TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

Alex Tabarrok responds to Marcia Angell’s claim on Econtalk that the pharmaceutical industry doesn’t drive much innovation:

Notice that Angell first claims the pharmaceutical companies do almost no innovation then, when presented with a figure of $70 billion spent on R&D, she switches to an entirely different and irrelevant claim, namely that spending on marketing is even larger. Apple spends more on marketing than on R&D but this doesn’t make Apple any less innovative. Angell’s idea of splitting up company spending into a “budget” is also deeply confused. The budget metaphor suggests firms choose among R&D, marketing, profits and manufacturing costs just like a household chooses between fine dining or cable TV. In fact, if the marketing budget were cut, revenues would fall. Marketing drives sales and (expected) sales drives R&D. Angell is like the financial expert who recommends that a family save money by selling its car forgetting that without a car it makes it much harder to get to work.

And by the way, if you have any interest in the economy or economics, or public policy, I would highly recommend listening to Econtalk. It’s consistently interesting and, in many cases, insightful. You could do a lot worse for things to listen to while commuting.