n_huffhines
What's it gonna cost?
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Boom!
...the story of Eli Whitney is particularly
instructive. Born in Westboro, Massachussets, in 1765, Whitney
graduated from Yale College in 1792. The following year he
designed and constructed the cotton gin, a machine that automated
the separation of cottonseed from the short-staple cotton fiber.
Very much like Watts engine in the coal districts of England, the
cotton gin was enormously valuable in the South of the United
States, where it made southern cotton a profitable crop for the first
time. Like James Watt, Eli Whitney also had a business partner,
Phineas Miller, and the two opted for a monopolistic pricing
scheme not dissimilar from the Boultons and Watts. They would
install their machines through Georgia and the South, and charge
farmers a fee for doing the ginning for them. Their charge was
two-fifths of the profit, paid to them in cotton. Not surprisingly,
farmers did not like this pricing scheme very much, and started to
pirate the machine. Whitney and Miller spent a lot of time and
money trying to enforce their patent on the cotton gin, but with
little success. Between 1794 and 1807 they went around the South
bringing to court everyone in sight, yet received little
compensation for their strenuous efforts. In the meanwhile, and
thanks also to all that pirating, the Southern cotton growing and
ginning sector grew at a healthy pace.
Ironically, Eli Whitney did eventually become a rich man
not through his efforts at monopolization, but through the wonders
of competitive markets. In 1798, he invented a way to manufacture
muskets by machine, developing the idea of interchangeable parts
and standardized production. Having probably learned his lesson,
he did not bother to seek patent protection this time, but instead set
up a shop in Whitneyville, near New Haven. Here he manufactured
his muskets and sold them to the U.S. Army. So it was not as a
monopolist of the cotton gin, but rather as the competitive
manufacturer of muskets that Whitney finally became rich.