Category Archives: Britain

To patent or not to patent, that is the question

Inventors, Patents and Inventive Activities in the English Brewing Industry, 1634-1850

Alessandro Nuvolari (alessandro.nuvolari@sssup.it) and James Sumner (james.sumner@manchester.ac.uk)

URL: http://ideas.repec.org/p/ssa/lemwps/2012-18.html

Abstract

This paper examines the relationship between patents, appropriability strategies and market for technologies in the English brewing industry before 1850. Previous research has pointed to the apparent oddity that large-scale brewing in this period was characterized both by a self-aware culture of rapid technological innovation, and by a remarkably low propensity to patent. Our study records how brewery innovators pursued a wide variety of highly distinct appropriability strategies, including secrecy, selective revealing, patenting, and open innovation and knowledge-sharing for reputational reasons. All these strategies could co-exist, although some brewery insiders maintained a suspicion of the promoters of patent technologies which faded only in the nineteenth century. Furthermore, we find evidence that sophisticated strategies of selective revealing could support trade in inventions even without the use of the patent system.

Review by Chris Colvin

Much about the recent legal dispute between Apple and Samsung suggests that our patent system is broken. The conventional economic argument for patent protection is that it is socially beneficial because it: (1) incentivises invention in areas where there would otherwise be few rewards for inventors; and (2) aids in the dissemination of ideas and combats secrecy (for a good explanation of the conventional view, see Suzanne Scotchmer’s excellent textbook). But in their 2008 polemic, and again in a recent working paper, Michele Boldrin and David K Levine argue that patents create only ‘an “intellectual monopoly” that hinders rather than helps the competitive free market regime that has delivered wealth and innovation to our doorsteps’. The authors argue instead that: (1) patents neither increase invention, nor adequately reward inventors; and (2) patents simply create a market in patents and in associated legal services.

Nuvolari and Sumner try to understand the remarkably low propensity to patent in brewing before 1850.

It is against this on-going debate on the value and efficacy of patent protection that Alessandro Nuvolari and James Sumner’s new working paper should be read. Distributed on NEP-HIS-2012-11-03, the paper offers an excellent industry case study from history with which to understand the role of patents within a single sector. Nuvolari (Scuola Superiore Sant’Anna, Pisa) and Sumner (University of Manchester) track their use in the brewing industry before, during and after the Industrial Revolution. Not only do they compile a new dataset of patents and patentees in brewing across the period, but they also catalogue alternative appropriability strategies used by innovators at the time: trade secrecy, complete openness, and everything between. Of particular interest to economists and historians studying innovation and incentives are the authors’ findings that the strategies of “insiders” and “outsiders” to the brewing industry differed substantially, and that there was a large trade in inventions, even for those that were not protected by patents.

Today, and with few exceptions, we have a one-size-fits-all patent system that offers the same levels of protection to inventors in all sectors of the economy. One mooted solution to our current patent mess is that these government-granted monopoly rights should be redesigned to be sector-specific; they are perhaps more appropriate to some industries than others and should have different protection lengths, breadths and costs to reflect this. For example, patents that relate to tablet computers should be weakened, whilst those relating to pharmaceuticals strengthened. Nuvolari and Sumner give us a warning shot from history for policymakers considering such an approach: a great deal of different appropriability strategies can be present even within the same industrial sector, let alone between sectors. Redesigning today’s patent system to be sector-specific would fail to reflect the different ways in which inventors compete; it may force rivals to use the same strategies, and may hamper rather than help progress.

Human Resources in Great Britain in the Long Run, 1871-2011

Population, Migration and Labour Supply: Great Britain 1871 – 2011

Timothy J. Hatton (Australian National University) (tim.hatton@anu.edu.au)

URL http://d.repec.org/n?u=RePEc:auu:hpaper:004&r=his

Abstract
A country’s most important asset is its people. This paper outlines the development of Britain’s human resources since the middle of the 19th century. It focuses on four key elements. The first is the demographic transition – the processes through which birth rates and death rates fell, leading to a slowdown in population growth. The second is the geographical reallocation of population through migration. This includes emigration and immigration as well as migration within Britain. The third issue is labour supply: the proportion of the population participating in the labour market and the amount and type of labour supplied. Related to this, the last part of the chapter charts the growth in education and skills of the population and the labour force.

Review by Anna Missiaia

This work by Tim Hatton was distributed by NEP-HIS on 2012-07-29 and deals with the evolution of population, labour force and human capital in Britain over the last 140 years. It is part of the upcoming third edition of the Cambridge Economic History of Modern Britain edited by Roderick Floud, Paul Johnson and Jane Humphries. The author of this paper is one of the most known scholars when it comes to British labour history. The paper neatly illustrates the main trends in the evolution of human capital in Britain in the long run.

The first trend is the one of population. British population tripled over this period, predominately due to the increase in the number of the over 60 population. The reduction in deaths was due to the reduction in infectious diseases.  This change in the age structure is typical of demographic transitions experienced by industrializing countries. Nowadays, the main cause of death is chronic conditions that are also responsible of the increased number of years spent in disability. As for the fertility transition, Hatton claims that it was not caused by the decrease in infant mortality (and therefore the need to have fewer children in order to ensure support in old age). On the contrary, Hatton claims that a shift in preferences for smaller and better off family took place and was enabled by more awareness of birth control.

The second trend is the shift of Britain from an emigration to an immigration country. Emigration was in general connected to fluctuations in the business cycle abroad and the author estimates that the without emigration, real wages would have been about 12% lower. The reversal took place in the 1980s due to a mix of changes in institutional factors and economic incentives. Countries such as the US, Canada and Australia abolished the preference for British migrants and Britain facilitated the migration of Commonwealth citizens.

As for the condition of the labour force, the participation of women increased and the one of people over 65 decreased. There are two hypotheses on why women stayed out of the labour market until the 1930s: economic choice or social norms hostile to women labour. In the first case the decrease in the number of children to take care of should have led to an increase in participation, which did not occur for a long time after the beginning of the fertility transition. According to Hatton, women empowerment led to the overcoming of social norms. In general, the number of hours worked decreased from 60 per week to 36 from the 1980s on. This was possible because of the increase in real wages that allowed workers to work fewer hours.

Finally, education became universal through the expansion of public schooling and higher education (especially in professional subjects). For women, the attainment of a higher level of education was functional to the larger participation in the labour force. In conclusion, this paper gives an excellent overview on different topics in British labour history. It connects the different dimensions (population, labour force, migration, schooling) within one framework and proposes the author’s view on several debated issues.

In Antitrust We (Do Not) Trust

British economists on competition policy (1890-1920)

By Nicola Giocoli (giocoli@mail.jus.unipi.it), University of Pisa

URL: http://econpapers.repec.org/paper/pramprapa/39245.htm

Abstract

Most late 19th-century US economists gave a rather cool welcome to the Sherman Act (1890) and, though less harshly, to the Clayton and FTC Acts (1914). A large literature has identified several explanations for this surprising attitude, calling into play the relation between big business and competition, a non-neoclassical notion of competition and a weak understanding of anti-competitive practices. Much less investigated is the reaction of British economists to the passing of antitrust statutes in the U.S. What we know is simply that none of them (including the top dog, Alfred Marshall) championed the adoption of a law-based competition policy during the three decades (1890-1920) of most intense antitrust debates in the U.S. The position of three prominent British economists will be examined in this paper: H.S. Foxwell, D.H. MacGregor, and, of course, Alfred Marshall – the latter in two moments at the extremes of our period, 1890 and 1919. It will turn out that they all shared with their American colleagues a theoretical and operational skepticism about the government and judiciary interference with the free working of markets. They also believed that British industrial structure and business habits were so different from those in the U.S. that the urge of interfering with markets in order to preserve competition was much weaker. Among the paper’s insights is that Marshall’s key concept of “defending a competitor’s right to compete” foreran the modern characterization of the goal of competition policy as “the protection of the competitive process”. Yet Marshall developed his concept without making recourse to the post-1930s neoclassical notion of competition as a static market structure which lies at the foundation of most contemporary antitrust policy: a useful lesson from the history of economic thought for those IO economists who still claim that the classical dynamic view of competition is unsuited as a foundation for an effective competition policy.

Review by Chris Colvin

I will be teaching industrial organisation (IO) to undergraduates next year. It is a brand new course, and so I have been trawling though the websites of IO teachers around the world for inspiration. Overall, I have been quite perplexed with what I have found: undergraduates seem to be fed material that is very theoretical and computational, with little or no context or application. Perhaps this prepares students well for graduate programmes in economics, but the vast majority of economics undergraduates aren’t going to be doing a PhD. And even those that do will require exposure to some empirical research.

I want my students to use their microeconomics, to get them to appreciate that real life is dirtier than in the models. And I want them to understand that economic ideas aren’t fixed in time and space, that a log-run perspective can yield interesting insights about human behaviour. I plan to do so by limiting the use of textbooks and instead delving into academic papers and antitrust cases. I feel economic history should play centre stage in an economics degree, not relegated to an obscure field study. So, when teaching sunk costs and market structure, I will look at the decline of Europe’s film industry in the early twentieth century; when covering collusion, I will set them the US sugar cartel of the 1930s; when teaching natural monopolies, I will examine Victorian railways; and when looking at the efficacy of patents, I will do nineteenth century alternatives.

I am also keen to find something accessible that students can use to appreciate the origins and evolution of competition policy – including why it differs by place, and how legal decisions based on economic arguments made long ago still have resonance today. I want to teach them some history of economic thought. One paper that I hope to discuss in this context is Nicola Giocoli‘s working paper distributed by NEP-HIS on 2012-06-13. Giocoli looks at the reaction in the UK to the advent of antitrust in the US. He finds that influential British economists like Foxwell, McGregor and Marshall were dead against US-style anti-monopoly legislation. They believed it would be difficult to implement, run counter to the ideals of a free market, and be inappropriate in the UK industrial context. The UK had to wait until the 1970s for a pukka competition policy to be introduced.

Alfred Marshall, whose ideas about antitrust policy are explored by Nicola Giocoli

What is particularly interesting about Giocoli’s paper is his description of a transformation in what economists thought competition entailed. For classical economist, competition was about firm conduct; they adopted a dynamic process-based view of competition. For the neoclassical economists that followed, competition was more about market structure, the market condition; this static view was more concerned with business size and the number of competitors. For someone teaching modern IO theory, this is fascinating. Over the last two (or three) decades, IO has seen a paradigm shift from the old structure-conduct-performance view of competition – which primarily concerned itself with measuring market structure – to the so-called New Industrial Organisation view – which, apparently much like the economists described by Giocoli, is far more concerned with figuring out firm conduct and doesn’t necessarily draw a causal link between structure and performance. In short, it appears we have come full circle.

I like Giocoli’s paper because he tries to marry his history of economic thought with up-to-date research in economic history. Instead of seeing the US as a success and Britain as a failure – a view that business historian Alfred Chandler made a living out of – Giocoli argues instead that competition law was unnecessary because Britain was largely still a success, still ahead of everyone else terms of total factor productivity – it didn’t require government intervention. I would encourage Giocoli to further develop this argument by looking at some of the work of Leslie Hannah, whose career has been devoted to debunking Chandler. His work (including in the JEH) shows that the Chandlerian corporation was actually far more a thing of Europe than America. A monopolist like Standard Oil – the company whose breakup is central to any history of antitrust – was the exception rather than the rule. US capitalism is a story of small family-run enterprise, not big business. How does this revision of the business history affect Giocoli’s argument?

“Nobody said it would be easy, and nobody was right.” On the (Im)possibilities of International Policy Coordination

International Policy Coordination: The Long View

Barry Eichengreen (eichengr@econ.berkeley.edu), University of California at Berkeley (United States)

URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:17665&r=his

Abstract: This paper places current efforts at international economic policy coordination in historical perspective. It argues that successful cooperation is most likely in four sets of circumstances. First, when it centers on technical issues. Second, when cooperation is institutionalized – when procedures and precedents create presumptions about the appropriate conduct of policy and reduce the transactions costs of reaching an agreement. Third, when it is concerned with preserving an existing set of policies and behaviors (when it is concerned with preserving a policy regime). Fourth, when it occurs in the context of broad comity among nations. These points are elaborated through a review of 150 years of historical experience and then used to assess the scope for cooperative responses to the current economic crisis.

Review by: Manuel Bautista González

“The question is whether those who talk the talk also walk the walk.” (Eichengreen 2011: 1)

Barry Eichengreen

Financial turmoil in the European Union has been increasing in the last months. According to The Economist, credit in the eurozone is tighter than it was in the worst months after the Lehman bankruptcy. “Forget about a rescue in the form of the G20, the G8, the G7, a new European Union Treasury, the issue of Eurobonds, a large scale debt mutualization scheme, or any other bedtime story. We are each on our own”, wrote Simon Johnson and Peter Boone earlier this week (Johnson and Boone 2012). Paul Krugman has brought attention to the horrific consequences of the defeat of the European monetary experiment: “Failure of the euro would amount to a huge defeat for the broader European project, the attempt to bring peace, prosperity and democracy to a continent with a terrible history. It would also have much the same effect that the failure of austerity is having in Greece, discrediting the political mainstream and empowering extremists” (Krugman 2012).

It is in this context that this paper written by Barry Eichengreen and distributed by NEP-HIS on 2012-01-03 is an opportune “breathless historical review” (Eichengreen 2011: 29) of past attempts of international policy coordination in monetary, fiscal and financial matters from the last quarter of the nineteenth century to our days. In so doing, Eichengreen provides an interesting narrative centered in politics and institutions that complements optimally a reading of his classical work on the history of the international monetary system and global capital markets (Eichengreen 2008) as well as his most recent account of the US dollar as a dominant international currency (Eichengreen 2011b).

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