Status-quo bias prevents Budget Cutting

Status-quo bias prevents cutting waste too. Yglesias:

You can’t balance the budget this way, but you can’t balance the budget by cutting food stamps either and this idea wouldn’t really hurt anyone:

Earlier this month, the U.S. Government Accountability Office issued a formal proposal to the Treasury and Federal Reserve noting that if it eliminated the $1 bill and replaced it with the $1 coin, the country could save roughly $5.5 billion during the next 30 years. The reason, according to the agency’s report, is that dollar bills have a shorter lifespan than dollar coins because they wear much faster, which in turn requires the government to spend more to print new bills.

Back in March of 2008, Barack Obama seemed to say he favored eliminating the penny which would save almost as much money.

political economy of intellectual property

Status quo bias combined with the absence of a concentrated interest group in favor of releasing 'orphaned works' plus a concentrated interest group that dislikes public discussion of intellectual property means that society is worse off
Yglesias:

Julian Sanchez wonders about the political economy of “orphaned works”. Granting that owners of valuable old content (Mickey Mouse, Batman) have a strong interest in preventing those works from coming into the public domain, can’t we at least get some relief for the vast majority of other works that don’t fit that bill.

Megan McArdle is also puzzled:

As Julian notes, it’s puzzling that this hasn’t been resolved. Julian asks “Who’s the rational veto player here?” and I can’t think of an obvious candidate. And yet, congress has not seen fit to do something about the problem, even though resolving it would seem to be a rare example of pareto improving legislation: readers get to enjoy the material, while the copyright holders, who aren’t collecting royalties now, are no worse off.

I suspect the answer is either that Congress simply overlooked this issue, or that there is some reason to block it that Julian and I don’t understand.

This seems to me like a mistaken model of how congress works. For a bill to pass, it needs a majority in at least one House subcommittee. Then it needs a majority in at least one House full committee. Then it needs a majority in the entire House of Representatives. In parallel, a bill that is identical in all respects needs a majority in at least one Senate subcommittee, one full Senate committee, and sixty votes on the floor of the United States Senate where objections from even a single Senator can force days of delay. Members of congress need to do all this work while simultaneously fundraising & electioneering, positioning themselves for sundry bids for higher office, etc. The only veto player you need to explain why something doesn’t happen in the federal government is basic human laziness and risk aversion.

Meanwhile, even though Walt Disney and DC Comics wouldn’t be hurt by an orphaned works bill they don’t really gain from one either and it makes sense for them to be mildly averse to anything that puts intellectual property policy on the national agenda.

Medicine and Intellectual Property

Economic theory suggests that patents are actually a poor incentive for creating new medicines! When would patents create good incentives and when would a prize be better? Yglesias :

Pursuant to this Kevin Drum story pharma horror story about a hundred-fold increase in the retail price of a drug that’s useful for averting premature births, it’s always worth pointing out that reforming how we incentive pharmaceutical research is some of the lowest-hanging fruit out there.

Even if we completely leave aside policy options that involve sticking it to the big drug companies, for any expected corporate revenue stream from a judge it would be welfare-enhancing for the federal government to pay a lump sum up front to have the drug released into the public domain rather than paying piecewise. In other words, if a company thinks it can maximize profits by charging $100,000 a pop for a pill that it expects to sell 10 of per year for 20 years, that comes out to $20 million in total revenue. But there are lots of people who might be helped by the pill who aren’t going to be able to afford it at that price. If you just buy the patent for $20 million (less than that with appropriate discounting) then total spending is the same but more people will get treated. In other words, we should be funding this research with prizes, not patents, as Joe Stiglitz lays out here. Bernie Sanders is the congressional champion of this idea, but it also garners support from libertarians like Alex Tabarrok. The Obama administration Office of Management and Budget is also doing some good things on this.