Glenn Reynolds points to a post on declining pharmaceutical R&D spending which, in turn, quotes this post of Megan McArdle’s at length without adding a great deal. In one of my earliest posts around here, now six or seven years ago, I cited the annual reports of the large pharmaceutical companies and noted that R&D increased, essentially, at the rate of inflation while advertising and the amount spent on lobbying increased with revenues.
My conclusion from that is that the companies know what business they’re in: pharmaceutical sales and rent-seeking. This is part and parcel of the loss of entrepeneurial spirit I’ve been complaining about. R&D is risky and doesn’t have a huge ROI. Lobbying is practically risk-free and provides enormous returns. Why take risks?
I was unaware of the close correlation. Thanks for bringing it to reader’s attention.
It does, however, reinforce an observation I share with you. Risk taking is the road to GDP growth. Regulatory capture is a prime cause of “corporate atherosclerosis.” Given the efficacy of drug treament, not good.