Comment of the Week, 2003-06-25
By Arnold Kling
On my criticism of a physician’s proposal to cut prices for prescription drugs, Bruce Bartlett wrote,
It would cut medical costs even more if we forced all doctors to work for the minimum wage.
I used a similar analogy in my latest essay.
If physician payments were reduced sharply, many doctors would exit the business. If you told them to reduce the number of nurses and assistants, then the doctors’ productivity would suffer, and they would have to exit the business even faster. Changing the subject to nurses and assistants does nothing about the physician’s need to earn a return on investment for going to medical school.
Changing the subject to advertising does not solve the fundamental economic problem that the cost of up-front investment in drug research has to be recovered. Cutting spending elsewhere does not make money available for drug company research. Expected returns on investment are what make money available for research. That is basic, first-year economics.
To continue the discussion, return to the original thread.