Economics of Technology – Page 105

British Inventions Taken Up and Exploited in the United States

Source of book image: http://www.mikemilken.com/fincareer.taf?page=they_made_america

Was it a difference in “innovative energies” that mattered, or was it a difference in institutions and incentives?

(p. 11) This crucial difference between invention and innovation was borne in on me on my return to England in 1957. As a young science reporter, I visited the government-funded National Physical Laboratory at Teddington, and they showed where their senior researcher Robert Watson Watt had in 1935 invented the radar system that was to help the Royal Air Force win the battle of Britain. His former colleagues remarked with chagrin on how swiftly this British invention had been taken up and exploited in the United States after 1939, laying the foundation for the great electronics industry. It was the same story with antibiotics, following Alexander Fleming’s 1928 discovery of penicillin; with Maurice Wilkes’s pioneering efforts in developing the first commercial application of the computer at the offices of J. Lyons and Company in 1951 and with the jet engine. All of these British inventions were superseded by the innovative energies of America.

Source:

Evans, Harold. They Made America: Two Centuries of Innovators from the Steam Engine to the Search Engine. New York: Little, Brown and Co., 2004.

A “Bridge” Technology Between Gas and Hydrogen?

Premacy gasoline-electric-hydrogen concept car. Photo source: WSJ, see below.

One of the difficulties in major changes in technology is how to handle the transition. Technologies that reduce the cost of the transition (I call them “bridge technologies”) can be important. Here is a potential example.

(p. D5) . . . with the Premacy concept, Mazda is attempting to combine this electric-motor engine with a combustion engine that is itself a kind of hybrid engine — one that can burn either gasoline or hydrogen, whichever the driver chooses. The company already has spent years developing such dual-fuel combustion engines and says they are now ready for the mass market. Mazda is expected to announce at the Tokyo Motor Show, which opens Oct. 22, that it will begin leasing a version of the RX-8 sports car in Japan with a combustion engine that burns hydrogen as well as gasoline.

Hydrogen is normally seen as an alternative energy source for use in cars powered by fuel cells, in which the chemical reaction between hydrogen and oxygen is used to generate electricity. Fuel-cell technology is attractive because it releases no harmful emissions, and Japan has roughly 15 government-run hydrogen stations to encourage the use of alternative fuels. More are expected.
But fuel-cell technology is also extremely expensive. Because of this, most industry experts think commercial use of fuel-cell cars is years, if not decades, away. That is why Mazda has been developing engines that burn hydrogen much like gasoline. Burning hydrogen, according to Mazda, is much more practical.

For the full story, see:

JATHON SAPSFORD. “Mazda Concept Car Will Run on Three Fuels.” THE WALL STREET JOURNAL (Weds., October 5, 2005): D5.
(Note: ellipsis added.)

If Only Caroline Had Read Schumpeter

Innovation is sometimes slowed because innovators do not know that creative destruction will replace old jobs with equally good, or better, new jobs:

In 1834 Walter Hunt of New York City made such a leap in lateral thinking. In his little machine shop down a narrow alley in Abingdon Square, he devised a machine for stitching cloth with two threads from two separate sources, one a needle on a vibrating arm and the other a transverse shuttle fed by an unwinding bobbin.
. . .
Hunt, an altruistic Quaker, never pursued his invention because his 15-year-old daughter, Caroline, recoiled from the thought that it would put seamstresses out of work. (p. 87)

Source:
Evans, Harold. They Made America: Two Centuries of Innovators from the Steam Engine to the Search Engine. New York: Little, Brown and Co., 2004.
(Note: ellipsis added.)

Software Industry Exemplifies Creative Destruction

(p. 4) In our view, Microsoft’s dominant share in operating systems evolved legitimately from a free-market competitive process. The PC software industry was legally open and contained many talented players (Sun, Netscape, Novell, Oracle, Apple, IBM), some larger than Microsoft, some smaller. The market process in this industry has always been characterized by intense innovation, rapid growth, sharply falling prices, and bitter rivalry (and occasional cooperation) between rivals. The industry exemplifies Austrian economist Joseph Schumpeter’s vision of competition as a process of creative destruction. Microsoft achieved its market position by aggressively innovating and promoting an open, standardized operating system platform . . .

Source:

Armentano, Dominick T. Antitrust: The Case for Repeal. 2nd ed: Mises, 1999.

The Impossible Dream?

In Locked in the Cabinet, Robert Reich’s amusing allegory about life in Washington, Reich laments that the Democratic Party — and in particular the labor constituents in the party — did not support his vision of education and training as a means of enabling the labor force to adapt to and flourish in a time of rapid economic change and dislocation. Instead, they constituted what Reich called the "Save the Jobs Party," which wanted to preserve the industry, the companies and the jobs that exist today.

I think there is a similar phenomenon in antitrust. Antitrust is about process, and a particularly arduous one at that. We are proud that antitrust "protects competition, not competitors". We say that the market has winners and losers and that that is good.

Unfortunately, process is less attractive, in the concrete world in which real disputes arise and real grievances are formed, than is a comforting end-state. And political actors, I fear, are generally more zealous in guarding the latter than in seeking the former.

So, I can imagine constituents and lobbyists and public interest groups demanding the intervention of antitrust authorities to prevent the BA/NYNEX merger, to open up Korea for more car exports, or to restrict the imports of Japanese television sets into the United States. And I can imagine constituents urging that competition authorities in the EC should leave the Boeing/McDonnell Douglas merger alone or that the antitrust agencies here should stop meddling with hospital mergers in Michigan. But it’s hard to imagine tens of thousands of people gathered on the Mall, carrying placards with pictures of Joseph Schumpeter, and demanding that the government give them more "creative destruction."

Source:

A. DOUGLAS MELAMED. "International Antitrust in an Age of International Deregulation." Address Before George Mason Law Review Symposium: Antitrust in the Global Economy, Washington, D.C., October 10, 1997.

(Note: At the time, Melamed was Principal Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice. Bold emphasis was added by Diamond.)