November 21, 2017

 Wright brothers tried to block anything at all that would be an advance in aircraft
technology. They had a warped wing that would change the wind flow.
 It is not true to claim that James Watt used his patent to block other steam engines.
 Wright brothers went from productive entrepreneurship to unproductive
entrepreneurship as they spend less time trying to improve the aircraft and more time
in court. They used their patent as an instrument for unproductive entrepreneurship.
 Seldon’s patent on the automobile was filed in 1895. He first started patenting the
process in 1879 – 16 years earlier. This was a period when patents were good for 14
years. He managed to drag the process out. He realized in 79 that the patent probably
wasn’t all that valuable and as far as we can tell he hadn’t tried to build a car yet. If
there was an error in the patent file, you had two years to correct it and no one else
could patent it. He kept filing based on errors, lengthening the time of his patent. He
then sold his patent to the Electric Vehicle Company. This is a patent over a gasoline
driven car. The EVC was in the business of producing EV’s. They then set up an
association of licenced automobile manufacturers and they used it to charge an entry
fee to enter the automobile business. The association claimed that their primary
objective was not to create a monopoly but to maintain the quality of their product. In
doing that, they wanted to prevent fly-by-night automakers who made crappy cars.
They refused licencing permission to anyone who they thought was not up to a certain
standard.
 One of the operators that they denied licencing to was Henry Ford. In 1903, the
association sued Ford and the case spent several years in court where they won a
couple of times until Ford won on final appeal. It was hard to find judges that
understood patent law. The Seldon patent was valid but could only be held against
people who were trying to build that exact car which had a two stroke motor. Ford
was using a four stroke motor. Ford was therefore not in violation. The association
lost with only two years left on the patent anyways.
 EVC – at the point where you had electric generators all over the place. The fact of an
electric car was perfectly valid.
 The early days of the automotive industry, it wasn’t clear what kind of car would win,
electric. Or gas?
o Arguably the first car was steam driven by Oliver Evans.
 EV’s won time, distance, and speed tests. The EVC was not such an auditee to what it
might sound.
 The EV had the same problem back then as it does now – battery charge.
 EV’s had advantages like being clean. They were advertised initially as being a ladies
car. The gas car you had to crank which means you had to have enough arm strength
to crank it and hold the crank when the car backfires and spins back. The EV car, all
you had to do was push a button.
o The EV was popular among women.
o You had to charge the battery every day and you had to take this 500 to 1000
pound battery out every time you wanted to charge it. This means that
everything had to be done somewhere that has a suitable set up.
 o Although the gas car had its drawbacks, all you had to do was fill it up and
drive off.
 Demand for electricity was a lot higher than when
 The one main difference between the EV and the gasoline car were consumer
connivance. This fact that consumers ultimately decide what they’re going to decide
is a theme in the automotive secotr.
 Ford didn’t make the assembly line or automobiles, he was bulding on things that had
already been done.
 Automobile industry : in terms of a firm, they are very small and had around 10
workers/assemblers. They did not produces all the bits and pieces
 Early cars looked like a horse cartridge – they were actually were
 Come sup with something that could replace the crappy engines.
 When you have all of these pieces in the car you have vertically intergrade the firm.
Early days in NA was a competitive industry producing a limited quantity and were
price takers.
 1900 you go from having a tiny number of car companies to around 200 and then
back down to the people who survived.
 Ford’s best known car is the Model T. He had already gone through models A to S.
 Ford’s idea was that it should be possible to build a car that would be a useful
appliance for rural people in Michigan and have it tough enough to survive being
driven around on the country roads and have it sold for around $500 or less. He was
aimed at the mass market. There were mainly people targeting the wealthy, not the
mass of the population. Ford wanted to build a car that would appeal to your ordinary
working man and sell it at a price that the working man would be a ble to do so.
o At one point he was making racecar’s in his garage but he know this isn’t
want he wanted. He eventually did this with the model T which involves
having the vertically integrated form.
o When his business was fired with people tbotttom thinking dhe hsf sll og the
bits.
o Different coloured pants dried at different rates which ment the assenbklly
line now had to a production line.

o $5/day paid people per day thinking that if you paid people that much, they
would buy cars.
 Herbert Hoover called the while house and asked them not to drop pay.
 Supply curve shows the quantity that will be provided at a specific price
 If you as a consumer want suppliers to supply Q1, you have to start at the horizontal
axis and go up rather than starting at the vertical axis.
 Supply price of labour is the minimum price per unit to cover costs of production.
 Labour is slightly different because you have to persuade workers to supply effort.
The amount that they earn to give up leisure must compensate them for giving up all
the effort. It has to cover the disutility of supplying the effort.
 The minimum you can get away with is the amount of disutility to them that you are
supplying for your hard work.
 Supply price to labour should be based on effort.
 Henry Ford comes along to say that you will no longer be artisans, I have machines to
do the jobs better. When Ford introduced assembly line crippled. When Ford
increased the $5/day wage, you had to let Fords’s inspectors’ in their homes anytime
they wanted.
o The assembly line increased the marginal productivity of labour more than it
increased the marginal supply price allowing him to increase his profits and
making it worth paying the workers a high wage.
o Overall, it was worth it for Ford to do this. As productivity went up so much,
cost per car came down so much that he could meet the $500 a car target. It is
not the wage of labour that matters, it’s the wage relative to the marginal
product.
o In the early days, Ford dominated the auto industry. Having evolved the auto
sector and dominated it, he stopped after the model T, the one car he
produced. It was durable, easy to maintain, not ugly, and he could sell it for
$500/car. He brings the sector up to bring others as competitors.
o Ford almost went bankrupt because he faced competitor from GM. He
changed the structure of the industry or at least set out the conditions to
change it. Billy Duran really set out the conditions.