Innovation

Critics of our system say that it is horribly wasteful and inefficient. I quite agree. But innovation is horribly wasteful and inefficient. It’s quite common for drug researchers at mean-old profit-oriented pharma to go their entire lives without working on a drug that actually makes it past Phase III trials and into patients. Those kinds of crazy bets are exactly the kind of thing that the centralized, rational, efficient systems that progressives like to build (or at least, dream of building) have the hardest time allowing.

via What Does It Mean To Have a Private Health Care System – Megan McArdle.

Discussing health care, Megan gets to the heart of the matter: proposed reforms will stifle innovation. The “reformers” have no credible response to this. Most “reforms” are about squeezing profits out of the system – but it’s profits that drive innovation.

This question certainly isn’t limited to health care. Some people want to “reform”our banking system in a similar way. After all, look where reckless innovation got us! Well, it’s true that innovation can go awry, but bad innovations usually fail quickly. And I rather like the banking innovations I’ve seen in my lifetime: direct deposit, mutual funds, ATMs, electronic bill payments – just to name a few. I’m sure I’d like the medical innovations even more, if I needed them.

Innovation is the goose that keeps on laying golden eggs. But the goose won’t lay eggs without profits. Throttle profits and you throttle the goose and the eggs.

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