Chapter 12 of Gregory Clark’s A Farewell to Alms describes how production efficiency increased in England during the Industrial Revolution, between 1760 and 1860. The greatest contributor to economic growth was the textile industry, with efficiency in converting raw cotton into cloth increasing by a factor of 14, as a result of productivity-enhancing innovations. Significant productivity gains were also achieved in agriculture and transport.
Interestingly, notwithstanding the extent of productivity gains in the textile industry, many of the most famous innovators did not achieve large financial rewards. James Hargreaves was denied a patent for the spinning jenny, and he died in a workhouse. Richard Arkwright did make a fortune, but most of it is said to have been made after his competitors stopped honouring his patents. Samuel Crompton could not afford to apply for a patent for the spinning mule and remained financially unsuccessful. Edmund Cartwright’s power loom and Richard Roberts’ self-acting mule met with little commercial success.
According to Clark, patents were largely ineffective in providing the key innovators of the Industrial Revolution with financial rewards, as the profits from improved productivity went to rival manufacturers or to society as a whole in the form of lower prices. However in my view that does not mean that the patent system was ineffective in encouraging innovation. The patent system motivates innovators by the prospect and possibility of a future reward, not the guarantee of such a reward.