On The Coming Re-Convergence
An interesting take on the situation, though lacking in one aspect: His App #3, Property Rights, needs to extend beyond mere real and personal property to intellectual property. This allows coupling the first two of his apps, Competition and Science, to economics, a coupling which incrementally increases the complexity of technology first by giving inventors domain over their inventions, and later by allowing improvements to those inventions either when the patent rights have expired or through licensing agreements. Author William Rosen called the patent system The Most Powerful Idea in the World, and traced its Western roots to the reign of Elizabeth I.
Ferguson mentions Smith, but Rosen goes one step farther and points out what Smith missed:
Smith's theorems did a spectacular job of explaining the self-regulating character of a free market, in which prices and profits are forced by competition to the lowest possible level. . . .
What they didn't do was explain how wealth, profit, and competition can all grow over time. In short, it didn't explain the two centuries of growth that were beginning just as Wealth of Nations was being published. It is in no way a criticism of the book to state that it covered everything except the reason the author's own nation was about to get wealthier than any other nation in the history of mankind. The failure is pretty much explained by what is not in the book. Despite living in the middle of the biggest explosion of inventive activity ever recorded, and even though his illustration of the advantages of specialization was a factory for making pins, Smith's book hardly mentions the role of the new machines then transforming his world. Next to nothing about waterpower, to say nothing of steam; nothing about the forging of iron, and his few paragraphs about the textile revolution are mostly an argument for restricting the export of spinning machines. His pin factory, it turns out, was only a metaphor; he never set foot inside one. . . .
The efficiencies of specialization are real, and the self-regulating "invisible hand" powerful, but it was the machines, and nothing else, that allowed Britain, and then the world, to finally produce food (or the wealth with which to buy food) faster than it produced mouths to consume it.
(William Rosen, The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention, Random House, 2010, pp. 250-251, I emphasized.)
Bottom line: While the development of engines was an offshoot of science, it took a formal recognition of patent rights to prod an inventor's desire to move creations beyond the laboratory and to invest enough in research to make these inventions economically viable.
Of course, there's another bottom line, that the machines need constant fueling . . . and without this fuel, growth - "to finally produce food (or the wealth with which to buy food) faster than it produced mouths to consume it" - would not be possible.
Which might explain this debt situation he mentions near the end of his talk. No cheap fuel, no economic growth. No economic growth, no ability to pay the existing loans still outstanding. Sound familiar?