Bioethics Blogs

Gouging

Jumping to the defence of pharmaceutical companies over their pricing policies isn’t fashionable – and a lot of the time, it’s not going to end prettily.  But it’s perfectly coherent to think that the profit motive is one of the motors of innovation, and that it’s part of the quid pro quo for spending money on drugs that may do nothing; in fine, that the profit motive may actually be a necessary part of getting the good stuff we want.  To an economist, the phrase “normal profit” means the minimum profit necessary to keep a firm going – where average revenue equals average total cost.  But if that was all that was on offer, there’d be no incentive to enter a market in the first place: if you’re (on average) in the same place as you were before entering the market, why bother?  So it’s reasonable to think that there ought to be some level of supernormal profits.  They help ensure we get a world that’s better tomorrow than it was yesterday.

On this account, the problem is not with making a supernormal profit – oh, all right then: what in everyday English we’d simply call a profit – but with gouging and/ or profiteering.  The question that needs to be addressed is one of what level of profit, and what kind of return on investment, is reasonable.  In some sectors of the economy, it may be quite high.  For example, if I can manufacture a luxury good for which people are willing to pay through the nose, and make a stonking great profit from it… well, all hail me.

The views, opinions and positions expressed by these authors and blogs are theirs and do not necessarily represent that of the Bioethics Research Library and Kennedy Institute of Ethics or Georgetown University.