The Economy and Long-Term Common Weal

It’s true that pollution taxes would be set at arbitrary, politically-driven levels rather than being market driven. But so are our current income-tax rates and energy policies.

Mr. Henderson notes Paul M. Romer’s ideas relating the structure of incentives to innovation using the profoundly crucial role patent policy has played in pharmaceutical innovation. But in the 21st century governments have countered the otherwise positive impact of patents with all manner of pharmaceutical price controls. This is no more dramatic than in Japan, which has solid patent policy but counters the effects by controlling prices that would otherwise allow market returns to be put back into innovation.

With its super-aging society—80-plus is its fastest-growing demographic—one might expect Japan to employ Mr. Romer’s calculations for the right incentive structure regarding both patent and pricing policy for the pharmaceutical innovation it needs. If healthier aging through innovation is a solution for Japan’s demographic age challenges, Mr. Romer’s insights would teach that public-policy controls on funding of that innovation is detrimental to its long-term economic needs.

Michael W. Hodin
CEO, Global Coalition on Aging
New York