Against Intellectual Monopoly

Stefano Trento, and Edward Welbourne.
    We learned an immense amount from our fellow bloggers at http://
www.againstmonopoly.org: John Bennett, Andrea Moro, Michael Perelman,
Sheldon Richman, and William Stepp.
    We are grateful also to the Slashdot Web site (http://slashdot.org) and its
many contributors for a set of detailed comments on an early version of some
of the chapters. Many other people contributed thoughts, ideas, examples, and discussion: Larry Ausubel, David Backus, Kyle Bagwell, Sandip Baliga,
Gary Becker, Robert Becker, James Bessen, William Brock, Andres Bucio,
Jorge Capapey, V. V. Chari, Pierre-Andre Chiappori, Eddie Dekel, Drew
Fudenberg, John Gallup, Richard Gilbert, Mike Golosov, Clara Graziano,
Dan Hite, Hugo Hopenhayn, Chad Jones, Larry E. Jones, Boyan Jovanovic,
Nobu Kiyotaki, Lennart Krantz, Timothy Lee, Jay Lepreau, Bob Lucas, Mike
Masnick, Salvatore Modica, Enrico Moretti, Roger Myerson, Paul Romer,
Mark Sattherwaite, Rob Shimer, Nancy Stokey, Juan Urrutia Elejalde, Ivan
Werning, Freddy Williams, Asher Wolinsky, Curtis Yarvin, and Alejandro
Zentn. Our student and research assistant, Fanchang Huang, read the whole
manuscript and corrected an endless list of typos, poorly assembled references, and other kinds of errors. He did a great job and we are most grateful
to him. We are likewise grateful to Tenea Johnson, who copyedited the
manuscript. We are sure some errors can still be found, and it is all our
fault.

    Earlier in the project, Chinese University of Hong Kong and the University of Pennsylvania IER/Laurence Klein Lecture provided opportunities to
present our work to broad audiences, and for this and the many comments
that resulted we are grateful.
    A great many attendees at conferences and seminars listened patiently
to variations on our analysis: the economic departments of Arizona State
University, Beijing University, European University Institute, Florence, New
York University, Oxford University, Purdue University, SUNY Buffalo, University of California, Los Angeles, Universidad Autonoma, Madrid, Venice
International University, University of Wisconsin-Madison, and Wuhan
University; theory and/or macroeconomics workshops at Brown University,
Carlos III, City University of Hong Kong, Columbia University, Cornell
University, Harvard University, Humboldt University of Berlin, Indiana
University, Iowa State University, London School of Economics, Northwestern University, Rochester University, Stanford University, Universitat
Pompeu Fabra, University of Toulouse, University of Alabama, University
of California, Berkeley, University of Chicago, and University of Kansas;
and conferences and seminars including American Economic Association
meetings in Atlanta, Carnegie Rochester Conference, Federal Reserve Bank
of Dallas conference on globalization, Federal Reserve Bank of Richmond,
Fundacion Urrutia Elejalde Conference, Madrid, Innocenzo Gasparini Institute for Economic Research, Milan, Instituto Tecnologico Autonomo de
Mexico, Mexico City, Loyola University, Chicago, Rochester University Weg-
mans Conference, Society for Economic Dynamics Conference, Paris, World
Bank-Pompeu Fabra conference, and Yale University's Cowles Commission.

     

ONE
Introduction
    In late 1764, while repairing a small Newcomen steam engine, the idea of
allowing steam to expand and condense in separate containers sprang into
the mind of James Watt. He spent the next few months in unceasing labor
building a model of the new engine. In 1768, after a series of improvements
and substantial borrowing, he applied for a patent on the idea, which
required him to travel to London in August. He spent the next six months
working hard to obtain his patent. It was finally awarded in January of
the following year. Nothing much happened by way of production until
1775. Then, with a major effort supported by his business partner, the rich
industrialist Matthew Boulton, Watt secured an act of Parliament extending
his patent until the year 1800. The great statesman Edmund Burke spoke
eloquently in Parliament in the name of economic freedom and against the
creation of unnecessary monopoly - but to no avail.' The connections of
Watt's partner Boulton were too solid to be defeated by simple principle.
    Once Watt's patents were secured and production started, he devoted a
substantial portion of his energy to fending off rival inventors. In 1782, Watt
secured an additional patent, made