walmart and medical cost

[Athena]

Walmart had so much buying power, it caused brand name companies to close down factories in the US and move their operations to places like China. Why is not possible for our government to do the same regarding medical supplies?

 

I use a CPAP machine, to manage sleep apena. The cheapest head gear I can find is $89. Now get this. The real cost of this stuff may be a couple of dollars. There are several different styles of head gear. Mine is a modeled soft plastic piece that fits in my nose, attached to two tubes, that look like the tubes for an aquarium pump, and a hard plastic piece that these tubes fit onto, connecting them with another tube, that leads to the machine. Just the nose is over $30 and how much can really cost to make this?

 

Then the process of getting this equipment if one is on medicare and has supplemental insurance is hell. The medical suppliers have some how convinced government that this combination of plastic parts can not be sold without a doctor's prescription! Yet the makers of cold medication, who use an ingredient that is used in making meth, (a seriously bad street drug) are able to block attempts to regulate this medication. Why? Why is a completely harmless but essential product so controlled, while a potentially very dangerous one that is shooting the cost of medicine (emergency room visits by people who can't buy) the cost of the criminal justice system and prisons sky high, remains uncontrolled?

 

Either we need to prevent to government from regulating all this stuff, or we need to take the elected officials to dinner and explain reality to them. Possibly take them out and shoot them for makings such lousy decisions? What in blazes is going on in the White House? The decision making regarding these things is terrible. Big business is running the show and we are getting screwed.

 

I swear, I am hunting down the tubing used for my head gear, and will buy it off the counter for a fraction of the price, and put together my head gear myself. I would like to learn how to make the plastic mold for the nose piece, and how to get the sold plastic liquid and make my own nose piece. Seriously, if these parts were sold at there true cost, we might save medicare. Those companies supplying medical supplies are on the government gravy train, and we need to derail this train. I know of people getting electric wheel chairs costing medicare thousands of dollars, who never use them. The system is out of control.

[lemur]

It amazes me that more people don't question the prices and costs of such things as you are doing. The problem is that so many businesses and jobs are funded by those high prices and the insurance pools that fund them. Cutting funding puts pressure on to reduce prices, but the response is usually to assume that prices/costs are fixed and to blame budget-cutters for not coughing up the money. It would be nice if the BS of so much economic structuring could be eliminated and people would do the simple work needed to help each other and teach each other to do things for themselves. Surely you could use plastic tubing from a hardware store and mold your own nose-fitting if you knew how or knew someone who could help you. Imagine if doctors gave out prescriptions for local craftspeople who made equipment from scratch? Ironically, it would cost LESS than the imported stuff does after it's been marked up to the highest price the market will pay in order to squeeze maximum revenue out of the insurance companies that squeeze maximum revenue out of the workers.

[swansont]

My guess is the price of the equipment includes the future cost of litigation for when somebody asphyxiates because of some defect or malfunction or misuse, and similar costs. We are a rather litigious society.

 

As far as meth manufacture goes, in the US you generally can't buy large amounts of anything containing pseudoephedrine even though it's not a prescription med, and you have to show ID, meaning you are tracked when you make the purchase. That's not really "uncontrolled"

[Marat]

Many governments do have general purchasing agreements for drugs with pharmaceutical companies in order to keep the prices of drugs low for their citizens. Canada is one such example. Essentially governments should use their block buying power -- together with their legal regulations, if necessary -- to act as a citizens' union forcing drug prices down. Better still, why not just nationalize the entire medical industry and have the government develop, price, and sell all medical products in service of genuine human need with no loss of efficiency in this quest for serving the demands of wealthy capitalists to make a profit?

 

The problem is far worse than just drugs and medical devices being overpriced. There is also the problem that drugs are developed in the first place to make profits rather than primarily to ameliorate human suffering, and this further induces pharmaceutical firms to lie about research data and to manipulate the market by inducing doctors to prescribe drugs so as to serve profit-making interests rather than human interests.

[lemur]

Many governments do have general purchasing agreements for drugs with pharmaceutical companies in order to keep the prices of drugs low for their citizens. Canada is one such example. Essentially governments should use their block buying power -- together with their legal regulations, if necessary -- to act as a citizens' union forcing drug prices down. Better still, why not just nationalize the entire medical industry and have the government develop, price, and sell all medical products in service of genuine human need with no loss of efficiency in this quest for serving the demands of wealthy capitalists to make a profit?

 

The problem is far worse than just drugs and medical devices being overpriced. There is also the problem that drugs are developed in the first place to make profits rather than primarily to ameliorate human suffering, and this further induces pharmaceutical firms to lie about research data and to manipulate the market by inducing doctors to prescribe drugs so as to serve profit-making interests rather than human interests.

Or why not eliminate or shorten the temporary monopoly provided by patent protection? That way generic competition could immediately drive drug prices down to the minimum possible? I still haven't figured out why global competition isn't allowed since there are so many stories about cheap drugs and healthcare elsewhere.

[swansont]

In general I don't understand the position that medicine should somehow be immune to the laws of economics. I do see that there are problems of conflict of interest that need to be addressed, but aside from those, why would e.g. shortening the time of patent protection help? If a company can't make enough money from successful drugs to pay for its R&D of unsuccessful ones, it won't pursue R&D. Forcing prices down can only go so far. It's not some magic lever that can make the cost of doing business disappear.

 

It's also a bit misguided. A large fraction of the increased cost of healthcare over time is that there are new treatments available. Much of the extra money goes to the new treatments, not the established treatments becoming more expensive.

[CaptainPanic]

The real cost of this stuff may be a couple of dollars.

 

- Buying 50 grams of plastic: 10 cents

- Molding it into a shape of a nose: 50 cents

- Buying tubing and elastic bands: 20 cents

- Put the whole thing together: 1 euro

- Testing it for failures, allergies, sleep disorders, or other injuries: Priceless

[lemur]

In general I don't understand the position that medicine should somehow be immune to the laws of economics. I do see that there are problems of conflict of interest that need to be addressed, but aside from those, why would e.g. shortening the time of patent protection help? If a company can't make enough money from successful drugs to pay for its R&D of unsuccessful ones, it won't pursue R&D.

Mainly I just think it's interesting that when people are talking about letting free-market dynamics rule, they rarely want to fully implement all free market parameters such as expanding competition and limiting monopolistic/oligopolistic control mechanisms to the maximum. People tend to like the free market when they can harness its profit-generating value by essentially colluding instead of competing. As you mention, when it comes to repressive effects on R&D people argue that temporary monopoly is a good way to allow market-control and collusion with science to generate new products.

 

Forcing prices down can only go so far. It's not some magic lever that can make the cost of doing business disappear.

"Forcing prices down" is not force in an authoritarian sense. It is the whole basis for claiming that free market economics is good for consumers as well as producers. Without price competition, or when price-competition is insufficient, market-freedom becomes nothing more than a means for the supply-side (management and labor) to collude in extracting as much money as possible from consumers. "The cost of doing business," as you describe it, is really just the maintenance of a certain culture of spending among business people. Yes, certain processes cannot be eliminated or substituted with cheaper alternatives, but most can and the points of resistance in cutting budgets are usually social instead of physical, imo.

 

It's also a bit misguided. A large fraction of the increased cost of healthcare over time is that there are new treatments available. Much of the extra money goes to the new treatments, not the established treatments becoming more expensive.

Right, you hear this a lot; that older drugs are cheaper because the companies use sales of newer drugs to fund R&D and other aspects of business. This may be good or bad but the point is that it is again a form of business collusion that shields competition. I don't mind have it debated that competition or collusion (market freedom vs. market control) results in a better economy; after all that's the classical debate between capitalism and socialism. What bothers me is that we constantly hear how everything is the result of a free market when there's all kinds of relative control mechanisms being traded as part of the supposedly 'free' market.

[swansont]

Mainly I just think it's interesting that when people are talking about letting free-market dynamics rule, they rarely want to fully implement all free market parameters such as expanding competition and limiting monopolistic/oligopolistic control mechanisms to the maximum. People tend to like the free market when they can harness its profit-generating value by essentially colluding instead of competing. As you mention, when it comes to repressive effects on R&D people argue that temporary monopoly is a good way to allow market-control and collusion with science to generate new products.

 

It's more the idea that this shouldn't be in place for pharmaceutical companies, but it's not objected to in all other areas of business. If one wants to argue against patent protection (which is not collusion), open up the field to include all products.

[lemur]

It's more the idea that this shouldn't be in place for pharmaceutical companies, but it's not objected to in all other areas of business. If one wants to argue against patent protection (which is not collusion), open up the field to include all products.

How is patent protection not collusion? What is any form of monopoly except an agreement of non-competition among all parties with the ability to produce something? You have a good point that the argument against patent protection shouldn't be limited to pharmaceuticals, but I'm not as interested in arguing against patent-protection (since I know I'll get buried under piles of reasons why it is beneficial). My point is that it is a temporary suspension of free market competition for the sake of allowing a special incentive for R&D of new products.

[Marat]

Something now often proposed as an alternative to patent protection is public bounties for new inventions, treatments, or drugs. Just as England in the 18th century offered a bounty to anyone who could develop a method for accurately determining longitude at sea, so too modern governments could offer a bounty for developing an effective but non-toxic immunosuppressive drug, a better treatment for cancer, a cure for viruses, etc. This way public interest could better control what products are developed and could also manage the cost parameters.

 

In general, though, the limit to the free market in medicine is that medicine has to serve goals of humanity which cannot be adequately represented by the profit mechanisms. Thus it has long been the practice of drug companies to make and store so-called 'orphan drugs,' that is, drugs for rare diseases which it is simply not financially worthwhile to treat. They do this because they are pressured by governments to act in the public interest in this way, and they agree since it is not too expensive for them, though it is unprofitable. If drug companies were fully socialized, however, the entire development of new treatments could be 100% in the public interest, rather than only a fraction in the public interest as it is now. As long as the system is private, we get absurdities such as have occurred over the last decade, when new drug development has just been an expensive effort to circumvent other companies' patent protections by making copy-cat drugs which represent absolutely no added benefit to humanity.

[swansont]

How is patent protection not collusion? What is any form of monopoly except an agreement of non-competition among all parties with the ability to produce something? You have a good point that the argument against patent protection shouldn't be limited to pharmaceuticals, but I'm not as interested in arguing against patent-protection (since I know I'll get buried under piles of reasons why it is beneficial). My point is that it is a temporary suspension of free market competition for the sake of allowing a special incentive for R&D of new products.

 

Patents protect you from someone copying your product. They don't prevent anyone from making a competing product. That's not collusion.

 

It's not a suspension of any free market belief that has been embraced by the US in the last 200 years or so; it's in the Constitution (article I, section 8).

[lemur]

Patents protect you from someone copying your product. They don't prevent anyone from making a competing product. That's not collusion.

 

Please just look at it at the most basic level. If a firm has the ability to produce and sell something cheaper than another firm, doing so reflects market freedom. If it refrains from doing so, it is submitting to limiting its freedom. By limiting its freedom and not competing with the patent-holder, it is colluding with the patent-holder to protect its market position. It does so in return for the privilege of holding its own patents and the temporary monopoly that comes with it.

 

You could just as easily collude with your neighbors growing vegetables by agreeing that no one would grow anyone else's vegetable. That way, each person would have a monopoly on their particular vegetable. It doesn't require patenting anything, but patent-protection are a way to enforce the collusion legally by being able to sue anyone who competes with you by producing the same product.

 

It's not a suspension of any free market belief that has been embraced by the US in the last 200 years or so; it's in the Constitution (article I, section 8).

I didn't say patents aren't legal. I just pointed out that they are a deviation from a completely free market. As I said, my only point is that economic discussions should be lucid regarding what constitutes freedom and what constitutes control. Otherwise there's no point in even talking about "market freedom." Defending patents as market freedom is like claiming anti-trust laws are a form of market-control; i.e. it obfuscates the basic logic of differentiating free markets from controlled ones. People can argue that various forms of market freedom and control are good or bad, but does it really help to argue about whether control is really freedom or vice versa?

[swansont]

Please just look at it at the most basic level. If a firm has the ability to produce and sell something cheaper than another firm, doing so reflects market freedom. If it refrains from doing so, it is submitting to limiting its freedom. By limiting its freedom and not competing with the patent-holder, it is colluding with the patent-holder to protect its market position. It does so in return for the privilege of holding its own patents and the temporary monopoly that comes with it.

 

That's not collusion. If I hold a patent I can sell my product without agreeing to anything with anyone else. I can license the product without any agreements about price. A patent is not collusion and does not give you a monopoly.

 

You could just as easily collude with your neighbors growing vegetables by agreeing that no one would grow anyone else's vegetable. That way, each person would have a monopoly on their particular vegetable. It doesn't require patenting anything, but patent-protection are a way to enforce the collusion legally by being able to sue anyone who competes with you by producing the same product.

 

Collusion does not require a patent, and a patent does not imply collusion. If you do not hold a license to sell a patented product, it is illegal to sell that specific product or use that specific process — that's the protection of the patent. That does not prohibit you from selling a competing product. Your example fails because it does not use patented products. If you did, and had a genetically modified carrot that you grew, the only protection you get is from anyone else growing that particular type of carrot. There is no protection against anyone growing any other genetically modified carrot, or anyone growing a run-of-the-mill carrot. All of these carrots growers could compete in the market.

 

The original Coca-Cola formula was patented. That did not stop other people from making and selling cola drinks. Coke holds a patent for a barrier-lined bottle. That does not prevent anyone from using a barrier-lined bottle, they just have to come up with their own way of making them, rather than copying Coke's method (until the patent runs out.)

 

Since we're on the topic of medicines, here's one more example. There are a number of statin medications on the market, such as Lipitor, Zocor, Pravachol and more than a half dozen others, all of which are patent-protected. And they all compete with each other. Viagra, Cialis and Levitra compete. Don't tell me you haven't seen the ads.

 

I didn't say patents aren't legal.

 

Neither did I.

 

I just pointed out that they are a deviation from a completely free market. As I said, my only point is that economic discussions should be lucid regarding what constitutes freedom and what constitutes control. Otherwise there's no point in even talking about "market freedom." Defending patents as market freedom is like claiming anti-trust laws are a form of market-control; i.e. it obfuscates the basic logic of differentiating free markets from controlled ones. People can argue that various forms of market freedom and control are good or bad, but does it really help to argue about whether control is really freedom or vice versa?

 

Why should a completely free market be used as some standard, or some goal to which we should aspire? Since we have never had a free market in the US, it seems like a straw man. Who was defending patents as market freedom?

[DJBruce]

As has been said before pharmaceutical products are expensive in part because of the fact that research and development is incredibly long and expensive process. Successful medications do not only need to generate enough revenue to pay for their own R&D cost, but the costs of the failed drugs before them, and these costs can be huge considering that 3 out of 20 FDA approved pharmaceutical products make enough money to cover their own R&D costs. Add to the fact that this do not consider the numerous chemical and products that never achieve FDA approval, and I think the true cost of things comes more into light.

 

As for medical products like the makes and hosing your were discussing Athena like CaptainPanic hinted at there is much more behind these products than just the actual building material. Since they must to be tested for allergies, effectiveness, safety, and that all medical products are sterilized before being packaged in order to protect patients.

 

http://www.medicinenet.com/script/main/art.asp?articlekey=18892

[lemur]

That's not collusion. If I hold a patent I can sell my product without agreeing to anything with anyone else. I can license the product without any agreements about price. A patent is not collusion and does not give you a monopoly.

You're right with your examples that patents don't prevent competition but neither does any monopoly insofar as consumers can substitute other products for the monopolized one. Anti-trust was used on telephone companies in the 1980s, I believe, but couldn't people have substituted some other means of communication for telephone? Couldn't telephony have been treated as a modern luxury and telegraph or mail have been considered sufficient competition?

 

Why can't you just admit that the fundamental interest businesses have in patenting products is to prevent other businesses from competing with them once production begins. Who wants to invest in developing a drug and have someone else analyze it, copy it, and drive down the price the moment it hits the market? Patents provide the monopoly position that allows the developer set the price. That's the whole point. If there weren't laws involved to formalize the monopoly position, it would just be informal cooperation between companies to avoid competing. It's like when you leave a company and sign a non-competition agreement, you are colluding with your employer against the public, who would like you to offer the same good/service of your previous employer at a lower price.

 

Why should a completely free market be used as some standard, or some goal to which we should aspire? Since we have never had a free market in the US, it seems like a straw man. Who was defending patents as market freedom?

Everyone has a different opinion. Free market proponents believe that free market dynamics result in the greatest economic efficiency, which provides the maximum benefit to consumers. Those who prefer greater market control tend to do so from the perspective that it is better for the workers to prevent total cost-cutting competition. Imo, it comes down to would you rather make more money, work more for it, and have less control over your work or would you rather make less money but have less work to do and have the freedom to choose how much and what kind of work to do. Obviously the corporate-controlled variation of "market freedom" does not extend the freedom to the individual level but at least in theory a truly competitive free market would drive prices so low on everything that people wouldn't produce or consume any more than they absolutely had to and as a result people would have more free time to do whatever they wanted - just very little money to spend.

 

 

[swansont]

You're right with your examples that patents don't prevent competition but neither does any monopoly insofar as consumers can substitute other products for the monopolized one. Anti-trust was used on telephone companies in the 1980s, I believe, but couldn't people have substituted some other means of communication for telephone? Couldn't telephony have been treated as a modern luxury and telegraph or mail have been considered sufficient competition?

 

I never made any argument about monopolies

 

 

Why can't you just admit that the fundamental interest businesses have in patenting products is to prevent other businesses from competing with them once production begins. Who wants to invest in developing a drug and have someone else analyze it, copy it, and drive down the price the moment it hits the market? Patents provide the monopoly position that allows the developer set the price. That's the whole point. If there weren't laws involved to formalize the monopoly position, it would just be informal cooperation between companies to avoid competing. It's like when you leave a company and sign a non-competition agreement, you are colluding with your employer against the public, who would like you to offer the same good/service of your previous employer at a lower price.

 

I won't admit it because I don't think it's true unless you redefine what is meant by "competition" and "monopoly" and you contradict your preceding paragraph where you admit "patents don't prevent competition"

 

Everyone has a different opinion. Free market proponents believe that free market dynamics result in the greatest economic efficiency, which provides the maximum benefit to consumers. Those who prefer greater market control tend to do so from the perspective that it is better for the workers to prevent total cost-cutting competition. Imo, it comes down to would you rather make more money, work more for it, and have less control over your work or would you rather make less money but have less work to do and have the freedom to choose how much and what kind of work to do. Obviously the corporate-controlled variation of "market freedom" does not extend the freedom to the individual level but at least in theory a truly competitive free market would drive prices so low on everything that people wouldn't produce or consume any more than they absolutely had to and as a result people would have more free time to do whatever they wanted - just very little money to spend.

 

Yes, it is opinion. That's my objection. It is an opinion that is being offered up as truth.

[lemur]

I won't admit it because I don't think it's true unless you redefine what is meant by "competition" and "monopoly" and you contradict your preceding paragraph where you admit "patents don't prevent competition"

How about this: why don't you just give an example of clear monopoly that excludes competition and I will see if I can't find a substitute that allows competition?

 

Yes, it is opinion. That's my objection. It is an opinion that is being offered up as truth.

What you are doing is more like using relative notions of what is "sufficient competition" to count as such. This ignores the fundamental relational difference between competition and non-competitive positioning. Competition is when there are no barriers to entering a market. A patent is a type of market-entry barrier. Therefore patents limit competition. That their whole purpose!

 

 

[swansont]

How about this: why don't you just give an example of clear monopoly that excludes competition and I will see if I can't find a substitute that allows competition?

 

I'm unclear as to why I should come up with an example supporting a position I did not take. Anyway, Ma Bell. That was a monopoly. Now, if you'll be so kind as to show how that monopoly existed because of patent protection, I'll see some relevance.

 

Competition is when there are no barriers to entering a market.

 

Oh, baloney. Coming up with cash to start a business is a barrier to entering the market. Not giving me $1,000,000 to start up a company is therefore anti-competitive, by that definition.

[john5746]

What you are doing is more like using relative notions of what is "sufficient competition" to count as such. This ignores the fundamental relational difference between competition and non-competitive positioning. Competition is when there are no barriers to entering a market. A patent is a type of market-entry barrier. Therefore patents limit competition. That their whole purpose!

 

It might be helpful to think about what is needed for a "free" market. It isn't something that exists in nature. We need the concept of property rights, you think? Copyrights, trademarks and patents protect intellectual property rights. If you want to allow theft of intellectual property, why not theft of buildings? It is anti-competitive to not allow Microsoft to use guns and take over Google servers, but it would preserve fair competition, at least in my opinion.

[Athena]

Folks, it is not just the cost of CPAP supplies, but the difficulty in getting them. I can not get the supplies I need without a doctor's prescription. I saw the specialist many years ago, and before I can get an air tube or filter, the supplier has to contact the doctor, and get a new approval. Then this is turned into my insurer and waits for my insurer to approve of this. My supplier never remember the procedure, so I would wait and wait for my supplies, and call them to find out what the hang up was, and prompt them to take the required steps. I went through all this for years, and the last straw when I made sure they had taken all the steps, and asked, if I come to your office and get the supplies, I can have them, right? This is a long drive and when I get there, I still can not pick up my supplies. The only person in the office does not know where the parts are stored.

 

So I change to a different supplier. Wait weeks for all the steps to be taken. Call to find out what happened, and none of the steps were taken. Call my insurer and request help. Wait weeks, get told to I can now make an appointment. Go to the appointment, and this supplier doesn't have the product I want. It is an access problem, not just a pricing problem! My tubing should have been placed months ago. I am waiting to die from some funky bacteria because I can not get the tubing I need. May be this is just an attitude problem, but can you imagine going through this to get a pair of shoes and new TV? We are talking an plastic tube, nose piece.

 

I think I found a plastic tube supplier in China. I just need to buy 200 feet of the tubing. I am willing to do that to have access to the tubing. That is my most urgent need. I need to get busy and find away to access the rest of the supplies. The whole system controls what I can or can not get and from whom, and there is nothing dangerous about the supplies. Being without is the danger. I wish I could buy them as easily as I can buy a pair of shoes.

[john5746]

I've been on CPAP for a couple of years now, so I feel your pain. Interestingly, my insurance charges supplies against my deductible, so this year I decided to buy them outside of my insurance. My supplier gave me two prices, one with insurance, one without(~20% less). Seems like the tubing is lasting at least a year for me.

[lemur]

I'm unclear as to why I should come up with an example supporting a position I did not take. Anyway, Ma Bell. That was a monopoly. Now, if you'll be so kind as to show how that monopoly existed because of patent protection, I'll see some relevance.

You were arguing about what in fact constitutes monopoly and competition. I was trying to arrive at an example that you would recognize as a clearly anti-competition monopoly to show that there's always a possibility of substituting something else for the monopolized commodity. That still doesn't change the fact that there is intent to prevent competitors from gaining access to one's production methods, recipes, etc. because competition lowers the price you can get for something.

 

Oh, baloney. Coming up with cash to start a business is a barrier to entering the market. Not giving me $1,000,000 to start up a company is therefore anti-competitive, by that definition.

So when a government creates high license-fees to enter a market, that doesn't form a barrier to market entry? These concepts are self-evident. "Barrier to entry" literally means anything that would prevent a potential competitor from entering a market. It could be start-up costs or fear of being jailed.

 

 

It might be helpful to think about what is needed for a "free" market. It isn't something that exists in nature. We need the concept of property rights, you think? Copyrights, trademarks and patents protect intellectual property rights. If you want to allow theft of intellectual property, why not theft of buildings? It is anti-competitive to not allow Microsoft to use guns and take over Google servers, but it would preserve fair competition, at least in my opinion.

Because buildings are commodities whereas patents protect methods, recipes, etc. If you copy someone's recipe, you still have to do the work of producing the product. Allowing multiple producers to compete results in cost-cutting that ensures the lowest possible price to consumers. According to the theory, firms are self-interested and rational and will therefore not price themselves out of business, but if they did they could just get back into the market again at competitors' prices without any barriers to entry. Perfect free market situations don't exist in practice, but the concepts make sense and it is of course possible to identify things like market entry barriers and other anti-competitive measures and eliminate those in an attempt to liberate markets (as so many social-democrats seem to hate).

 

 

[swansont]

You were arguing about what in fact constitutes monopoly and competition. I was trying to arrive at an example that you would recognize as a clearly anti-competition monopoly to show that there's always a possibility of substituting something else for the monopolized commodity. That still doesn't change the fact that there is intent to prevent competitors from gaining access to one's production methods, recipes, etc. because competition lowers the price you can get for something.

 

No, I was arguing that patents do not constitute a monopoly and do not eliminate competition. But since you contend there's always a product to substitute, even when you have a monopoly, that makes my point.

 

So when a government creates high license-fees to enter a market, that doesn't form a barrier to market entry? These concepts are self-evident. "Barrier to entry" literally means anything that would prevent a potential competitor from entering a market. It could be start-up costs or fear of being jailed.

 

Free market is your argument, not mine. "Competition = no barriers" and "barriers = no competition" are not self-evident. False statements aren't self-evident.

 

Take the case of Coke again. When they changed their original formula (~100 years ago) they, like other companies, decided not to patent it, because they did not want it freely available once the patent protection ran out. So they treat it as a trade secret. Now that's a big barrier to competition. I can't make an exact copy of Coke. I have to come up with my own formula. That's a barrier to market entry, so from your definition it's not free market, but I'll be damned if I can see how that's not the free market in action.

[john5746]

According to the theory, firms are self-interested and rational and will therefore not price themselves out of business, but if they did they could just get back into the market again at competitors' prices without any barriers to entry. Perfect free market situations don't exist in practice, but the concepts make sense and it is of course possible to identify things like market entry barriers and other anti-competitive measures and eliminate those in an attempt to liberate markets (as so many social-democrats seem to hate).

 

I don't think we should pursue your definition of a free market. Businesses pursue profit, so if intellectual property can be stolen, then it has no value and therefore they should not invest in it. Innovation is very risky, high costs but with possibly big payoffs in terms of profit margin and market share. You will be taking away most of the payoff without removing the costs. That is a huge barrier.