“But, the AP found, access to Monsanto’s genes comes at a cost, and with plenty of strings attached. I should hope so. If Monsanto is giving away its technology and failing to protect its IP it is in serious trouble with its shareholders, among others. And never mind (and the AP reporter doesn’t) that Monsanto apparently licenses its technology broadly (I assume that 200 companies is broad in this market) rather than keeping it locked up for itself (the usual complaint about firms exercising their IP rights). Isn’t this how technology markets are supposed to work?”
Monsanto’s behavior appears to be consistent with what we would expect from a dynamically efficient system of intellectual property rights. While people may have different opinions about the optimal time period for setting patents, or even debate the merits of IP, that is different than punishing a company for its success based on a short term ‘static’ analysis of their behavior.
Some research even indicates that under the current regime, farmers can still benefit in the face of a monopolist supplier. When looking at the gains from biotechnology for Bt Cotton, research in the American Journal of Agricultural Economics found :
“The welfare framework explicitly recognizes that research protected by intellectual property rights generates monopoly profits, and makes it possible to partition these rents among consumers, farmers, and the innovating input firms. We calculate a total increase in world surplus of $240.3 million for 1996. Of this total, the largest share (59%) went to U.S. farmers.”
In conclusion, if we are concerned about monopoly power and market concentration in agriculture, we have to ask ourselves what policies are empowering these firms? It seems the loudest voices cheering on the government’s investigation of Monsanto also support the very policies that lead to industry consolidation to begin with. This seems all too familiar. The financial industry is the most heavily regulated industry in the United States. Add to that the interventions of the Federal Reserve through centrally planned interest rates, and we have created an industry incentivized to take extraordinary risks despite or as a result of in some cases) all of the regulations. When the industry came crashing down in 2008, many of the same advocates whose policies helped create the financial crisis also were the loudest to blame the industry for its ‘greed’ and ‘short sightedness.’ I think we are seeing something very similar with Monsanto, and I hope it doesn’t become an industry wide phenomenon. A financial crisis is bad enough, but we don’t need a food crisis.
Henry I Miller and Gregory Conko. 'Freeing the Biotech Revolution.' CEI Monthly Planet. November 2004. The Competitive Enterprise Institute Volume 17 No 9
First Monday, Volume 1, Number 2 - 5 August 1996Differential Pricing and Efficiency