Chris Thompson indeed published an article on January 24, 2007 entitled A Penny on the Dollar, which included the text:
Back in 2004, the initiative's supporters repeatedly promised that the public subsidy — estimated at the time as $6 billion, including interest — would be substantially offset by a fortune in royalties from treatments that would inevitably spring from such research. One week before the election, Robert Klein, the real-estate mogul who spearheaded the campaign, went on The NewsHour with Jim Lehrer and promised, "The state of California will gain new jobs, new tax revenues, and intellectual property revenues to pay back the taxpayers."
Thompson got directly to the report by Stanford professor Baker:
The rebuttal to the no-on-71 argument read in part, "Studies led by a Stanford University economist project that 71 will generate millions in new state revenues from royalties."
But Thompson didn't get Gilbert's criticism of Baker exactly right. Thompson wrote:
According to Gilbert's study, the Baker-Deal report estimated that new therapies inspired by stem-cell research would bring in $9 billion in revenue, of which the state's cut would be at least $204 million. Since these therapies would take about ten years to develop, inflation would boost the value of the royalties to between $537 million and $1.1 billion, depending on the profit-sharing terms.
Gilbert claims that while Baker and Deal inflated the value of these procedures over time, they neglected to mention that all the associated costs would rise as well. "A dollar of revenue earned ten years in the future does not have the same value to the state as a dollar of revenue earned in the present," Gilbert wrote. "The study accounts for inflation in health-care costs, but does not discount future revenue flows."
Even assuming the Baker-Deal model is correct, the state would get no more than about 35 percent of what they estimated. But their model is wrong, Gilbert says. In its place, he compared the money spent on research and development by universities, hospitals, and research institutes with the cash they got back in licensing income. For every dollar spent, he estimates, these institutions received 6.6 cents in return. Ten years of inflation would reduce that considerably, and the state will have to share the windfall with its private partners.
Thompson neglected to mention the following Gilbert text after the sentence about "dollar of revenue." Gilbert wrote: "A correct value calculation should discount future revenue flows by the time value of money. While reasonable people may disagree over the appropriate choice of a discount rate, a number at the low end of the range is the rate of interest paid by ten-year treasury bonds." If one talks about getting $100 ten years from now, that is not the same as having $100 now. The $100 in ten years has to be discounted by what one could have earned in between. [Inflation is a separate issue; the time value of money is an issue EVEN IF there is ZERO inflation.]
To visualize in terms of a more familiar topic, consider the lottery. There has been recent discussion of lottery winners in Oregon: "A couple who won a $2.6 million lottery jackpot and spoke of helping young people fight drug addiction and alcohol abuse are facing a lawsuit alleging they held four months of parties with public sex, fights and signs of drug dealing." When one speaks of a $2.6 million dollar lottery jackpot, that refers to a payout over time, similar to alleged projected patent royalties from Proposition 71, which would be received over time, NOT ALL NOW. In fact, the Oregon couple did NOT take the $2.6 million paid over time; they took a payout paid in the present. Specifically, the couple accepted a lump-sum payment of $871,000 from the Oregon Lottery in October 2005. The $2.6 million in the future became $871,000 because of the time value of money, not because of inflation.
Thompson wrote --Lawrence Baker, one of the Prop. 71 report coauthors, hasn't read Gilbert's study, but acknowledges that his numbers shouldn't be taken as gospel.-- but Thompson neglected to mention the Symposium at Princeton, who was at the symposium, and what Baker wrote in the paper at the Symposium.
On the lottery example, note that David Sneath's prize of $136 million amounted to $84.3 million when taken as an immediate
lump sum. See Jackpot winner to boss: I'm out of here. One would have thought academics would correct for such things, but they didn't. Shoddy work.