This Week:

Quote of the Week

Patent Nonsense:  Imagine The Alternatives (Part IV in the "How Ideas Affect Policy" Series)

An End to Copyrights: The Artistic Freedom Voucher

Greetings,

There is no "Off the Front Page" feature this week.  It's all written, but I ran out of room.  I expect it will be back next week.  I think I'll have a "Website of the Week," as well.

In the first three installments of the "How Ideas Affect Policy" series, I have been focusing on public health and trying to suggest that there is a dominant philosophy and ideology that limits our imagination in very profound ways.  Last week I suggested that a different philosophy would lead to different policies and programs to deal with public health.  At the end I gave some general ideas about "innovative public policies" that might grow from this different philosophy.

This week, in the final installment of this series, I give some concrete examples of how we might organize things differently, both in terms of policies that support creative solutions to public health issues and policies that support creative work in general.  If your philosophy is in line with the dominant, market-oriented philosophy of the day, I imagine these ideas will seem kind of loony to you.  However, if your philosophy is more in line with mine--that is, if you accept that  human beings are complex creatures who are capable of altruism and solidarity in addition to individual enrichment--then I think these ideas might sound sensible.  And exciting!

So, off we go.  Next week will be something completely different!

See you then,

Nygaard

"Quote" of the Week:

Here is a comment from economist James Love of the Consumer Project on Technology at Columbia University.  In the first paragraph of a 2003 paper titled "A New Trade Framework for Global Healthcare Research and Development," he said:

"In the United States and other countries without a universal public health system, the uninsured simply cannot afford the newest medicines. In developing countries, patent owners price life saving medicines beyond the reach of most people, a morally offensive outcome."

It doesn't have to be this way.  Consider the following comment from Dr. Jonas Salk (1914-1995).  Salk was the discoverer/inventor of the Salk vaccine, which was one of the first successful attempts at immunization against a virus.  This vaccine was instrumental in the near eradication of a once widely-feared disease.  After the vaccine was announced in 1955, Salk refused to profit from his discovery, saying (in response to an interview question):

"Who owns the patent on this vaccine?  The people, I would say.  There is no patent.  Would you patent the sun?"

Patent Nonsense:  Imagine The Alternatives  (Part IV in the "How Ideas Affect Policy" Series)

There are many ideas out there about how we can replace the current patent system for pharmaceuticals with a system that costs society far less AND actually meets human needs.  Here is a brief summary of only a few of those ideas.

1.  The Prize Model

One alternative to patents is called the "Prize Model."  This is where drug companies can compete for rewards for specific results.  The prizes, which would be awarded by governments or other publicly-accountable groups, could reflect public health priorities, with greater rewards for innovative products, products that meet previously-unmet needs, or innovations which make the overall pharmaceutical system work better (such as better databases or research techniques, etc).

It's really a simple idea:  Governments would place large sums into a fund that would be allocated every year to firms that bring new products to market.  In exchange for these large payments ("prizes") the company would give up all patent rights, so the product would be available to anyone who wants to produce it.  Very quickly we'd see ultra-cheap generic versions, and people would have quick access to much-needed drugs.  The "prize" could be awarded all at once, or allocated in installments as the effectiveness and safety of the drug is evaluated over time.  The more effective, the bigger the "prize."  Simple.

In the words of James Love of the Consumer Project on Technology ( http://www.cptech.org/ ), under a "prize" system "the costs of marketing medicines, which today is far higher than the amounts invested in research and development (R&D), would be greatly reduced.  There would be much less concern over counterfeiting, parallel trade, and the management of price control systems.  Most importantly, the poor would have much better access to medicines."

2.  Direct Funding of Drug Development

This is the simplest of all:  Governments could directly fund drug development.  Governments already do a lot of this.  For example, in the U.S. we have the National Institutes of Health, as well as (somewhat skimpy) government contributions to international initiatives like the UN's Global Fund to Fight AIDS, Tuberculosis and Malaria.  I discussed this idea in Nygaard Notes Number 118 ("High Drug Prices Explained"), where I talked about how the savings from the reduction in the costs of the drugs would be far greater than the costs of the direct funding.  That's because of the phenomenal economic inefficiencies built into the current system.

3.  Open Collaborative Public Goods Models

In the computer world, there is a movement known as "open source" in which software and other useful high-tech stuff is developed with contributions from anyone who can offer an improvement.  Improvements are then shared freely online with anyone who wants to download them.  All sorts of interesting and useful things have been given to the world using this model, without anyone having a patent on any of it.  I did most of the research for this article, in fact, using the Mozilla Firefox internet browser, which is an open-source product that has liberated me from the patent-protected Internet Explorer and Netscape browsers.  (Visit http://www.opensource.org/ to learn more.)

In the biology field there is a similar movement afoot, where databases, scientific info, and other biological information is increasingly open to all researchers, freely and without restriction.  You may have heard of the Human Genome Project, which is an international research effort to sequence and map all of the genes (together known as the "genome") of members of our species.  It was finished in 2004, and a key part of the project was that all researchers could access the human genome data to verify, replicate or challenge findings found there.  No one made a profit from doing it.

Such an open, collaborative model could play an important role in drug development.  Just as with the other models above, the money saved by eliminating the marketing, overpricing, and so forth that comes with a patent system could be used to support a variety of open source, or public domain, efforts.

4.  The Social Security Model

Social Security works by requiring all workers to contribute to a general fund that is then used to support anyone who suffers a loss of income through death, disability, or loss of a breadwinner.  Everyone is required to contribute for the good of all.  What an idea!

Scholars Tim Hubbard and James Love have proposed a type of system for drug development that sort of works like the Social Security system.  In their system, consumers (or employers) would be required to make contributions into drug research and development (R&D) funds.  These R&D funds would be licensed and regulated, like pension funds.  A public body would manage the funds on behalf of consumers, in the interests of public health.  In Hubbard and Love's model, there would be more than one public body, which they call "R&D Funds."  As Love describes it, "The R&D Funds would compete on the basis of their prowess for drug development, and upon their priorities.  The actual business model for financing R&D would be tested in the market.  The R&D Funds could experiment with prize systems, direct investments in profit or non-profit entities, open collaborative public good models, or other approaches.  Business models that were better would attract more funding."

While the government would set the required contributions, as with Social Security taxes, the employer (or employee) would be free to choose the particular intermediator that received their contributions.  The most effective ones would get more money.

5.  Mixed Models

Governments could decide to adopt a mixed model, with a certain percentage of national R&D investments allocated to each of these (or other approaches), and over time, based upon experience, increase or decrease allocations based upon results. The important proposition is that business models could themselves compete, and evolve.

An End to Copyrights: The Artistic Freedom Voucher

So far in this series on "How Ideas Affect Policy" I've been talking about alternative models for developing pharmaceuticals and meeting public health needs.  That has to do with patent law.  But the evil twin of patent law is copyright law.  So, while I'm on the subject, I want to briefly summarize a simple but (in the current context) radical idea for an alternative to the copyright system that has been proposed by one of my favorite economists, Dean Baker of the Center for Economic Policy Research.

Copyrights provide an incentive for creative or artistic work by providing a state-enforced monopoly.  But Baker points out that "With the advance of digital technology, copyright enforcement is leading to ever greater inefficiencies and requiring increasing amounts of government repression."  Or, as Chuck D of Public Enemy put it, "Lawsuits on 12-year-old kids for downloading music, duping a mother into paying a $2,000 settlement for her kid?  Those scare tactics are pure Gestapo."  That may be, but newspapers in recent years have been filled with stories about the music industry filing lawsuits against kids (and adults) who have been downloading songs onto their computers.

In short: Copyrights do not and will not work in the Internet age.  "Under such circumstances," Baker says, "it is essential to consider alternative mechanisms for supporting creative and artistic work."  The "alternative mechanism" that Baker has come up with is something he calls an "Artistic Freedom Voucher" or AFV.  Here, very briefly, is how it might work:

Moving Away From the Star Maker Machinery

People who live in Minnesota may be aware of a program called the "Political Contribution Refund" (PCR) program, where you can make a $50 contribution each year to a Minnesota political party, a candidate for state office, or candidates for the Minnesota Legislature, and the state will refund your fifty bucks.  In other words, you can donate money for free!  (You don't believe such a program exists?  Go to http://www.taxes.state.mn.us/individ/other_supporting_content/political_contrib_refund.shtml and check it out!)

The PCR program is intended to increase political participation on the part of citizens who would otherwise not be able to afford to donate money to a candidate or party.  And, in an attempt to reduce the importance of "big money" in politics, only candidates who agree to observe state campaign spending limits qualify to receive these donations.  The AFV program would be similar to this in many ways.

People who do creative work, like writers, musicians, singers, actors--anybody who now benefits from the copyright system--would be allowed to register with the government in the same way that religious or charitable organizations must now register for tax-exempt status.  (This registration is only for the purpose of preventing fraud--it does not involve any evaluation of the quality of the work being produced.) Once they registered, they could receive AFV funds.  Regular citizens would be allowed to contribute $50 or $100 a year to the creative person of their choice, as long as that person is registered.  As under the PCR program, they would get their entire contribution refunded by the government.  So, basically, it would be public funding of artists, with the decisions about who gets that funding left in the hands of...you and me.

I'll let Baker take it from here, in his own words, for the next four paragraphs:

"In exchange for receiving AFV support, creative workers would be ineligible for copyright protection for a significant period of time (e.g. five years).  Copyrights and the AFV are alternative ways in which the government supports creative workers.  Creative workers are entitled to be compensated once for their work, not twice.  The AFV would not affect a creative worker's ability to receive money for concerts or other live performances.

"The AFV would create a vast amount of uncopyrighted material.  A $100 per adult voucher would be sufficient to pay 500,000 writers, musicians, singers, actors, or other creative workers $40,000 a year.  All of the material produced by these workers would be placed in the public domain where it could be freely reproduced.

"Under plausible assumptions, the savings from reduced expenditures on copyrighted material would vastly exceed the cost of the AFV.  Much of this savings would be the direct result of individuals' decisions to use AFV-supported music, movies, writings and other creative work in place of copyright-protected work.  A second source of savings would be the result of lower advertising costs, since much of the material used in advertising-supported media would be in the public domain." [Ed note: No point in advertising something that can be had for free, eh?]

"In contrast to copyright protection, which requires restrictions on the use of digital technology, the AFV would allow for the full potential of this technology to be realized.  Creative workers would benefit most when their material was as widely distributed as possible.  They would therefore have incentives to promote technologies that allow for recorded music, video, and written material to be transferred as easily as possible.  By contrast, copyright enforcement is demanding ever greater levels of repression (e.g. restriction on publishing software codes, tracking computer use, and getting records from Internet service providers) in order to prevent the unauthorized reproduction of copyrighted material.  The police crackdowns on unauthorized copying by college students, and even elementary school kids, would be completely unnecessary for work supported by the AFV."

Money For Artists, Not for Stockholders

Don't get me started on how the arts and entertainment industries work--I worked in that industry  as a musician for a number of years.   Suffice it to say that the copyright system means that those artists who sell millions of copies of their work make millions of dollars, and the corporations who decide (through their control of the promotion and distribution systems) which artists will sell millions of copies make even more money than the artists.

Under the AFV system, money would be distributed much more widely and democratically.   That is, rather than their survival being dependent on "selling" their work in the "marketplace," alternative artists or writers could support themselves by convincing only a small number of readers or listeners (100 to 200 people) to direct their AFV funds to the project.  Hundreds of thousands of really creative and hard-working people, in other words, could give up their day jobs.

Let's bring it close to home: If each of the people who now pledges to Nygaard Notes could instead donate $100 and get it refunded, my pledges would go up to about $14,000, which is about my entire income.  Plus, since so many of my readers are low-income folks, the AFV program would allow likely encourage more of them to actively support Nygaard Notes (or whoever they want), because it wouldn't cost them anything.

In a nutshell, then, an AFV program would

1. Redistribute money from corporations to creative workers, which would, in turn, allow more creative workers to make a living doing their work;
2. Place a vast amount of creative material in the public domain, where it would be free and available to all;
3. Eliminate the increasing need for the repressive copyright enforcement that is bringing police into bedrooms and dorm rooms around the world;
4. Actually be cheaper for everyone!

Needless to say, much more detail on the AFV idea (charts, graphs, etc) is available directly from CEPR.  Go here to look at it: http://www.cepr.net/publications/ip_2003_11.htm