PIPE Workshop: Michael Andrews, University of Maryland, Baltimore County

Bar Talk: Informal Social Interactions, Alcohol Prohibition, and Invention

To understand the importance of informal social interactions for invention, Michael examines a massive and involuntary disruption of informal social networks from U.S. history: alcohol prohibition. The enactment of state-level prohibition laws differentially treated counties depending on whether those counties were wet or dry prior to prohibition. After the imposition of state-level prohibition, previously wet counties had 8-18% fewer patents per year relative to consistently dry counties. The effect was largest in the first three years after the imposition of prohibition and rebounds thereafter. The effect was smaller for groups that were less likely to frequent saloons, namely women and particular ethnic groups.

Next, Michael uses the imposition of prohibition to document the sensitivity of collaboration patterns to shocks to the informal social network. As individuals rebuilt their networks following prohibition, they connected with new individuals and patented in new technology classes. Thus, while prohibition had only a temporary effect on the rate of invention, it had a lasting effect on the direction of inventive activity.

Finally, he exploits the imposition of prohibition to show that informal and formal interactions are complements in the invention production function.

The discussant will be Maxwell Palmer (Boston University)

Michael Andrews is assistant professor of economics at University of Maryland, Baltimore County.