Against Intellectual Monopoly

spurred or protected by patents.

    However, these all seem rather obvious, if not stereotypical, examples.
A less obvious but nevertheless familiar form of innovation is emigration.
The first English, Dutch, Irish, or Somali immigrant to the United States
was no less innovative than the inventor of the airplane, and emigrants are
constantly discovering new countries and business opportunities without
any need for intellectual monopoly. Indeed, emigration and the formation
of new communities is both a prototypical example of the fundamental role
played by competitive innovation in the development of human civilization and a reminder of the fact that the forces of monopoly are always
and almost inescapably at work after every great competitive leap forward.
    The first immigrant faces a large cost: he or she must cross the ocean,
or desert, or mountain range. He also faces a high risk of failure: who
knows what is waiting over there and what living conditions will be like?
The cost is much smaller and less risky for imitators - seldom if ever are
unsuccessful immigrants imitated. Followers of early settlers already know
that the newfound land is hospitable and fertile - and the pioneers are
available to inform newcomers about job opportunities and local laws and
customs. Yet the common association of "early settlers" with "old money"
or "political influence," or both, suggests that there is still a substantial
advantage to being first.
    Sadly, as in other industries, after years have gone by and the number of new opportunities for immigrants diminishes, pressure from early
entrants for monopoly protection emerges. Such rent-seeking legislation in
the immigration industry we call immigration and naturalization restrictions or quotas. Although economists doubt that these restrictions provide
much benefit for the early entrants, there is no doubt that protection from
competition from new immigrants is much sought after.
    The history of emigration carries also some broader messages about innovation. It shows that free entry and unrestricted imitation characterize the
most successful experiences, whereas monopolistic restrictions on immigration are often associated with subsequent poor economic performances.
One example is the contrasting experiences of the Portuguese and Spanish
settlements of Central and South America, respectively, and that of the
English settlements of North America. The first was limited to small bands
of politically connected adventurers; the second was open even to politically
unpopular groups such as the Puritans. The economic consequences speak
for themselves.

    In a similar way, successful new industries are almost invariably the product of innovation-cum-imitation-cum-cutthroat competition, and many
potential successes have been thwarted from the start by the adoption of
monopolistic arrangements favoring the very early innovators. It is also true
that the more mature and economically successful a country is, the stronger
is the internal pressure to introduce monopolistic restrictions to immigration. So it is also at the end of the industry life cycle that wealthy, mature,
and technologically stagnant firms are the breeding ground of monopolistic restrictions purchased through the constant lobbying of politicians and
regulators.
The Industrial Revolution and the Steam Engine
    It has been argued that the Industrial Revolution took place when it took
place (allegedly, sometime between 1750 and 1850) and where it took place
(England) largely because patents giving inventors a period of monopoly
power were first introduced by enlightened rulers at that time and in
that place. The exemplary story of James Watt, the prototypical inventorentrepreneur of the time, is often told to confirm the magic role of patents
in spurring invention and growth. As we pointed out in the introduction,
this is far from being the case.
    The pricing policy of Boulton and Watt's enterprise was a classical example of monopoly pricing: over and above the cost of the materials needed to
build the steam engine, they would charge royalties equal to one-third of the
fuel cost-savings attained by their engine in comparison to the Newcomen
engine. Notice two interesting properties of this scheme: it allows for price
discrimination, and it is founded on the hypothesis that, thanks to patent
protection, no further technological improvement will take place. It allows
for price