Comment: "The most popular argument

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"The most popular argument

"The most popular argument for patents among economists is the utilitarian one that a patent for a certain number of years is necessary to encourage a sufficient amount of research expen­diture for inventions and innovations in processes and products.

This is a curious argument, because the question immediately arises: By what standard do you judge that research expenditures are “too much,” “too little,” or just about enough? This is a problem faced by every governmental intervention in the mar­ket’s production. Resources—the better lands, laborers, capital goods, time—in society are limited, and they may be used for countless alternative ends. By what standard does someone assert that certain uses are “excessive,” that certain uses are “insuffi­cient,” etc.? Someone observes that there is little investment in Arizona, but a great deal in Pennsylvania; he indignantly asserts that Arizona deserves more investment. But what standards can he use to make this claim? The market does have a rational standard: the highest money incomes and highest profits, for these can be achieved only through maximum service of consumer de­sires. This principle of maximum service to consumers and pro­ducers alike—i.e., to everybody—governs the seemingly mysterious market allocation of resources: how much to devote to one firm or to another, to one area or another, to present or future, to one good or another, to research as compared with other forms of investment. But the observer who criticizes this allocation can have no rational standards for decision; he has only his arbitrary whim. This is especially true of criticism of production-relations. Someone who chides consumers for buying too much cosmetics may have, rightly or wrongly, some rational basis for his criti­cism. But someone who thinks that more or less of a certain re­source should be used in a certain manner or that business firms are “too large” or “too small” or that too much or too little is spent on research or is invested in a new machine, can have no rational basis for his criticism. Businesses, in short, are produc­ing for a market, guided by the ultimate valuations of consumers on that market. Outside observers may criticize ultimate valua­tions of consumers if they choose—although if they interfere with consumption based on these valuations they impose a loss of utility upon consumers—but they cannot legitimately criticize the means: the production relations, the allocations of factors, etc., by which these ends are served....

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