AILSA CHANG, HOST:
Federal Reserve Board governor Lisa Cook is in the headlines this week because President Trump is trying to fire her. But economists have long recognized her for her research, including work on innovation and economic growth. To get to know her work, we turn to Karen Duffin and Mary Childs of our Planet Money podcast. They looked at Lisa Cook's work back in 2020 before she was nominated to the Fed Board. Their story picks up with Lisa Cook's work relating to one of the most impactful ideas in economics, called endogenous growth theory. It says that a country can cause more economic growth by fostering innovation through things like investing in science, encouraging market competition and passing strong patent laws.
(SOUNDBITE OF ARCHIVED NPR CONTENT)
KAREN DUFFIN: Paul Romer eventually won the Nobel Prize in economics for it, and he taught it to an entire generation of economic students.
MARY CHILDS: 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.
LISA COOK: It seemed naive. You can have laws on the books and not enforce them and never have growth.
DUFFIN: 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. At the time, Russia technically had patent laws.
CHILDS: But no one seemed to enforce them. For example, several of the bankers she was supposed to interview disappeared mysteriously.
DUFFIN: If you're afraid for your life, you're probably not inventing things.
CHILDS: 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, equal treatment is not guaranteed.
COOK: I was desegregating schools along with my sisters - you know, I was beaten up. I still have scars from that - hair won't grow in my eyebrow and a scar on my leg from having been beaten during the period of desegregation.
DUFFIN: So Lisa is pretty sure she's found a blind spot in the hot new economic theory. Maybe innovation also requires safety and equality.
CHILDS: To test her hunch, she needs to find a pool of inventors, where some were subject to violence and inequality, and others weren't. For innovation, there actually is a way to count ideas - patents on inventions. 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.
COOK: The thing that I was deluded about was that all these data were just hanging around and available. Patents were not searchable. There was no Google Patents. You know, race is not recorded on a patent record.
CHILDS: Lisa will have to, patent by patent, figure out a way to identify the race of each filer for the 2 million patents filed in that 70-year period.
COOK: 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 (laughter).
DUFFIN: So she plots out the number of patents filed per year chronologically on a graph. She can look back in time and see how Black innovation grew or fell in different times and places throughout this history.
CHILDS: Starting at the beginning of her dataset in 1870, the Civil War was receding in the background. The 14th Amendment had recently passed.
DUFFIN: 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.
CHILDS: They invented all kinds of things in this period - an elevator, rotary engines, a tapered golf tee, a dough kneader, a telephone system, a fertilizer distributor.
DUFFIN: But then the story her dataset was telling her took a turn.
COOK: There was a sharp decline in patenting right at 1900, around the time of Plessy v. Ferguson and thereafter.
CHILDS: 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. But then she sees another big dip in the patent filings from African Americans and realizes that 1921 was the year of one of the worst incidents of racial violence in American history, the Tulsa race massacre.
DUFFIN: This one neighborhood in Tulsa had become famous as a bustling, affluent community. But in late May of 1921, mobs of white men invaded the town. They massacred residents. They also firebombed the neighborhood from airplanes. This haven of Black affluence burned to the ground.
COOK: Tulsa demonstrated that no one would help them - no one. At every single level, nobody had their backs. They were all afraid.
DUFFIN: It was a message that was heard across the country.
COOK: If I'm a Black inventor in another city, why would I ever invent anything if I thought the intellectual property was never going to be defended?
CHILDS: Patent filings by African Americans dropped off across the country.
COOK: The divergence between white patenting and Black patenting was just so stark.
CHILDS: When she does the final math, she finds that the United States had lost out on more than 1,100 inventions from Black inventors.
COOK: The number of patents that were lost would be equivalent to that of a medium-sized European country at the time.
DUFFIN: An entire Netherlands.
CHILDS: 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.
DUFFIN: 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.
COOK: 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.
CHILDS: Lisa extended her initial dataset through 2010 to see how far things had come.
COOK: 1899 was the peak year for African American patents per capita. It still is. That has not returned.
(SOUNDBITE OF MUSIC)
CHANG: It took roughly 10 years for Lisa Cook to get her paper published in an economic journal. That full story from Karen Duffin and Mary Childs can be found on the NPR website. Just search for Lisa Cook and Planet Money.
(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
