Do Patents Encourage or Hinder Innovation? The Case of the Steam Engine

The Freeman, in December of last year, published an excellent study of a natural experiment in patents: the Steam Engine. The power of a steam engine is rated in "duty": the amount of weight it can lift. During the 42 years from 1772 to 1813 duty rose 3.8 percent per year; during the 38 years from 1814 to 1852 duty rose more than twice as fast-8.5 percent per year. The difference? Boulton and Watt had a patent on the separate condensor from 1769 to 1800, with almost absolute control on the development of the steam engine. During the later period, the inventors declined to patent their inventions, and there was greater innovation. The beneficiary? Everyone who used a steam engine, or bought products produced by a steam engine.

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