Bar Talk: Informal Social Interactions, Alcohol Prohibition, and Invention
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2019-10-28
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Andrews, Michael; Bar Talk: Informal Social Interactions, Alcohol Prohibition, and Invention; Economic History Workshop, 2019; https://economics.yale.edu/event/bar-talk-informal-social-interactions-alcohol-prohibition-and-invention#sthash.P95qCcAW.F7aML5iv.dpbs
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Abstract
To understand the importance of informal social networks for invention, I examine
one of the largest involuntary disruptions of social networks in 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. I present evidence that the effect was driven by the disruption of social interactions and rule out alternative explanations. I next use the prohibition experiment
to document several facts. I show that the social network increases invention through
exposure to ideas in addition to exposure to collaborators and that informal and formal
connections are complements in the invention production function. Finally, I show that
the social network exhibits path dependence in the sense that as individuals rebuilt
their social networks following prohibition, they connected with new individuals and
patented in new technology classes. While prohibition had only a temporary effect on
the rate of invention, the fact that the post-prohibition network exposed individuals to
different ideas means that prohibition had a lasting effect on the direction of inventive
activity.