From My Notebook, no 5

I am reviewing Daniel Klein’s new book, “Knowledge and Coordination: a liberal interpretation”, Oxford University Press, 2012, in which I noted (p.13) his illustration of a “light bulb moment” from a W. Somerset Maugham short story, “The Verger (1952), in reference to an event that leads entrepreneurs to “greet fortune when it comes knocking”.

As is normal I am reading several books at once (when not writing).  In this case, my other reading is Dugald Stewart’s, 1809, “Lectures on Political Economy” (Volume II, edited by Sir William Hamilton, Edinburgh, Thomas Constable, 1856).

Stewart quotes an interesting, because different, illustration of what Daniels calls a “light bulb moment”, though possibly due to the habits of a more leisurely age, it was more like delayed multiple moments spread over 18 months.

It concerns the dedicated patience of a certain Daniel John Richard who was entrusted with a watch by a villager returning from London in 1679, the first seen in the village, and who set about for 12 months studying the mechanism in detail, after which he conceived the idea of building a similar mechanism from scratch. That task took another six months, during which time he invented his own tools, and also visited Geneva to consult watch-makers in the art of manufacturing watches.

What at first was a mere curiousity inevitably became a serious passion. Why just make one watch for self-amusement; why not make watches for his neighbours?  So he did.

He took in “associates” and trained them to make his watches and widened his sales to neighbouring cantons. Before he died in 1741, his five sons took up the watch-making business, and the incomes from local manufacturing of watches promoted all kinds of other businesses and with them an extensive commerce in lace, stockings, cutlery and other light manufactures.  Watches reached 40,000 a year and the local population of villages reached 6,000 by the early 1800s, accompanied by the inevitable necessity of inter-communal trade in provisions and other utensils.

These examples from Daniel Klein (George Mason University, Virginia) and Dugald Stewart (Edinburgh University, Scotland)  of the “light-bulb” effect on individual entrepreneurs and the growth of market businesses from scratch where nothing existed before, struck me as instructive of the evolution of market processes under independent individual entrepreneurs, which no efforts of politically motivated managers can mimic. 

Politicians “picking winners” have a hopeless tract record from a hopeless quest, whatever their moral sense of “public duty”.