Patents and the Abundance Agenda
Dean Baker
I haven’t read Ezra Klein and Derek Thompson’s new book Abundance, but everyone I know seems to be talking about it. Therefore, I decided to throw in my two cents, not on the book for obvious reasons, but on what a serious Abundance Agenda (AA) would look like. Specifically, I want to talk about patents and how reform of the rules on intellectual property needs to be at the centre of a serious AA.
The key point that most people in policy debates seem determined to ignore is that there is a huge amount of money at stake with patent monopolies and their cousin, copyrights.
In the case of prescriptions drugs alone, these protections likely increase the annual costs immensely. Imagine we lived in a world where nearly all drugs were cheap. Drugs are rarely expensive to manufacture or distribute. Without patent monopolies, drugs would be selling as cheap generics.
Patent monopolies also hugely raise the cost of medical equipment like MRIs or kidney dialysis machines. If this equipment sold in a free market, we would likely be paying around a third or less than what we do today. Low-cost drugs and medical equipment would go far toward making medical care affordable.
We do need to pay for the research underlying these innovations, but this can be done through other mechanisms, and most obviously direct public funding, as we used to do through the National Institutes of Health and government agencies. We can also make this research more efficient by requiring that it be open source.
In a world where patent and copyright monopolies play a much smaller role, a wide range of items — from smart- phones and computers to software, movies, and video games — would be far cheaper than is currently the case. This would seem to fit in well with a real AA.
But beyond just making things cheap, reforming intellectual property is also likely to have some serious political appeal if any politician ever took it up. First, the effort would be acknowledgement that bad things didn’t just happen to less-educated workers, the losers in the economy over the last fifty years. Politicians and their accomplices in the policy world did bad things to them.
Specifically, they repeatedly changed the rules on intellectual property to make patent and copyright monopolies longer and stronger. These changes, both in domestic law and international trade agreements, were not just the natural working of the market. They were deliberate policy that had the effect of shifting income from less-educated workers to those with college and advanced degrees.
Putting intellectual property reform on the table is acknowledgement that policy did in fact screw tens of millions of less educated workers to the benefit of more educated workers. If we restructured patent and copyright rules to make them shorter and weaker, it would redistribute a massive amount of income from the richest 10 percent of the population, and especially the richest 1 percent, to everyone else.
This would be a great act of redistribution that involved less government, not more.
This change would also help with the biggest grievance raised by Klein and Thompson, restrictive zoning. While we badly need zoning reform, it is noteworthy that excessive land and housing demand from the very rich reduces the supply for everyone else.
To take one particularly egregious example, Bill Gates owns 10.5 acres of prime land for his mansion just outside of Seattle. This could easily be a location for either 100 single-family houses or several hundred multi-family units. And that’s just from one copyright-enriched billionaire.
Taking a slightly different angle, the stock of second homes runs into many millions of dollars. Suppose that reformed patent and copyright rules, as well as other redistributive measures, cuts the financial size of those second homes in half. That would leave housing stock, equal to this amount, to be occupied by people as first homes. If we increased current production by 20 percent, a big lift, it would take more than 10 years to add this much additional housing. In this sense, a bit of redistribution can go far towards creating abundance.
I could describe other growth-enhancing measures that also reverse an upward redistribution (free trade in doctors’ services and a modest sales tax on financial transactions to reduce waste in the sector are two favourites), but I’ll save those for another day, perhaps after I’ve read the book. But no one should be confused, patent and copyright monopolies are a big deal in the economy and redistribute an enormous amount of income upward. We should be talking about them when we talk about an abundance agenda.
Source: Real World Econ Rev, 2 Apr 2025 https://rwer.wordpress.com/2025/04/02/patents-and-the-abundance-agenda
