Against Intellectual Monopoly by Michele Boldrin;David K. Levine

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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 discrimination because, given the transport technology of the time,
the price of coal - and horses, the alternative to the Newcomen engine being
horses - varied substantially from one region to another. It assumes that
technological improvement will be stifled, because it is based on the idea
that only the Watt engine could use less coal than the Newcomen engine.
No surprise, then, that Boulton and Watt spent most of their time fighting
in court any inventor, such as Jonathan Hornblower, who