Regulation is everywhere. Let's choose who benefits.
by Dean Baker
The extraordinary financial collapse of recent months has been commonly described as a testament to the failure of deregulation. The events are indeed testament to a failure—a failure of public policy. Blaming deregulation is misleading.
In general, political debates over regulation have been wrongly cast as disputes over the extent of regulation, with conservatives assumed to prefer less regulation, while liberals prefer more. In fact conservatives do not necessarily desire less regulation, nor do liberals necessarily desire more. Conservatives support regulatory structures that cause income to flow upward, while liberals support regulatory structures that promote equality. "Less" regulation does not imply greater inequality, nor is the reverse true.
Framing regulation debates in terms of more and less is not only inaccurate; it hugely biases the argument toward conservative positions by characterizing an extremely intrusive structure of, for example, patent and copyright rules, as the free market. In the realm of insurance and finance over the last two decades, calls for deregulation have been cover for rules tilted starkly toward corporate interests. And the recent change in bankruptcy law, hailed by conservatives, requires much greater government involvement in the economy.
False ideological claims have circumscribed the public debate over regulation and blinded us to the wide range of choices we can make. Without these claims, what would guide regulatory policy? What kinds of choices would we have?
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Patent and copyright protection are good examples of government policies obscured in the debate. They are forms of regulation, not elements of a "free market."
It does not matter that we call patents and copyrights "property" or even that we have a clause in the Constitution that authorizes Congress to grant patents and copyrights. Suppose autoworkers were given a property right to a job in the automobile industry, a right they could even sell. Would anyone say that this right to a job is part of the free market?
Patents and copyrights are government-granted protections designed for a specific public purpose, as stated in the Constitution: "to promote the Progress of Science and useful Arts." But granting intellectual property rights is one of many possible mechanisms for accomplishing this important public goal. Whether patents and copyrights are the most effective mechanisms for the promotion of the arts and sciences is an empirical question. And the answer could be different depending on the specific social and economic circumstances. However, we cannot have a serious discussion of the relative merits of patents and copyrights until we recognize that these are public policies and not intrinsic features of the free market. Debates about both patent and copyright have been hugely distorted by the failure to recognize this obvious fact.
In the case of patent protection, policy disputes arise most frequently with regard to prescription drugs. If drugs were sold in a competitive market (i.e., without patent protection), the overwhelming majority of drugs would sell for just a few dollars per prescription. Wal-Mart and other major drug store chains now sell most generic drugs for less than $10 per prescription—we know these drugs can be manufactured safely and sold profitably at low prices.
The drugs available as generics are not chemically distinct from their brand-name counterparts that often sell for hundreds of dollars per prescription. The only difference is that the latter, as a group, enjoys a government-guaranteed monopoly. Patents constitute a government policy that effectively raises drug prices by several thousand percent above the free market price.
Recognizing this should be the starting point in any policy debate.
http://bostonreview.net/BR34.1/baker.php