Costs will keep rising unless we confront this economic challenge.
 | By John Guida Senior Staff Editor, Opinion |
The debates over Build Back Better, the reconciliation package under consideration among Democrats in Congress, have focused largely on spending policy. |
In a guest essay for Times Opinion today, Samuel Hammond, Daniel Takash and Steven Teles argue that an important piece is missing from the proposals: regulatory reform, for what they see as "regressive regulations that restrict supply and competition." |
They argue that the root causes of rising costs for items like housing, health and child care, and college are to be found in constrained supply — a result of "structural problems that aren't easily fixed through the usual tax-and-spend tool kit." |
In response to some questions, Hammond, Takash and Teles expanded on their argument for relaxing excessive regulations to tackle the daunting affordability problem for housing, child care and education. |
John Guida: Let's say a trillion-dollar reconciliation package passes. What would be an ideal follow-up package of regulatory reform? |
Samuel Hammond, Daniel Takash and Steven Teles: Top of the list should be patent reform. The standards of patent quality have allowed enormous "thickets" of patents around drugs and the extension of effective patent terms to nearly double the length of the 20-year term sometimes set by law. Generic drug markets aren't perfect, but they bring prices down dramatically. The federal government has 100 percent control of this agenda. |
JG: Could something like that attract bipartisan support — something like what we saw with infrastructure? |
SH, DT, ST: It depends. Assuming the proposal doesn't become a casualty in the culture war (like housing policy), it's not impossible to imagine a broad consensus emerging on one side with a small coalition of defectors from an intransigent opposition. If legislation were something relatively limited in scope on an under-the-radar issue with strange bedfellows championing the issue, you may well be able to get together a relatively broad bipartisan coalition. |
JG: Ezra Klein, in a column that explored your research, wondered about looking for future "choke points" and "the places where the economy can't or won't supply the things we need." Any guesses what those might be? |
SH, DT, ST: Here again intellectual property is part of the problem. Our patent system is a good one, but in the pharmaceutical space (as Klein discusses) it distorts incentives to go after extending more lucrative monopolies rather than investing in less lucrative but more socially beneficial investments. For systemwide choke points created by I.P., the Biden administration is taking the lead by looking at the ways patent enforcement through both injunctions and excessive royalties make cutting-edge industries less competitive and, by extension, supply chains more vulnerable. |
Can a supply-focused approach work? With the possibility of trillions of dollars of new spending coming, Hammond, Takash and Teles make a strong case for trying. |
Here's what we're focusing on today: |
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