
-tg
Jerry
> > I don't know about patents,
>
> Why not? Did you go to one of those religious schools? Anyway, you can
> just google it.
>
> -tg
I know what a patent is. I don't know the ethics of patents.
ck
> On Apr 15, 3:28 am, ck <ck_NoS...@ntlworld.com> wrote:
>
>>> What is monopoly?
>>> 1. Is competition merely absent (because the company offers a better
>>> deal for customers than anyone else can compete with)?
>>> 2. Or is competition forbidden by law (in which case the company does
>>> not need to offer customers a good deal)?
>>> In case #1, I see no problem. They must act as if they have
>>> competition.
>>> In case #2, what we have is government interference with the market.
>
> My point here, which you didn't get, was that there is a difference
> between being better than the competitors (both real and potential)
> and prohibiting competitors by force of law. The first case is not a
> true monopoly. Monopoly does not mean merely absence of competition;
> it means competition is not allowed.
Just so we are clear on definitions:
Monopoly exists when a specific individual or an enterprise has
sufficient control over a particular product or service to determine
significantly the terms on which other individuals shall have access
to it. Monopolies are thus characterized by a lack of economic
competition for the good or service that they provide and a lack of
viable substitute goods. The verb "monopolize" refers to the process
by which a firm gains persistently greater market share than what is
expected under perfect competition.
http://en.wikipedia.org/wiki/Monopoly
Now whist the enterprise may be better than the rest, or simply have
more resources than the rest, we are talking of a situation where
there is no real competition by virtue of its 'success'. In this case
we are talking of a balance between the a company's instinct for profit
and the health and welfare of the population from whom they derive
that economic control. Are you are saying you can see no situation
where the government should intervene?
>> or 3. Where the major player has grown to a size where it can afford
>> to buy up the competition, and as the only source, it dictates price...
>
> In this case, competition is permitted. While the major player is
> recovering from its expenses, it is vulnerable to new competitors. #3
> comes under #1.
So you are suggesting a window of opportunity may exist for
anyone brave enough to take on this mighty corporation. Fine
in theory, but how likely is that? Here, I'll allow for
technological advancements which may allowing a new startup
a possible edge over an established player reliant on a much
older infrastructure. That said, the older company would soon
realize this, buy up the new company, sack a bunch of people
and move on as the mighty snowball.
It is even conceivable that new technologies or advance research
might be bought up or suppressed, simply because there was too
much invested in the 'way of life' supported by the older
technologies.
>> or 4. As the only player, you not only control the market, you become
>> a controlling / regulatory factor in the population. so that you
>> controlled, or were used to control factors beyond simple supply and
>> demand. Put another way, unbridled success would turn you into a kind
>> of Big brother, whether you intend it or not. { No names no pack drill.}
>
> #4 comes under #2. When a company gets large enough, it tends to
> acquire the ability to influence government in its favor.
This last points begs the question, who or what is the government?
The company would more than likely has a single executive, or a
single tire of executives, who would be vulnerable to influence,
the way we all are when push comes to shove.
>> As for your response to case #1. Well that's easier said than done.
>
> Agreed. I don't see this case as a true monopoly, because competition
> is permitted. To me monopoly means competition is not permitted.
A situation where competition is allowed, but where there is no actual
competition, is a situation you need to allow for. This argument is
about our allegiance to a general principle and those situations where
special measures are required.