As the slew of vaccines emerging in record time indicates, there is much truth to the maxim “necessity is the mother of all invention.”
Where face-to-face interactions have traditionally been seen as integral to the development of new ideas, it seemed possible that COVID-19 lockdowns would stymie innovation.
Yet data from the 1918 Spanish flu pandemic suggests the opposite: Compared to the areas that stayed open for business, the areas that underwent lockdowns maintained innovation during the period of restricted mobility, and went on to become more innovative in the pandemic’s wake.
The simple – albeit morbid – reason is that non-pharmaceutical interventions such as stay-at-home orders save lives, and the basic ingredient in the development of new ideas is humans. This is the main finding of a recently published study by Ohio State University economist Professor Enrico Berkes and his colleagues.
The Spanish flu pandemic that followed the conclusion of World War I is considered to be the most lethal pandemic in recent history. Around one-third of the world’s population was infected, and out of the 500 million people who caught the virus, 50 million died, including 675,000 in the US.
Much like the current COVID-19 pandemic, policy responses to the Spanish flu were not uniform, which allowed researchers to examine the impact of lockdowns on a variety of important phenomena beyond those relating to health.
Using detailed data from 50 large US cities, Professor Berkes and his coauthors examined the impact of Spanish flu lockdowns on innovation, as measured by the registration of new patents. The researchers divided the cities into two groups: long-lockdown cities, with cumulative lockdown durations exceeding 90 days, and short-lockdown cities, with cumulative lockdowns equaling 90 days or less.
The expectation was that lockdowns would seriously impede innovation, due to the importance that businesses, universities, and inventors place on being physically adjacent to one another. The existence of industrial clusters such as Hollywood reflect the widespread view that allowing innovators to interact face-to-face breeds exponential levels of innovation, and data on actual innovation confirms the accuracy of this supposition. This is why aspiring technology entrepreneurs are willing to tolerate the astronomical cost of living associated with Paolo Alto, California, the home of Silicon Valley.
This is also part of the reason why the current COVID-19 lockdowns have precipitated an exodus from cities such as San Francisco and New York, facilitated by the emergence of remote working. Beyond wanting more space, residents have reasoned that the rents charged by landlords in Manhattan are only worthwhile if one can actually rub shoulders with the metropolitan elites, be it in offices, restaurants, or theaters. Once this option is removed by extended stay-at-home orders, the temptation to live somewhere cheaper becomes compelling.
However, contrary to expectations, Professor Berkes and his colleagues found that innovation rates in the long-lockdown cities were approximately equal to those in the short-lockdown cities during the pandemic, despite the cancelation of the cocktail parties that would potentially spawn the next big thing. Moreover, in the long-run, the long-lockdown cities fared considerably better than the short-lockdown cities; patent applications increased by 12 percent following the pandemic’s conclusion.
The researchers accounted for this surprising result by delving into the fundamental sources of innovation. First, despite the huge controversy over the impact of lockdowns on the economy and on people’s mental health, there is no doubt that they save lives, including the lives of potential innovators.
Beyond this, the researchers also noted that extended lockdowns were usually embedded in coordinated policy responses to the pandemic: The absence of lockdowns sometimes reflects government neglect or inattention rather than a conscious decision on relaxed restrictions. Therefore, the governments that opt for longer lockdowns tend to be the ones that are being more proactive in responding to the crisis.
While inventors like to be able to meet other inventors face-to-face, they also welcome economic stability, as investors will shy away from making long-term commitments in environments of uncertainty. Thus, despite being able to benefit from a coffee with colleagues, innovators in short-lockdown cities suffered from the general climate of uncertainty.
Finally, putting these two mechanisms together, Professor Berkes and his colleagues also noted that lockdowns tended to preserve intangible and organizational assets, such as the knowledge embedded in successful companies, laying the foundation for a faster post-pandemic innovation recovery.
It is too early to determine if a similar pattern has emerged one century on, during the COVID-19 pandemic. Tentatively speaking, there are signs that the countries that operated the strictest lockdowns at the start of the pandemic as part of a mature and well-implemented public health strategy, such as Denmark and New Zealand, are faring better economically, and inventors living in these countries will surely benefit from the relative certainty and stability, as compared to those operating in more chaotically governed countries.
Moreover, the emergence of sophisticated substitutes for face-to-face interactions, most notably Zoom, limit the extent to which lockdowns impede innovation. For example, OPEC+ has been able to achieve unprecedented levels of coordination internally and in conjunction with G20 despite conducting its meetings virtually. Traditionally, the delicate negotiations necessary for such accords would surely have required the familiarity and trust engendered by physical contact; but this is 2020, the year in which scarcely a precedent has not been broken.
Omar Al-Ubaydli (@omareconomics) is a researcher at Derasat, Bahrain.
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