Transcript Lisa Cook: What promotes or kills innovation?

00:00 What we know is that invention is critical to economic growth. And the conventional wisdom said, if you have strong property rights, strong intellectual property rights on the books, that that should be sufficient.

00:17 Imagine Russia in the early 1990s, it was making this transition from a socialist economy to a market economy and it was going unevenly. I was interviewing bankers and entrepreneurs and for them it was dangerous to operate. So they were asking me if we have the intellectual property rights and laws on the books why aren’t inventors coming? Why isn’t innovation coming?

00:49 I thought maybe we could look at history to see if we had an example that would be illustrative. And we found that with African American inventors and other inventors in the late 19th century and early 20th century. We had lots of African American inventors and they were working on some of the same big ideas that other inventors in the US were were working on. For example; the carbon filament for the light bulb that really made Edison’s invention, the light bulb, go; or the traffic light; also the gas mask, something that turned out to be critical for fighting fires.

01:37 African American inventors and white inventors face the same intellectual property rights regime. But then African Americans are shocked with this wave of violence that starts happening, riots and lynchings and the segregation laws that uphold this kind of violence that other inventors were subjected to. And what we see is a dramatic decline in invention by African Americans, invention measured by patents.

02:11 That’s what we call an historical experiment because we have a control group, all the inventors who were not black, and then we have a treatment group, inventors who were black, and we see what happens when this takes place.

02:27 The kind of violence that were visited on African Americans were devastating. The riots and lynchings, they destroyed entire communities. This is what’s being reflected in the patent data and we have a way to look at the sequencing of these riots and lynchings and then say what the effect is on patenting and innovation.

03:03 The conventional wisdom suggested that intellectual property rights would be enough, that if their ideas were protected that would be enough. But what we find is that the environment in which these ideas are flowing and they’re getting produced also needs to be protected. So that means personal security, that means that contracts have to be enforced.

03:30 We might think of economic history from the late 19th century and early 20th century as being completely irrelevant. We can learn the lessons of that period for economies today, economies that are trying to organize themselves as markets, that are trying to grow, they can learn from this small slice of history that has big implications for all economies.

04:02 We sometimes have to challenge the ideas or how broadly applicable those ideas are to say that maybe there’s a caveat, maybe there is something else we need to learn about how theory is applied.