The Abundance Boys are the latest intellectual fad in elite policy circles. The basic idea pushed by Yoni Appelbaum, Ezra Klein, and Derek Thompson is that we have to remove regulatory obstacles to growth, largely put in place over the last 50 years by progressives, in order to achieve “abundance.”

There clearly is much truth to the idea that regulatory obstacles have made it more expensive to make progress in many areas. The most obvious case is housing, where it is extremely difficult to build new units in places like California.

While the complaint is valid, it is not clear that the villains are necessarily progressives. The biggest obstacle to zoning changes that would allow for more housing are the NIMBY crowd, who don’t generally define themselves as progressives. To take another example, the biggest obstacle to high-speed rail has been delaying efforts by right-wing ideologues like Elon Musk.

But skipping over the direction of the finger pointing, they are correct that we have put up legal and regulatory barriers that slow growth. This raises the question of why they largely skip over the most important of these barriers, government-granted patent and copyright monopolies.

These government-granted monopolies are the reason that products like drugs, medical equipment, software, and many other items are expensive. If they were sold in a free market, without government protection, they would cost a fraction of their current price.

This is probably the biggest deal in the case of prescription drugs, both because of the amount of money involved and also because this is a matter of people’s health and even their life. We often hear stories of people struggling to get the government or an insurer to pick up the cost of a new cancer drug being sold for hundreds of dollars a year. Failing to get a third party to pick up the tab, people often turn to GoFundMe or some other mechanism for scrounging up the needed funds.

This should infuriate people, since almost invariably the drug in question could be profitably produced and distributed for a few hundred or a few thousand dollars. The five and six-figure prices are the result of the drug having a patent monopoly.

These enormous markups also give drug companies the incentive to lie about the safety and effectiveness of their drugs, exactly as economic theory predicts. The worst example of such lying was with the opioid crisis, where the drug companies lied about the addictiveness of the new generation of opioids in order to push them as widely as possible.

A more recent case that came to light was when the FDA approved the Alzheimer’s drug Aduhelm, overturning the assessment of it advisory commission. The drug’s maker, Biogen, had extensive contact with FDA officials pushing for Aduhelm’s approval. We pay a high price in terms of bad health outcomes because of the perverse incentives created by patent monopolies.

There is also an enormous amount of money involved. In the case of prescription drugs and other pharmaceutical products, we will spend over $700 billion this year for drugs that would likely cost around $100 billion in a free market. The difference of $600 billion comes to $4,800 per household. The added cost due to patent monopolies and other protections is roughly 2.0 percent of GDP or 20 percent of all after-tax corporate profits.

Patent protection of prescription drugs is a big deal in the economy — and this is just the beginning. If we add in the cost of protection in medical equipment, software, smartphones, computers, and many other areas, we are almost certainly talking about well over $1 trillion a year. It’s hard to understand how people concerned about regulatory obstacles slowing growth could manage to overlook such massive obstacles that hit us in the face nearly all the time in our daily lives.

There is the argument of the patent protectionists that we need these monopolies in order to foster innovation and creative work, but it is easy to show this is not true. We have other mechanisms for financing innovation and creative work, like paying people.

We do this in a big way (or at least did, pre-Trump) in the case of biomedical research with funding through the National Institutes of Health (NIH). The federal government was spending more than $50 billion a year on biomedical research through NIH and other government agencies. Most of this was more basic research, but the government has directly funded the development and even testing of some drugs and vaccines, most notably the Moderna vaccine against Covid.

If we wanted to replace the patent supported research with federal funding we would likely need to triple or even quadruple the money now being spent, but this would still leave us way ahead, even before considering the better health outcomes from eliminating the incentive to lie about drugs’ safety and effectiveness.

To my view this would be best done through competitive bids on long-term contracts to develop drugs in various areas. For example, a company could put forward a $20 billion proposal, over ten years, to do research on treating colon cancer. A requirement of the grant could be that all findings are fully transparent and open source, meaning they are posted on the web as soon as practical. Any drugs that the company develops and brings through the FDA approval process could be produced as cheap generics the day they are approved.

Companies would have a strong incentive to do good work, since any subsequent grants would depend on their performing effectively. Also, if any companies chose to flake off and just pocket the money, it would quickly be apparent, since they would not be posting any useful findings on the web.

This is similar to what we do now with military contracting, although there would be no basis for the secrecy that such contracting requires. There are good reasons for not wanting the latest weapons research posted on the web, there are no good reasons for not wanting the latest research into treating cancer or heart disease posted on the web.

We actually have some very good examples that this sort of contracting system can be effective. The Moderna vaccine is an obvious one, but so is SpaceX, which was largely funded by government contracts.

We may want different sorts of funding mechanisms for innovation and creative work in other areas. (I propose an individual tax credit, modeled on the charitable contribution tax deduction, for creative work.) I discuss this issue in chapter 5 of Rigged (it’s free).

But the key point is that we should be discussing alternatives to patent and copyright monopolies for supporting innovation and creative work. Without these monopolies, all drugs are cheap, scans like MRIs would carry small price tags and the latest computers and smartphones would sell for $100 or $200 a piece. It’s hard to understand why authors ostensibly interested in “abundance” would not be looking in this direction.