Fifty Inventions That Shaped the Modern Economy

by Tim Harford

If you cannot be a good accountant,” he warns, “you will grope your way forward like a blind man and may meet great losses.” Pacioli’s

but the direct ancestor of today’s corporations was born in England, on New Year’s Eve, in 1600. Back then,

creating a corporation didn’t simply involve filing some routine forms—you needed a royal charter. And

A corporation’s charter specifically said what it was allowed to do and often also st...

was allowed t...

Crucially, and unusually, the charter granted those merchants limited liability for the company’s actions.

The way we invest today—buying shares in companies whose managers we will never meet—would be unthinkable without limited liability.

But handling England’s trade with half the world was a weighty undertaking. The corporation Queen Elizabeth created was called the East India Company. Over the next two centuries, it grew to look less like a trading business and more like a colonial government.

At its peak, it ruled 90 million Indians. It employed an army of 200,000 soldiers. It had a meritocratic civil service. It even issued its own coins. And the idea of limited

economist Milton Friedman argued that “the social responsibility of business is to maximize its profits.” If it’s legal, and it makes money, they should do it. And if people don’t like it, don’t blame the company—change the law.6 The trouble is that

companies can influence the law, too. They can fund lobbyists.

The East India Company quickly learned the valu...

cozy relationships with British politicians, who duly bailed it out whenever it got into trou...

a famine in Bengal clobbered the company’s revenue. British legislators saved it from bankruptcy by exempting it from tariffs on tea exports to the American c...

their part: it eventually led to the Boston Tea Party, and the American Declaration of Independence.7 You could say the United States owes its existence to e...

In effect, the Glass-Steagall Act made it a legal requirement for banks to hire management consultants.11 For a follow-up, in 1956 the Justice

January 1842, Charles Dickens arrived on American shores for the first time. He was greeted like a rock star in Boston, Massachusetts, but the great novelist was a man with a cause: he wanted to put an end to the cheap, sloppy pirated copies of his work in the United States.

They circulated with impunity because the United States granted no copyright protection to noncitizens. In a bitter letter to a friend, Dickens compared

The United States finally began to respect international copyright in 1891, half a century after Dickens’s campaign.2 And a similar transition is occurring in developing

countries today: the less those countries copy other ideas and the more they create of their own, the more they protect ideas themselves. There’s been a lot

movement in a brief time: China didn’t have a sys...

all until...

The modern form of intellectual property originated, like so many things, in fifteenth-century Venice. Venetian patents were explicitly designed to encourage innovatio...

The economists Michele Boldrin and David Levine argue that what truly unleashed steam-powered industry was the expiration of the patent, in 1800, as rival inventors revealed the ideas they had been sitting on for years. And what happened to Boulton and Watt,

Far from incentivizing improvements in the steam engine, then, the patent actually delayed them. Yet

since the days of Boulton and Watt, intellectual property protection has grown more expansive, not less. Copyright terms are growing ever longer. In

the United States, copyrights originally lasted fourteen years, and were renewable once. They now last seventy years after the death of the autho...

have become broader; they’re bein...

vague ideas—for example, Amazon’s “one-cli...

Charles Dickens himself eventually discovered that there’s a financial upside to weak copyright protection. A quarter of a century after his initial

visit to the United States, Dickens made another visit. Maintaining his family was ruinously expensive and he needed to make some money. And he reckoned that so many people had read cheap knock-offs of his stories that he could cash in on his fame with a lecture tour. He was absolutely right: off the backs of pirated

What began to make that possible was an early kind of computer program called a “compiler.” And

Steven Johnson’s Where Good Ideas Come From zooms in closer, looking at

wait—it starts with an attempt to invent the death ray. This was in 1935. Officials in the British Air Ministry

Wilkins pondered: it might be possible, he suggested, to transmit radio waves and detect, from the echoes, the location of oncoming aircraft long before they

But by 1940, it was the Brits who’d made a spectacular breakthrough: the resonant cavity magnetron, a radar transmitter far more powerful than its

Winston Churchill took power and decided that desperate times called for desperate measures: Britain would simply tell the Americans what they had and

named Eddie Bowen endured a nerve-racking journey with a black metal chest containing a dozen prototype magnetrons. First he took a black cab across

The magnetron stunned the Americans; their research was years off the pace. President Roosevelt approved funds for a new laboratory at MIT—uniquely,

Within two years, what’s now known as the Federal

Two-part pricing models work by imposing what economists call “switching costs.” Want to brew another

Switching costs don’t have to be just financial. They can come in the form of time or hassle. Say I’m already

of brand loyalty.10 If the Gillette company’s marketing

But the two-part pricing model pioneered by Gillette is highly inefficient, and economists have puzzled over why consumers stand for it.

In the middle of the media frenzy over Ernest Oelgert’s poisoned workmates, the report landed. It gave tetraethyl lead a clean bill of health. And the public greeted it with skepticism. Under pressure, the U.S. government organized a conference in Washington, D.C., in May 1925. It was a showdown. In one corner: Frank Howard, vice president of the Ethyl Corporation—a joint venture of General Motors and Standard Oil. He called leaded gasoline a “gift of God,” arguing that “continued development of motor fuels is essential in our civilization.”6

True, the lead additive did solve a problem: it enabled engines to use higher compression ratios, which made them more efficient. But ethyl alcohol had much the same effect, and it wouldn’t mess with your head, unless you drank

Why did General Motors push tetraethyl lead instead of ethyl alcohol? Cynics might point out that any old farmer could distil ethyl alcohol from grain; it couldn’t be patented, or its distribution profitably controlled. Tetraethyl lead could.12

It was only in the 1960s that American universities developed policies on conflicts of interest in research.18

know that they make more money from fatter animals.3 No wonder that across the world, more antibiotics are injected into healthy animals than sick humans.4 In the

big emerging economies, where demand for meat is growing as incomes rise, use of agricultural antibiotics is set