Neb said:
I'm not exactly sure what you mean by stifling innovation either.
The stifling innovation thing is the increase in costs of how much it costs to get a new drug out into the system. Also because they only have a limited time to be able to sell the drug(FDA approval takes ages), they have to charge a much higher price to recoup their costs.
Neb said:
There's no more or no less innovation to be found in a private or public firm that makes drugs, none.
Well not just that, a govt is less likely to be able to 'pick the winner' in terms of choosing the right technology/drug to pursue.
Why? Because it lacks distributed information.
Neb said:
Mmmhmm, but couldn't this wonderfully useful capital be invested in one big firm that would then distribute the benefits equally, rather than on a lopsided scale? You know...the government?
What is distributed information? It's all the little things that people know. But often they don't have the incentive to tell other people about it. eg. when you know that a company is going to experience high profits in the future because you know that what it's investing in is a good industry or whatever... you should BUY that stock on the stock market or, purchase a call option on the stock, or any kind of action like this. Likewise, if you think the company is going down, it makes sense to SELL the stock or buy a put option on it etc.
When you do this, you are contributing your information to the price. An efficient market will help the price remain accurate in this way. If you're interested in the subject, check out the
Efficient Market Hypothesis, or
Prediction markets. You might also find the
Wisdom of Crowds an interesting read. They generally work pretty well, because all the people gambling/investing in them generally have good knowledge of what they invest in, and they're prepared to put their money where their mouth is.
Anyway, the point is, without the use of distributed information, the govt cannot apportion its money so well. This is because there is no way to "increase your stock holdings" in a non-listed firm such as a govt owned one. The only influence on govts is one vote every 3 years, as opposed to the market where not only do you have much much more choice, you can choose how much you want to invest in something and it operates on a much faster time schedule (some changes have almost instant effects on the price of a stock). This kind of information can't be represented by a 1 and a 2 on a ballot sheet.
Also, there's no way for a govt firm manager to "pretend that the money he's investing is his own". Without this, his preferences will be skewed, he may be more inclined to take up a more risky position than what a private company in the industry would support. When you take up more risk than you can handle for example, you can easily lose money.
So it is actually the govt distribution of things within businesses that is lopsided, not the markets.
Anyway, I hope you found that interesting.