Sobriety is bad for the economy. We know this thanks to work by Mike Andrews at the University of Maryland. He shows that when the Americans banned alcohol in 1920, the number of patents taken out by people living in formerly “wet” counties who were banned from drinking fell significantly. “Disrupting informal social networks has large negative effects on innovation,” he concludes.
The science writer Steven Johnson points out that innovation arises from serendipity such as unplanned meetings – which are likely to happen in bars. That scene in The Imitation Game where Alan Turing discovers the key to cracking Germany’s enigma codes from a conversation with a girl in the pub fits this pattern. In the same spirit (literally), many great ideas – from the ethernet to several Pixar films – began as sketches on cocktail napkins. Yet others arise from chance meetings over lunch: the pacemaker began with a meeting between cardiologists and an electrical engineer. “Socialising is good for innovation,” says the Cato Institute’s Ryan Bourne in his new book, Economics in One Virus.
Even the dullest economist should therefore celebrate the partial reopening of pubs. Not only is this boosting aggregate demand, but it could also eventually improve the supply-side of the economy by facilitating new ideas.
If some innovation begins in the pub, however, there might be a downside to us working from home. It’s not working from home that’s the problem, but drinking from home. If we don’t go to the pub with colleagues, we’re less likely to hear the chance remark, as Turing did, that sparks a great idea. Zoom meetings are no substitute for the informality of real physical contact.
I’m not sure, though, how big a problem this is. Andrews points out that the hit to innovation caused by prohibition was only temporary. After a few years people had built social networks that weren’t based around bars, and these generated a revival of new ideas. “While a given network is fragile, people are resilient in staying networked,” he says.
In fact, social networks that aren’t based around work might actually be more innovative because they help to break down silo mentalities, our tendency to stay within our comfortable space with its old familiar ideas.
And, of course, socialising is only one source of new thoughts. Others come from going for a walk (Peter Higgs thought of his now-eponymous boson while hiking in the Cairngorms) or from lying under a tree (as Newton claimed) or perhaps even from sitting in the bath. All of these are easier to do at home rather than cooped up in an office.
In truth, though, we don’t know exactly where innovative ideas come from: if we did, we’d all go there more often. What is likely, though, is that a goodly fraction of them come from outside formal company structures and meetings. As Joseph Schumpeter argued 70 years ago, bureaucracy is the enemy of entrepreneurialism. Innovation happens perhaps despite bosses, not because of them. To put this another way, successful capitalism requires some non-capitalistic structures. Not least of these are social networks. Which is why – even from the dullest economic perspective – it is important that these return to good health.
