Planet Money - Patent racism (classic)

Episode Date: January 19, 2022

Economist Lisa Cook has been nominated to serve on the Federal Reserve board. In 2020, she talked to us about proving that racism stifles innovation. | Subscribe to our weekly newsletter here.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. We tend to talk about the Federal Reserve a lot on this show. And usually when we're talking about it, we're talking about one person, the chair. But the Fed is governed by a seven-person board, and together they create the monetary policy of the United States. Now, last week, President Biden announced nominees for three of those positions. There's Philip Jefferson, whose work has focused on the economics of poverty. There's Sarah Bloom Raskin, who has pushed for bank regulators to consider the financial risks

posed by climate change. And the third nominee announced is Lisa Cook. We've talked to Dr. Cook several times on this show, including for an episode that we first ran in 2020 when racial justice protests were happening all over the country. We're sharing this episode again today for people who want to better understand her and her work. Here's that episode. In the mid-90s, there was this big new economic theory that was all the rage. It was an idea for how countries can produce unlimited economic growth, which is kind of the whole point of economics. You know, growth means less poverty, more prosperity. For decades, economists had said there are basically just two ways to make an economy grow. Invest in capital or in labor. In tangible, mundane things like factories and workers.

Which means growth is ultimately limited. Because there are just so many people you can hire or factories you can build. But then some economists, most notably Paul Romer, said, actually, there's a third way to grow, innovation. And before this, people thought of innovation as a sort of mysterious force that kind of comes and goes at its own discretion. Paul Romer said, actually, you can make innovation happen. Innovation is just like a factory you can build. you can build. All you have to do is, like, invest in science education, promote market competition, and most importantly, pass strong patent laws so that ideas can be protected and monetized.

Just do these things, pass those laws, and innovation will follow. And people loved this idea. Paul Romer eventually won the Nobel Prize in Economics for it, and he taught it to an entire generation of economics students. But one of those students, a Ph.D. candidate named Lisa Cook, as she learned about this, she thought, I'm not sure it's that simple. Just pass patent laws, get innovation? No. It won't work that way. No, no. It seemed naive. Like, you know, build it and they will come. And that's not how it works. You can have laws on the books and not enforce them and never have growth. Lisa Cook was skeptical in part because of personal experiences. For one, she'd spent some time in Russia. She was studying the banking system there in the 1990s.

And at the time, Russia technically had patent laws. But what they didn't have was a lot of innovation. And to Lisa, the reason seemed clear. Like, sure, there were laws, but no one seemed to enforce them. For example, several of the bankers she was supposed to interview disappeared mysteriously. She was scared just walking to work. If I don't get, you know, hit by a moving object falling out of a window or, you know, attacked on the street, like, I'm lucky. If you're afraid for your life, you're probably not inventing things. Also, Romer's big innovation theory assumes that the law is enforced equally. And Lisa knows very personally, for example, from her childhood in Georgia,

that equal treatment is not guaranteed. Yeah, I mean, I was desegregating schools along with my sisters, and I was beaten up. I still have scars from that scar where hair won't grow in my eyebrow and a scar on my leg from having been beaten during that period, during the period of desegregation. So Lisa is pretty sure she's found a blind spot in the hot new economic theory. She suspects that there is more to fostering innovation than just science schools and patent laws. Maybe innovation also requires safety and equality.

To test her hunch, she needs to find a pool of inventors where some were subject to violence and inequality and others weren't. She thinks, hmm, now where could I find such a data set? So, of course, you know, knowing a little bit about American history, I knew that African American inventors were subject to the things that started happening to African Americans around the period of the end of Reconstruction. destruction when lynchings were largely at their peak and when segregation laws were being put into place and thereafter. And this is how Lisa Cook decided to study the very things that people are protesting right now. Violence against Black people and the unequal enforcement of law, and whether those things stunt innovation. All she had to do was gather a bunch of data, plug it into a formula, and she'll have her answer. Simple. And it was nowhere near that easy. Hello and welcome to Planet Money. I'm Mary Childs. And I'm Karen Duffin.

Today on the show, Lisa Cook sets out to investigate whether one of the most important theories in economics is missing something. If she's right, it would have implications for the wealth of Black Americans and also for entire economies. spend more than 10 years creating new data sets from scratch, teaching basic American history to her colleagues, and shining a light on one of the biggest blind spots in economics. Lisa Cook has this hunch that one of the most important ideas in economics has a big hole in it. To test her theory, she needs a way to measure exactly how violence and a lack of rule of law, how that impacts innovation. She needs concrete data, things she can count. For innovation, there actually is a way to count ideas, patents on inventions. There's a whole database of patents going back centuries.

So, OK, she's got that side of it. a base of patents going back centuries. So, okay, she's got that side of it. And to measure violence and unequal rule of law, she uses a range of markers, from segregation laws to the most extreme example, lynchings. She'll look at data from 1870 to 1940 and compare the number of patents filed by Black and white inventors. If Black inventors file fewer patents during periods of increased violence and lawlessness, and they file more patents when violence and lawlessness decrease, then she's proven it. She's right. The thing that I was deluded about was that all these data were just hanging around and available. Like, patents were not searchable. There was no Google Patents.

You know, race is not recorded on a patent record. Yeah, the most critical information that Lisa needs, the race of inventors, that is not listed on patents. In fact, the only patent filing that does list race is one of the earliest granted to an African-American. It was a man named Norbert Rillieu. He invented an evaporator that's used in sugar production in 1843. And the reason the patent file notes his race is because someone tried to take it from him because of his race. The person was living on a plantation in New Orleans, and they thought that it was an illegitimate patent because enslaved persons couldn't receive patents. Beyond that, Lisa will have to, patent by patent, figure out a way to identify the race of each filer for the two million patents filed in that

70-year period. So she starts looking for common African-American names in census records, which do list race. So she can cross-reference those with the patent records. One theory about Black names is that African-Americans named themselves after a president. She checks it out. Well, it turns out all Americans name men after presidents. She also combs through historical newspaper articles, scholarly papers, biographies, also a surprisingly useful source. If African-Americans were working for a government entity and that entity was completely secret, like the Department of Defense, we wouldn't know about that person's inventions. But in their obituaries, their family could talk about that person's inventions. And they did. X was a great inventor of some sort.

The place where she finds the most data is in a survey that was commissioned by the U.S. Patent Office and W.E.B. Du Bois. They'd wanted to showcase African-American inventions at the 1900 World Fair. It took me a year to identify the names and then a year to match them to the data and then another year to fail at that. She ends up with a list of 726 patents filed by African Americans between 1870 and 1940. Finally, she has all the data she needs to start testing her theory. So she plots out the number of patents filed per year chronologically on a graph. And staring at them all lined up, she can look back in time and see how Black innovation grew or fell in different times and places throughout this history. Starting at the beginning of her data set in 1870, the Civil War was receding in the background. The 14th Amendment had recently passed, promising equal protection under the law for all men born in the United States.

During this period, African-Americans made a lot of gains, holding office, owning property, and filing more and more patents. She sees the line on her graph rise. African-Americans filed patents at roughly the same rate as white inventors through about 1900. Given this new freedom and new rights, African-American inventors flourished. They invented all kinds of things in this period. An elevator, rotary engines, a tapered golf tee, a dough neater, a telephone system, a fertilizer distributor, and a bunch of other things. But then, as Lisa followed the patent line further, the story her data set was telling her took a turn. There was a sharp

decline in patenting right at 1900, around the time of Plessy v. Ferguson and thereafter. Plessy v. Ferguson, the Supreme Court ruling that gave official legal sanction to a so-called separate but equal America. Legislators were passing laws that pushed African Americans into not at all equal homes and schools or just cut off access to things altogether, including things that you would need to invent. They've been locked out of libraries where they used to go check the patent registries. They are locked out of the commercial districts where their patent attorneys are. They were cut off from talking to other inventors. I think that was one of the biggest casualties. For those who were still inventing, they had to go to extreme lengths. Like she found this one guy, Garrett Morgan. He invented a precursor to the gas masks used in World War I. Also hair straightening cream, a better stoplight. But he couldn't sell all of

those things himself. So he had to find a workaround. At the time, Lisa says, Native Americans held a special prominence as inventors of medical remedies and clothing and boats. So Garrett would go to trade shows with a sort of cover story. He would bring along a Native American and he'd have the Native American sort of give the pitch. and he was the Native American's research assistant. That's how he would present himself. But for a lot of African American inventors, after Plessy v. Ferguson, they just straight up lost their jobs. Including one of the top patent officers at the U.S. Patent Office. Also a top inventor at the U.S. Postal Service, who was in charge of coordinating with other inventors around the country. Neither of them ever filed a patent again. And as Lisa connects the fluctuations in patent filings to specific spikes in lynchings or new segregation laws, the data seem to be confirming her hypothesis. But then she sees another big dip in the patent

filings from African-Americans. And this one does not appear connected to lynchings or segregation laws. And I couldn't get rid of the effect. Like you have to test when you're looking at something that is that stark. You have to test adjacent years to see if you are seeing what you're thinking you're seeing. And I just couldn't get the effect to go away, no matter what I threw at it. Her data were screaming at her that something big had happened in 1921. She couldn't scrub it out as a calculation error, no matter how many times she checked. She looks into it and realizes that 1921 was the year of one of the worst incidents

of racial violence in American history, the Tulsa Race Massacre. If you've seen Watchmen on HBO, this was the attack on Black Wall Street. This one neighborhood in Tulsa had become famous as a bustling, affluent community, a place where Black Americans could settle and live well. It had its own newspaper, its own hospital, schools, banks, a bus service. But in late May of 1921, mobs of white men invaded the town. They massacred residents, shooting on sight. They also firebombed the neighborhood from airplanes. This haven of Black affluence burned to the ground.

Tulsa demonstrated that no one would help them. No one. The local government failed. The state government failed. The U.S. government failed. At every single level, nobody had their backs. They were all afraid. It was a message that was heard across the country.

The government would not provide even the most basic protections for Black Americans. Not for their lives, not for their property. So certainly not for their inventions. It's a sense of personal security. I don't feel safe anywhere. But also, my livelihood might be in jeopardy. I may never be able to make a living doing the things I'm doing. So that's why if I'm a block inventor in another city,

If I were a black inventor in another city, why would I ever invent anything if I thought the intellectual property was never going to be defended? If the black Wall Street that everybody knew about, if it weren't protected, why would I be protected? So it shouldn't be surprising that after that, patent filings by African Americans dropped off. Not just in Tulsa, not just in the South, but across the country. As Lisa traced the graph from the beginning of her data in 1870, through the Plessy ruling, the Tulsa riots, and up to 1940, she saw a consistent trend. The divergence between white patenting and Black patenting was just so stark. When she does the final math, she finds that the United States had lost out on more than 1,100 inventions from Black inventors. And there's no real way to quantify what those things might have been,

the things that never got invented. But Lisa says that looking at some of the inventions that narrowly did make it into the world gives us a window into what we almost lost. She thinks about her own cousin, Percy Julian. He was the first African-American to head a major corporate laboratory. And in 1940, he invented an improved way to make cortisone, an anti-inflammatory steroid. Now this is a major medical advance. I don't think I know anyone over the age of 20 who hasn't used cortisone. His house was firebombed twice.

We wouldn't have that if they had been successful, if whoever firebombed his house had been successful. So it's not an abstract idea. What's even less abstract is the economic impact of all those lost inventions. The number of patents that were lost would be equivalent to that of a medium-sized European country at the time. An entire Netherlands. a medium-sized European country at the time. Whoa. An entire Netherlands.

So Lisa has found the gap in the innovation theory that she had suspected might be there. The idea that if we just make strong patent laws that innovation will come? Her data show it's true for some people, not true for others. She's pretty sure that she's sitting on findings that have huge implications for African-Americans most directly because this cuts them off from an important source of wealth, but also for the wealth of entire nations. So she starts putting her findings in front of respected economists. She takes it to Milton Friedman, the Nobel Prize winning libertarian economist who had written about how the market unchecked will solve discrimination.

When I walked in the door and sat down, he said, young lady, you've got to publish this. This is one of the best ideas I've seen in the last generation. You've got to publish this. And I was just taken aback because, you know, economists are not known for being effusive. She sends her paper to Paul Romer and two other Nobel Prize winners, Ken Arrow and George Akroff. They all say, yes, publish this. So that's three Nobel Prize winning economists saying this is important. You have to tell people. After the break, Lisa finds out how hard it is to innovate within economics.

To get an academic paper published, it has to get through a panel of experts who read and critique it. If you make edits to their satisfaction, maybe they will publish it. She sends her paper to some of the major economic journals. And what she'd expected to come back was feedback about her methodology, assumptions, specific equations, things in the paper. But instead... Most of their questions were about U.S. history. They weren't about the econometrics. They weren't about the econometrics. They weren't about the underlying economics. The thing that I was shocked at, the thing that I was shocked at the most,

was that people in economics didn't know U.S. history. Her readers seemed to be getting bogged down in these questions about definitions. Like, a lot of people asked, what is a former slave? That I got that question just took me aback, you know, and I sent it to like my senior colleagues, like, is this asking what I think it's asking? You interpret this for me, please, please, I might be missing something. There may be some nuance here that I don't get. Also, she had used the words lynchings and extrajudicial killings interchangeably in the paper. And journal editors would ask, do lynchings really count as extrajudicial killings?

I kept getting this question. Change it. Like, not even there's a debate to be had. Change it. Just change it. Because we don't think this applies here. it. Just change it. Because we don't think this applies here. Extrajudicial killings happen to white people and to people in developing countries or in emerging markets. This is a lynchings or something different. And granted, debating definitions is a normal part of the academic publishing process. But the questions she's getting also felt to Lisa a little like they were debating American history and ideals across the divide of the black and white experience. Like the question she got the most, many of her readers kept asking, wait, how would a local lynching affect a would-be inventor across the country? would-be inventor across the country. Why would you care about a lynching that happened in a different state? Why would you care? The kind of fear and terror that Black people knew then and that they know now was not even fathomable. It was unimaginable. And this was post-Rodney King.

unimaginable. And this was post Rodney King. So I really was, I was flabbergasted. Why would you not care? And I thought, oh boy, I'm in trouble. I'm in trouble. So she basically wrote a Black history paper on top of her econ paper, spelling out the effect of racial violence as it rippled through Black communities across the country. Lisa says it usually takes two to three years for a paper to be published. But for her paper, it took 10 years of critique and revision and debate, also support from her Nobel Prize-winning colleagues, before her research was published in the Journal of Economic Growth in 2014. before her research was published in the Journal of Economic Growth in 2014. It shouldn't take all that.

It really shouldn't. It shouldn't take, you know, three Nobel laureates to rescue the idea and then show up and do, you know, hand-to-hand combat. The field of economics prides itself on its detachment, on its ability to set aside the noise and chaos of human behavior and explain things in cold hard data, in models and equations. But as Lisa's research showed, if you aren't putting all of the variables into these equations that you're using to explain the world, maybe because you haven't learned about those things or lived them or you don't

believe they even exist. If you're missing a variable, you'll get the wrong answer. And that goes back to the fundamental equation. If there is something that impedes the rate of arrival of ideas, you're going to slow down the economy. It's not just for that period, and it's not just for Black people. This is a cautionary tale for all economies. A cautionary tale that America does not seem to have fully learned yet. Lisa extended her initial data set through 2010 to see how far things had come. 1899 was the peak year for African-American patents per capita. It still is. So that has not, that has not returned.

Really? That is still the peak per capita for African-Americans. That is Dr. Lisa Cook talking to us in 2020. She is now a nominee to the Federal Reserve Board. If you have questions about the Fed or how the board works, we would love to hear those. You can email us at planetmoney at npr.org. We're also on social media at Planet Money. Today's episode was originally produced by Alexi Horowitz-Gazi with help from Nick Fountain and Liza Yeager. It was edited by Bryant Erstadt. The rerun was produced by Dave Blanchard and edited by Jess Chang.

Our supervising producer is Alex Goldmark. Special thanks this week to Paul Romer. I'm Kenny Malone. This is NPR. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.