20 February 2015

Your Money Or Your Life

One of the differences, if not the motivating difference, between micro-quants and macro-quants is the maximization function. That last bit is econo-quant speak for "what's the source, amount, and purpose of profit"? For the micro folks, it's just as much as the laws allow for my client company. For the macro folks, it's a bit murkier. Generally, macro refers to the sovereign, but could also be a region, continent or planet. The max function for the macro folks is "benefit to everyone" in the sphere. So, in many places water supply is held communally through local or regional government, and price is set to balance household, farm, and industrial/commercial demands. We see the conflict going on in the western states in these days of drought.

What with ACA and baby boomers and the poor banging on the door of health care, there's a particularly nasty example of the conflict betwixt the micro and macro quants. The guy's name is Martin Shkreli. If you plug that name into your favorite search vehicle, you'll get a long history of his activities. The short version: a one-time hedge analyst who creates "pharma" companies with the sole purpose of buying up old, little used drugs (generally from the sole provider) and raising the price a whopping amount. Doesn't do anything else with the drug.

He got kicked out of the first one he started, and with his current one, attempted to take an old Bayer drug and move it from $100 to $100,000, according to reports. Today, comes another piece on the effort. Bayer, seeing that they'd been ignoring free money, bumped the price themselves, although not so much.

If there were a "free market" in pharma, with bans on patents, what would happen? R&D would fall to governments entirely; as things stand now, governments and academia do far more R&D than the general public is aware. In fact, there is growing controversy over the practice of universities claiming patent incomes on the R&D they do, especially that which is funded in part or whole by the Damn Gummint.

What Shkreli is attempting is simple: if my company makes a life saving drug, patients owe my company the rest of that patient's life earnings. After all, without that drug there would be no life. Ah the twin myths of democracy and civilization; enough of us remain Cro Magnon. Ayn would be so proud.

No comments: