Justin Jeffrey

The recent reappraisal of the price the US puts on the capture of Osama Bin Ladan (50 million) raises many interesting questions. Surely, some will ask: since we're spending billions over in Iraq and Afghanistan, why not raise the ransom even higher? The reason is mainly that an increase in the tens of millions of dollars doesn't make much, if any, of a motivational difference to the average person the US would like to help capture Bin Laden. This has been nicely pointed out in the blog. The government is wise to conserve here--how much more does a hundred million US dollars motivate the average Pakistani or Afghani citizen, who by and large struggle simply struggle to get by, to go in search of Osama Bin Laden? The numbers are so huge as to be incomprehensible--they are to me, anyway, and I earn a decent living as a professor. I can only imagine the lack of inspiration as this new, abstract ransom increase, is advertised to downtrodden refugees.
Diminishing returns--at least with regard to motivational efficacy--are real, and it is nice to see the U.S. government take notice. They will spend billions to capture Bin Laden in other ways--but, wisely, they keep the ransom for his capture within s sensible range.
Here my praise of the US government will need to cease. So clever with military motivation, and so inept with the motivation of innovation. Clearly quite a bit of thought has been given to the relatively paltry sum paid out to would be "rats" on Bin Laden. I wonder how much thought has been given to the amount of money required for drug companies, say, to continue innovation--that is, to contine the development of new and effective drugs for important pathologies. A strange lack of economic curiosity, to put it nicely, is evidenced on the part of our government by the extraordinary generosity given to drug companies to extend their patents. These patents allow their privileged recipients to amass amounts of wealth that are far beyond what is needed to incentivise drug innovation.
The "government"--obviously too broad a term here--knows how incentives work. At least some parts of the government know, and they are careful not to waste their resources by trying to induce an Afghan peasant to leave his family for an extra one hundred million dollars beyond the current reward for the capture of Bin Laden. If this acumen were applied to drug patents--and who knows what else--our country could be much more efficient. Greed motivates, and I won't deny that. But beyond a certain point, even the greedy become satisfied--or satisfied enough--to make salary (or reward) increases economically indefensible (because inefficient).

Let's stick with capitalism, and acknowledge the centrality of greed as a motivator, but let us also be aware of where the satiation of economic greed begins to conflict with overall market efficiency. This conflict is evident in a number of areas, but strikes me as especially problematic in the area of health care and the extension of drug patents, where the amount of money earned by the relevant drug companies, and the correlated cost to the consumer, make for an especially bitter pill to swallow. For the same pill, it seems, could have been innovated and produced and finally consumed for a much smaller amount of money that is paid to our drug companies. How much money does it take to motivate a chemist, a company, a manufacturer, to make a quality drug? The question has been investigated at length with regard to the ransoms we will pay for terrorists--we should start asking the same questions, with at least as much rigor, when it comes to U.S. pharmaceuticals.

Justin Jeffrey
Duke University

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