Prices vs. price paths

 [[{“value”:”Recently I have been writing about how the federal government should not go further in bargaining or forcing down the prices of pharmaceutical drugs.  Supply is elastic and the benefits from new pharma drugs are enormous. But it is not as simple as being “for higher prices.”  There is also a price trajectory over time. 
The post Prices vs. price paths appeared first on Marginal REVOLUTION.”}]] 

Recently I have been writing about how the federal government should not go further in bargaining or forcing down the prices of pharmaceutical drugs.  Supply is elastic and the benefits from new pharma drugs are enormous.

But it is not as simple as being “for higher prices.”  There is also a price trajectory over time.  Higher prices today can induce more competition, which can mean lower prices tomorrow, maybe even much lower prices.  If not tomorrow, perhaps five or ten years hence.

Higher prices today can mean greater efforts at price discrimination, including over time.  That too can mean lower prices (compared to the counterfactual) at later points in time, or sometimes today as well.

So yes it is fine to be for higher prices for pharmaceuticals.  But in many scenarios you end up being for lower prices too, just not all the time and just not for everybody.

So shout it from the rooftops: “I am not the demonic Satan, I am for both higher and lower prices as part of a complex mix, to expand elastic supply.”  Catchy, right?

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