How Violence Limits Economic Activity Economist Lisa Cook examined how race riots, lynchings, and segregation at the turn of the 20th century reduced the number of patents filed by African-Americans.
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How Violence Limits Economic Activity

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How Violence Limits Economic Activity

How Violence Limits Economic Activity

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CARDIFF GARCIA, HOST:

Hey, everyone. It's Cardiff. This is THE INDICATOR from Planet Money.

Lisa Cook is an economist at Michigan State University. And throughout her amazingly eclectic career, her research and policy work has covered topics ranging from banking reform and economic growth in Africa to economic history to the eurozone to how economies develop. Plus, she's, like, a data set wizard, and she speaks five languages.

And you know what? We're going to be here all day if we cover the whole resume. Why don't I just bring her in? She joins us from studios at the University of Michigan.

Dr. Cook, how are you?

LISA COOK: Hi. Sorry, I got a bit lost here.

GARCIA: Technically, since you are at the cross-state rival Michigan State, you are technically in hostile territory right now, aren't you?

COOK: (Laughter) That's right. That's right. Google Maps goes haywire when I come on the University of Michigan campus.

GARCIA: Well, after the break, we're going to discuss with Dr. Cook one of her papers whose findings seem especially relevant today. It's a paper that studies the effects of violence on economic activity, and specifically on inventive activity.

And she researches this topic in a way that is itself inventive - by looking at the rates at which African-Americans obtained patents for their inventions between 1870 and 1940 and how those patenting rates were affected by three things - segregation laws, lynchings and the race riots in which mobs of white Americans would attack and, in many cases, kill African-Americans and destroy their homes and businesses.

This is a fascinating paper. And that conversation is coming right up.

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GARCIA: OK, Dr. Cook, here's where I want to start. You note in this paper that there has already been some research in economics on the effects of war and political instability on economic growth and on economic outcomes.

But then you write about something that has gone unexamined, and I'm quoting you here, which is "the effect of violent conflict and social instability on inventive activity and the creation of intangible capital." So why don't you just take us through that?

COOK: So to start with, intangible capital - I really do mean research and development. And that would've been an input into economic activity. And inventive activity - I just mean all inventions, and ones that are particularly leading to innovation and, therefore, higher standards of living.

GARCIA: OK. And you study specifically the period between 1870 and 1940. Why don't you take us through what was happening during that period that applies to this paper?

COOK: So there were many major riots - one of the most prolific periods with respect to major riots. And lynchings peaked for black victims and for white victims during that period, and they - in the 1890s. And then there were segregation laws that were being proliferated, and they related to every aspect of life, including voting rights, including education, public services and intermarriage.

In 1896 came the Plessy v. Ferguson ruling so that, for the country, separate but equal became the law of the land. And then these laws - these state laws became more prevalent outside the South after 1900.

GARCIA: Yeah. I was intrigued by something in the paper that you wrote, which was that, in fact, black patenting activity was rising at roughly the same pace as patenting activity for white Americans before roughly the early 1900s, when we started to see the effects of the segregation laws, the lynchings and the race riots.

COOK: Right. And this is what we would expect during the periods of war in the U.S. - both black and white inventors inventing a lot more. And that's when we would expect there to be more inventions. And then we see this diverging for blacks and whites starting at about 1900.

The peak year for African-Americans during that entire period, with respect to patents per capita, is 1899. And, Cardiff, this is a striking thing. This is still the peak year for African-Americans with respect to patents per capita if we look through patents through 2010.

GARCIA: Yeah. It's worth dwelling on what you just said. You're saying 1899 was the peak year for patent rates per capita for the African-American population.

COOK: That's right.

GARCIA: That's astonishing.

COOK: No, it is. It is. And my point in the paper is that conflict, violence can have lasting, persistent effects on economic activity. And this is the statistic that encapsulates that.

GARCIA: Wow. OK, so you're looking at the effects of segregation laws, political violence in the forms of lynchings and in the forms of race riots on black patenting activity. What did you find?

COOK: So I found primarily that it wasn't a good thing, as you might guess. And, in particular, it had a negative and significant effect on black inventors. And then I estimated that there were about 1,100 missing patents during this period, and that would be roughly equal to what a medium-sized country in Europe would've gotten during that period. So that's really...

GARCIA: Wow.

COOK: That's fairly large.

GARCIA: Yeah. And so what were some of the channels through which violence ended up affecting - negatively - patenting rates? Because I think, you know, the most direct effect would be sort of obvious - that if you fear for your life, for your personal security, then you're going to be less likely to be able to pursue inventive activity and to get it patented. But your paper also found some indirect effects as well.

COOK: That's right. So if you speak indirectly, or possibly even directly - couldn't get to a patent agent. So let's say that commercial areas became all white. It would be difficult for a black inventor to find a patent agent or a patent attorney to work with to get an invention patented.

GARCIA: And that's the result of segregation laws.

COOK: And that's a result of segregation laws.

GARCIA: There's another one that I was intrigued by, and it's in your discussion of the effects of the Tulsa race riots of 1921, which was that there was a perception - a correct perception within the African-American community that the institutions - the official institutions - in this case, the U.S. government or local governments - would not defend their property rights - that even if they got something patented, that it would not be defended, or if they tried to get something patented, that it wouldn't go through because the institutions would fail them.

COOK: Right. Right. So there were several examples of this. There was a bed-maker in Ohio who kept putting his stamp on the bed. He had a patent and a trademark, and he kept putting his stamp on the bed. And these were apparently some super-duper beds. You know, they were highly sought after. And his shop was burned down.

And, you know, this is just, to him - trying to defend his patent and his trademark, rebuilds and tried to sell them again. And same thing happened.

GARCIA: And in what ways do you think the findings of this paper are relevant for the present moment?

COOK: I think that the connection between violence and economic activity has not been thought about in the American context, certainly not recently. But I think that policymakers, for example, are thinking about the riots in Charlottesville and thinking about how this has direct effects on people's participation in economic activity and the indirect effect of everybody else looking on and thinking about how insecure they feel, and especially because certain groups are being targeted.

GARCIA: Is there anything in the paper that you would want to emphasize that we did not discuss?

COOK: One thing - when violence declines, economic activity picks up - a bit of activity picks up. So you have to be able to show that to rule out other causes.

GARCIA: Oh, so in other words, you show that it goes in both directions.

COOK: Exactly. Right. Yeah.

GARCIA: Not only did economic activity and inventiveness fall in the immediate aftermath of violence, but once the violence started to slow down...

COOK: Right. Yeah.

GARCIA: ...Economic activity ticked back up.

COOK: Exactly.

GARCIA: Dr. Cook, thanks so much for joining us today.

COOK: Thank you.

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