Prestige and Profit: The Royal Society of Arts and Incentives for Innovation, 1750-1850
Debates have long centered around the relative merits of prizes and other incentives for technological innovation. Some economists have cited the experience of the prestigious Royal Society of Arts (RSA), which offered honorary and cash awards, as proof of the efficacy of innovation prizes. The Society initially was averse to patents and prohibited the award of prizes for patented inventions. This study examines data on several thousand of these inducement prizes, matched with patent records and biographical information about the applicants. The empirical analysis shows that inventors of items that were valuable in the marketplace typically chose to obtain patents and to bypass the prize system. Owing to such adverse selection, prizes were negatively related to subsequent areas of important technological discovery. The RSA ultimately became disillusioned with the prize system, which they recognized had done little to promote technological progress and industrialization. The Society acknowledged that its efforts had been “futile” because of its hostility to patents, and switched from offering inducement prizes towards lobbying for reforms to strengthen the patent system. The findings suggest some skepticism is warranted about claims regarding the role that elites and nonmarket-oriented institutions played in generating technological innovation and long-term economic development.
I have benefited greatly from discussions with Ran Abramitsky, Steve Broadberry, Neil Cummins, Naomi Lamoreaux, Tom Nicholas, Patrick O’Brien, and Leigh Shaw-Taylor, as well as with seminar participants at Cambridge University and the Society for the History of Technology. Esther Brubaker provided invaluable assistance with the compilation and analysis of the data. I am grateful for the support of the National Science Foundation, the Center for the Protection of Intellectual Property, the Hoover National Fellows Programme, and the IP2 Center at Stanford University. Thanks are especially due to the Economic History Group at the London School of Economics, which provided a supportive and stimulating environment during the completion of this project. Liability for errors is limited to the author. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.