Why Nations Fail

Between 1820 and 1845, only 19 percent of patentees in the United States had parents who were professionals or were from recognizable major landowning families. During the same period, 40 percent of those who took out patents had only primary schooling or less, just like Edisson.

If you were poor with a good idea, it was one thing to take out a patent, which was not so expensive after all. It was another thing entirely to use that patent to make money. One way, of course, was to sell the patent to someone else. This is what Edison did early on, to raise some capital, when he sold his quadruplex telegraph to Western Union for $10 000. But selling patents was a good idea only for someone like Edison, who had ideas faster than he would put them to practice. (He had a world record 1093 patents issued to him in the United States and 1500 in the world.)

First Welfare Theorem, identifies the circumstances under which the allocation of resources in a market economy is an abstraction that is meant to capture a situation in which all individuals and firms can freely produce, buy, and sell any products or services that they wish. When these circumstances are not present there is a “market failure”. Such failures provide the basic for a theory of world inequality, since the more that market failures go unaddressed, the poorer a country is likely to be.

Innovation is about making sacrifices today in order to have more tomorrow.

In the 1690’s, T’ang Chen, a retired Chinese scholar and failed merchant, wrote: More than fifty years have passed since the founding of the Ching(Qing) dynasty, and the empire grows poorer each day. Farmers are destitute, artisans are destitute, merchants are destitute, and officials too are destitute.Indeed the four occupations are all impoverished.

All in all, French armies wrought much suffering in Europe, but they also radically changed the lay of land. In much of Europe, gone were feudal relations, the power of the guilds; the absolutist control of monarchs and princes; the group of the clergy on economic, social and political power, and the foundation of ancient regime, which treated different people unequally based on their birth status.

What Michaels did not anticipate perhaps was an echo of Karl Marx’s remark that history repeats itself- the first time as tragedy, the second time as farce.