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

Abstract

I evaluate the importance of informal social interactions for invention by exploiting a massive involuntary disruption of informal networks from U.S. history: alcohol prohibition. State-level prohibition differentially treated counties depending on whether they were wet or dry prior to the state laws. After prohibition, previously wet counties had 13-35% fewer patents per year relative to consistently dry counties. The drop was largest 2-3 years after the imposition of prohibition and then rebounded as individuals reconstructed their informal social networks. I conduct several additional analyses that suggest the observed drop in patenting was driven by the disruption of informal social networks. Using data on inventors' identities and collaborations, I show that individuals who were successful inventors before prohibition became relatively more likely to struggle to invent in the social network that evolved in response to prohibition, and that the new social network led to a change in the direction of inventive activity.

Keywords: Patents, Invention, Social Interactions, Social Networks, Economic History

JEL Classification: N, O3