Against Intellectual Monopoly

evidence about intellectual monopoly and innovation. Is it a fact
that intellectual monopoly leads to more creativity and innovation? Our
examination of the data shows no evidence that it does. Nor are we the
first economists to reach this conclusion. After reviewing an earlier set of
facts in 1958, the distinguished economist Fritz Machlup wrote, "It would
be irresponsible, on the basis of our present knowledge of its economic
consequences, to recommend instituting [a patent system] .1120
    Because there is no evidence that intellectual monopoly achieves the
desired purpose of increasing innovation and creation, it has no benefits.
So, there is no need for society to balance the benefits against the costs. This
leads us to our final conclusion: intellectual property is an unnecessary evil.
Comments
    We are grateful to George Selgin and John Turner, of the University of
Georgia Terry College of Business, for pointing out a number of factual
mistakes and imprecisions in our rendition of the James Watt story, as it
had appeared in earlier versions of this chapter and in our 2003 Lawrence R.
Klein Lecture. In a recent article, Selgin and Turner also take issue with our
interpretation of the facts and add a few additional ones that, in their view,
contradict our vision of James Watt as a primary example of an intellectual
monopolist. It seems clear, even from the references quoted by Selgin and
Turner, that many students of the Industrial Revolution shared our view -
or more properly, we share theirs.21
    Selgin and Turner's argument and facts do not, however, address the issues
we raise about Boulton and Watt. Take their discussion of the hypothetical "Watt sans patent." Obviously Boulton and Watt loved their patents,
obviously they wanted and fought for them, and obviously they claimed
they would have gone broke and the world would have come apart without
their patents. Our point is another: could they have made enough money
to compensate their opportunity cost without the patent? All the evidence,
including that reported by Selgin and Turner, suggests this is the case. In fact,
they make our case quite convincingly: to quote Scherer22, they assert that seventeen years before the second patent expired they, Boulton and Watt,
were already breaking even. In economics, breaking even means that your
opportunity costs have been paid, and your capital has received the riskadjusted, expected return - and Frank Scherer is a distinguished economist.
Whatever profits Boulton and Watt made after that, it was all extra rents
from monopoly power and, economically, not needed to pay their opportunity costs. So, we all agree that, at least for the final seventeen years, the
patent was not serving a useful economic purpose; hence, it was damaging
because it created monopoly distortions.

Notes
    1. Lord (1923),p.5-3.
    2. Carnegie (1905), p. 157.
    3. Much of the story of James Watt can be found in Carnegie (1905), Lord (1923), and
Marsden (2004). Information on the role of Boulton in Watt's enterprise is drawn
from Mantoux (1905). A lively description of the real Watt, as well of his legal wars
against Hornblower - and many others - and of how he subsequently used his status
to alter the public memory of the facts, can be found in Marsden (2004). That the
patent on the Wasbrough mechanism (apparently also invented independently by
Pickard) was unjust is also the view of Selgin and Turner (2006), who, like Watt, do
not seem to provide any evidence of why it was so.
    As both the Lord and Carnegie works are out of copyright, both are available
online at the very good Rochester site on the history of steam power, http://www.
history.rochester.edu/steam (accessed February 23, 2008). Later drafts of this chapter
benefited enormously from the arrival of Google Book Search, which allowed us to
check many original historical sources about James Watt and the steam engine we
would have never thought possible before.
    4. Lord (1923) gives figures on the number of steam engines produced by Boulton
and Watt between 1775 and 1800, and The Cambridge Economic History of Europe
(1965) provides data on the spread of total horsepower between 1800 and 1815
and the spread of steam power more broadly. However, Kanefsky (1979) has largely
discredited Lord's numbers, which is whywe use figures on machines and horsepower
from Kanefsky and Robey (1980).
    Our horsepower calculations are based on 510 steam engines