Watt, innovation, and the Industrial Revolution

In my courses I try to tell the story of urban modernity through a series of sub-stories. One of these is about how the Industrial Revolution happened. In 2012 I explained the Industrial Revolution thus: the key technology of the Industrial Revolution was the steam-engine; the key innovator of the steam-engine was Watt; and the key instrument for funding Watt’s innovations was the patent. So: the creation of patents—the creation of intellectual property as a new form of property-right—was the vital ingredient that triggered the Industrial Revolution.

I based this story on James Vance’s arguments in This Scene of Man (1977). Vance taught me Urban Geography in 1986. But I knew I needed to take a closer look at the emergence of intellectual property in the 1700s; it was the one part of the story I had not seen verified by other sources. What had changed? Did it become easier to get patents? Did the laws change so that commoners (like Watt) could get patents? Or did non-aristocrats gain increased access to the courts to defend their patents?

It turns out that Eric Robinson, an historian of Watt, had the same concerns. In 1972, Robinson wrote “James Watt and the Law of Patents” where he describes an unexpected finding: there was no substantial change in patent laws nor practices in the late 1700s. Lord Mansfield, who adjudicated the patent-fights of Watt and his contemporaries, makes no remarks about changes in the law of patents. Robinson had to go through Watt’s own letters to find comments about patent law and practice. Though Watt proposed some improvements to patent law, these were never implemented.

In fact, the critical change to patent law happened 150 years before Watt started improving the steam-engine. The Statute of Monopolies, passed in 1623, banned all monopolies with the exception of temporary monopolies defined by ‘letters patent’ (meaning open, public documentation of the right-to-ownership). The next major intervention in patent law began with Parliament’s Select Committee on Patents in 1829—a full two centuries after the Statute of Monopolies, and fifty years after Watt’s major patents were filed.

So patents were a key ingredient in the development of steam-engines, but not a ‘proximate trigger’ of the Industrial Revolution.

Before proceeding with the story of Watt and steam-engines in the late 1700s, I want to note an important political-economy lesson from the struggle that led to the Statute of Monopolies. English aristocracy became concerned about monopolies in the late 1500s. The Statute of Monopolies in 1623 was the result of a long-running fight between Parliament and the monarchs from Mary (1553-1558) through Elizabeth I (1558-1603), and James I (1567-1625). At the time it was only monarchs who granted monopolies, so the 1623 Statute was both a political restriction on the monarch and an economic restriction on the monarch’s favored friends.

Here in the 21st century, in an era of monopolistic corporate power, deregulation, and economic decline, it is worth noting that the fight against unfair economic advantage has been waged for more than 400 years. When neoliberals recite their blind faith in ‘free markets’ and claim Adam Smith as patron saint, it is worth reminding our present world that Adam Smith spoke out against monopoly-power. Smith wanted competitive markets, and argued that freedom-of-contract needed to be tempered by courts and regulations that maintained the competitiveness of markets. What Joseph Stiglitz and Amartya Sen make clear—building explicitly on Smith’s work—is that there is no such thing as a ‘free market.’ There are competitive markets and monopolistic markets. Strong regulatory governments—US, Europe, East Asia—can push back against dominating firms to keep markets competitive. Weaker governments—Afghanistan, Somalia, Congo—cannot regulate (or cannot enforce the regulations they have), so their ‘unfettered’ economies become monopolistic. Unregulated, monopolistic economies may be extremely lucrative for the top tenth of 1% in a country. But for overall national output and wealth, monopolistic markets tend to be both unproductive and violent. I have argued this before; but it is worth noting that the breakup of monopolies (and resulting economic growth) of the U.S. from 1901-1980 was not the only time when governments intervened to bust monopolies for the benefit of broad-based economic growth. The anti-monopoly struggle has a multi-century history.

Okay, back to Watt and steam-engines: the only short story I can identify through this weeks’ research is a story of institutional learning. In this narration, equal credit goes to Matthew Boulton, Watt’s business-partner for many years. Watt was technically and theoretically brilliant, but he was a poor businessman, he was depressive, and he had few influential contacts. Boulton was a successful businessman with numerous and diverse contacts, and many resources. Boulton was also wise enough to recognize the value of Watt’s innovations and insight. Here is Thurston’s 1901 summary of their relationship:

In the new firm, Boulton took charge of the general business, and Watt superintended the design, construction, and erection of their engines. Boulton’s business capacity, with Watt’s wonderful mechanical ability—Boulton’s physical health, and his vigor and courage, offsetting Watt’s feeble health and depression of spirits—and, more than all, Boulton’s pecuniary resources, both in his own purse and in those of his friends, enabled the firm to conquer all difficulties, whether in finance, in litigation, or in engineering (Thurston 1901:103).

So: a combination of elements had to come into place to make the steam-engine possible. First, the technology itself. Worcester, Huygens, Savery, Papin, and Newcomen had all invented crucial components of the steam-engine between 1628 and 1712 (Thurston, 1901, ch.1, sec.2). In fact Boulton and Watt first made a profit based only on an improved Newcomen engine; they charged license-fees based on the increased efficiency of their steam-pump over the Newcomen pump.

Second, the existence of the Statute of Monopolies did matter. It meant that commoners (and aristocrats) could claim property-rights to their ideas. But it took a long time for this new regime of intellectual property to yield results. Watt & Boulton had essentially the same rights as all their predecessors back to 1623.

Third, there was the experience of business-practice. Boulton was a successful industrialist even before he met Watt. As a commoner under Common Law, Boulton was able to manufacture and market small metal products and become wealthy. When he partnered with Watt, he was also able to lobby Parliament to extend Watt’s 1769 “Fire-Engine” patent in 1775. He was able to fund patent-litigation against William Bull. Boulton was even able to subcontract out the fabrication of the first steam-engines, before Boulon & Watt could build all the parts in-house. This segmentation of a production process was complex. It required Boulton’s prior experience with the business of industrial production. This is a form of institutional learning.

Fourth, freedom of contract meant that commoners could negotiate tens or hundreds of contracts for products and services without the slow and fraught process of gaining royal approval. I need to research this further. Adam Smith argued for this right to private contracts in 1776, but I don’t know the state of those rights in the late 1700s, nor when and how they changed. I do know that James Watt personally knew Adam Smith. Maybe Smith’s arguments were directly influenced by acquaintance with the struggles and frequent failures of inventors and entrepreneurs. And I know that the license-negotiations for intellectual property are a crucial component of private contracting.

Fifth, the promotion of scientific research—known then as inquiries into natural philosophy—was critical. The historical marker-point was the foundation of the Royal Society in 1660. Apparently Charles II not only signed off in the creation of the Royal Society, but he was actually personally enthusiastic about the advancement of science. This formal, public affirmation of scientific discovery made a huge difference over the next century. While patents made technological R&D profitable, the Society promoted a more general theoretical comprehension of nature.

Another way to stitch this story together is to emphasize how different modes of thinking were necessary to produce and implement technical innovation. Building on Flyvbjerg’s research (1993, 1998, and 2001) I argue that humans think rationally in multiple modes. One of these modes is episteme—logical reasoning based on abstract, unchanging principles. Scientific understandings of steam and thermodynamics are examples of episteme, and Watt was famous for his theoretical brilliance. Second is techne—the ability to understand how to get things done, how things go together. Watt was also famous for this ability; he was a fine builder of working prototypes. Third is phronesis—the ability to make effective judgement-calls. Here was Boulton’s strength, as both a businessman and as a political lobbyist. Fourth is sophia—wisdom based on reflexive experience. Again this was Boulton’s strength, and the reason why institutional learning is a concise way of understanding this story. It took business-experience, from logistics through management to social contacts, to make this all work. Boulton could think in a way that Watt could not; Boulton could pull off the elaborate productive choreography of building a new device with subcontractor-manufacturers, while fending off patent-infringers, and negotiating profitable contracts with mine-owners who wanted a more efficient pump than the Newcomen engine.

It may help to illustrate this story with a 21st-century parallel. Steve Jobs did not invent the mobile-phone, nor the smart-phone. In fact, Palm was a brilliant innovator with the ‘Palm Pilot.’ The smart-phone of 2012 is a fusion of the 1990s technologies of Palm Pilots and mobile-phones. So Apple entered a market that was already quite fully developed before the iPhone was even introduced. Likewise, Watt did not invent the steam-engine. In fact his first profitable model was only a more-efficient pump that entered into the existing, 60-year-old market of Newcomen pumping-engines. Boulton and Watt actually made their first profits off of fuel-efficiency, a lesson worth noting for the 21st century. Once Boulton & Watt got going, they also provoked competition and increased the market by making steam-pumps more cost-effective. Furthermore, by subcontracting component-fabrication, they improved the competence of English machinists–especially in the ability to bore large piston-cylinders. But as Selgin & Turner (2009) argue, even the Boulton & Watt double-action steam-engine was a low-power, low-efficiency condensing engine. It was one of their competitors—Richard Trevithick—who developed the high-pressure steam engine in 1803 that would power the mills, locomotives, and steam-boats of the 19th century.

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