Megan McArdle posts an analysis of drug prices and drug R&D and why limited drug company profits would decrease R&D.
She points out that Merck could earn 5 percent on its money by investing in government bonds, and doing no drugs at all. So it needs a chance of profits over that rate. It would be "psychotic," in her estimation, for Merck to continue making drugs if they have only a 1 in 1000 chance of making big profits.
But the same logic could apply to farmers, at least those who own their land free and clear. They could earn more by selling out and investing their capital. But, unlike drug companies, they keep farming (mostly, at least until they get too old). (Of course, this is a point my mother used to make some 60 years ago.)
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