Intellectual Property Rights, the Industrial Revolution, and the Beginnings of Modern Economic Growth

Abstract

There is a growing consensus that in all cases of successful and unsuccessful economic growth, institutions mattered (Elhanan Helpman 2008; Daron Acemoglu, Simon Johnson, and James Robinson 2005). Somewhat oddly, little detailed research has been done to date to relate the Industrial Revolution, the taproot of modern economic growth, to its institutional origins (but see Mokyr 2008). The focus of institutional analysis has been either on earlier episodes of mostly Smithian growth, such as the commercial revolutions in medieval Europe (Avner Greif 2005), or on more modern experiences, when good data allowed researchers to have a meaningful debate on how to test hypotheses on the importance of institutions. The main argument made about institutions and the British Industrial Revolution is that political events from the late seventeenth century on created a regime that supported an executive that was sufficiently constrained to create a “rule of law” and respect private property rights, and yet not engage in (or permit others to engage in) unbridled rent-seeking (Douglass North and Barry Weingast 1989; Kenneth Dam 2005). Part of this argument is that in this age intellectual property rights (IPR) began to be increasingly res pected. The reason this argument is central is that, in the end, the Industrial Revolution was a set of tech nological improvements, a few large and dramatic, most mundane and incremental. The kind of insti tutions that incentivize technological progress differ from those that support the growth of markets by pro tecting property rights. It is true that in a wholly lawless society technological progress is unlikely, but all the same the institutions that support the different kinds of growth are not likely to be identical. Indeed, one could argue that to some extent the reverse was needed for Intellectual Property Rights, the Industrial Revolution, and the Beginnings of Modern Economic Growth