S1: This ad free podcast is part of your Slate plus membership.
S2: Hello, welcome to the Patterns, Races and racism episode of Slate Money, your guide to the Business and Finance News of the Week. I’m Felix Salmon of Axios. I’m here with Emily Peck. Oh, and very excitingly, we are here with Lisa Cook. Lisa, welcome to the show.
S1: Thank you so much.
S2: Introduce yourself. Who are you? Where are you and what do you do?
S1: I am Lisa DeCock. I am professor of Economics and international relations at Michigan State University, which I’m not quite.
S2: I can never remember whether the Shamansky that’s the one she likes or the one she doesn’t like, but well I’m sure she’s going to the city of Michigan.
S3: It’s it’s the other one.
S2: She’s the other one. I think so. I’m glad I’m glad we didn’t manage to have the great rivalry on this show. Professor, you are an expert in many things. We have to sort of pick and choose a little bit, but we are going to talk a lot about innovation on this show. We’re going to talk about patents and how it’s been very hard historically for African-Americans to get patents. We’re going to talk about covid and vaccine patents. We have a whole Slate plus segment on payments in not only the United States, but also in Africa. We have a whole bunch of wide ranging discussions largely centered on this whole question of innovation and intellectual property. We’ll even take a trip with you to China, where you met a guy who had to take out patents on a winemaking technique. This is all lots of fun. I’m looking forward to it. It’s a great show coming up on Slate Money.
S3: I’m really glad you’re here. You wrote a piece in The Times back in November, and I think that’s when we wanted to have you on right away, but you’re extremely busy. So here we are now. And the piece was called Racism Impoverishes the Whole Economy. And I thought it was just really a wonderful a wonderful piece. And I was hoping you could talk to us about it and maybe start it off by just explaining what you mean by that. How does racism impoverish not just African-Americans, but the whole economy?
S1: That piece was motivated by my research on patents and innovation and. In that paper, my 2014 paper called Violence in Economic Activity, evident evidence from African-American patent’s 1870 to 1940, what I found was that different types of violence affect African-American patenting differentially. So they are more affected by these activities, affected both races, but African-Americans were actually harmed with respect to patenting. Now, if we were just talking about income, that’s one thing. But we’re talking about patents. We’re talking about the foundation of innovation that drives business investment. That is 20 percent of GDP. So we depend on innovation to increase our living standards. Right. So this targeted violence had an effect, of course, on the targets of that violence, the African-Americans and African-American inventors. But they also had an effect on the economy. So it was costly. So I calculated it and we lost the equivalent of a medium sized European countries patents to this kind of violence.
S2: And the idea is we lost a bunch of patents that would otherwise have been granted to black Americans but weren’t able to be because of all of this violence was their effect as well. Is there any way of telling? Was that also an effect on the number of patents granted to white Americans? Was that hurt as well? Or is it just that the economy as a whole didn’t benefit from the patents that weren’t given to black folks?
S1: The economy as a whole was not able to benefit from the patents that would have been granted to African-Americans.
S3: So you had this really wonderful example, Lisa, because I think when we just say, like, oh, patents were granted, it sounds kind of clinical, but these are inventions that never came to be. It’s like all this innovation, all these leaps and technological know how that we like literally we’ll never know what could have been because inventors were scared away or they weren’t able to work to their full capacity or potential because maybe of fear or as you lay it out in your paper. But you had this really great example when you went on Planet Money. I think it was a relative of yours. And it was it wasn’t an example of someone who didn’t get a patent. It was someone who did, but just barely the cortisol invention. Could you talk about that? I thought that was so interesting.
S1: My cousin in law, Percy Julian, was the first African-American to head a corporate laboratory, and it was Glidden Labs. And he was in this race to industrially create cortizone, to create it at an industrial scale. And this was an international race. There was a chemist in Austria who was involved in this space. Other big corporate labs in the US were involved in this space. And my cousin Percy Julian got there first and his house was bombed, firebombed twice. And he had small children at the time. So this is really scary. So it wasn’t as if being an inventor, often we think about inventors is being untouchable as being the elites in society. Well, inventors weren’t precluded from having that kind of violence visited upon them. That was the example that I was giving. So, yes, he was able to receive many different patents, but that was not inevitable and could have been serious consequences from there were serious consequences, but ones that had to do with the lives of him and his family. The bombers succeeded.
S2: So tell me a bit a little bit about the then this is this is the whole point of your paper, the effect of this on the national economy. You said that there was an international race to get this cortizone manufacturing patent. The idea then would be that basically we Americans got there first. We managed to manufacture cortizone under patent protection for the rest of the world. And we got to export lots of cortizone to the world because no one else was allowed to manufacture it because we had the patent. But if we haven’t got the patent, then the Swiss would have got the patent and they would have got all of the export revenue and Switzerland would be that much richer and United States would be that much poorer. Is that pretty much it?
S1: And sort of. But but for 20 years, you get to have the lead for 20 years. Right. And then you have to cede to someone else’s or another firm that is created something generic. For example, so, you know, I don’t think that the first way Percy was thinking about this was in terms of profit for the firm, I think it was the pure science. Can I get to the answer first? And there’s a whole PBS special about him, and it shows sort of this the scientific race to be able to get there first. And, you know, I’ve studied Soviet inventors. And one thing that they wanted to do, because in their own patent office, they could not be identified. They could never get patents because they couldn’t hold private property. But they got patents from the US that an office who could determine who had the idea first. That’s why they were there. They didn’t have to cite prior research when applying for a patent in the Soviet Union, but they were given the honor, the award of being the first with the idea and the U.S. Patent Office. And it was a you know, it was a mundane activity. This is something that patent examiners have to do, have to ascertain novelty, at least at the time they had to ascertain novelty. So I think that was largely the race to being the first one to to get there.
S3: You also talk about in the Times piece about comparative advantage and the economic consequences that everyone kind of suffers from when people can’t work at their level they were educated at. So when African-American doctor can’t work as a doctor or when an inventor can invent and those consequences don’t just accrue to those people. Can you talk about that?
S1: One of the things that we I think are saying, for example, in the covid period or everybody saw was this race to get a vaccine. So what if everybody who had the talent to be able to participate in that activity was able to do that? What if you had only half the people who had these skills, who had a knack for epidemiology? What if only half could participate? We would have gotten to half the vaccines in this possibly short amount of time, maybe even shorter. So that’s where the penalty really is. And what the vaccines do is to raise the standard of living. They helped to bring the economy back because the virus actually is the economy. And I think it’s one of the most stark examples of how using your comparative advantage can be for the benefit of everybody in society, not just in your country, not just in your neighborhood, not just in your city, but in the world. So I think, you know, we know that Syrian immigrant was one of the ones who helped to develop the I think it’s the is it the Moderna vaccine?
S2: Well, there were two Turkish refugees in Germany who developed the Pfizer vaccines, the Pfizer one.
S1: Right. Right. So, you know, I think we have to be open to think about who can contribute. You can’t judge a book by its cover. And that’s the that’s the whole thing that the research that I am talking about in The New York Times piece or the paper, we have to make sure that there is a free flow of ideas and that we don’t predetermine where those ideas can come from.
S2: Tell me where you stand on the very fraught issue in the news right now about the vaccine patent. Since we’re talking about vaccines and we’re talking about patents, I feel like we have to talk about vaccine that Onda trips, which is a big international treaty. Protocol, it is possible for countries to just basically ignore patent protection on vaccines and go ahead and say this is a national emergency and we’re going to just try and manufacture this much-needed vaccine ourselves, not under license. No one has done that yet because they’re afraid of retaliation and because it’s not just about the patents, it’s also about the know how. And you really do need the cooperation of the people who develop the drugs to explain how best to produce them. But it does seem that the negotiations between countries and the vaccine manufacturers have dragged on quite a long time. It does seem to be a large part of why the European Union in particular is kind of behind the curve in terms of vaccinations. These negotiations took so long and they took so long precisely because there was patent protection involved and the manufacturers were trying to monetize those patents as best they could. So would we have been better off basically trying to say this is a global emergency and we should just not have any patent protection on this? Would we have been better off if the University of Oxford hadn’t licensed the patent to AstraZeneca and had just said this was done by a public university and will release it to the world, just like Jonas Salk did with the polio vaccine?
S1: I think it’s a really good question. But, you know, I don’t think it’s as stark as it was. The issue isn’t as stark as it was during the HIV AIDS crisis when TRIPS was being worked out. So, you know, the Serum Institute of India is producing, you know. Gob’s, you know, the one at one point, one billion doses, a billion doses, is it a million or a billion?
S2: A billion. What happened was the University of Oxford licensed the IP simultaneously to AstraZeneca and to the Serum Institute. And so AstraZeneca is producing as many as it’s producing in the serum institute, is producing one point one billion doses, which is so much more than all of Kovács combined.
S1: Right. Right. So in that sense, I think the licensing agreement is working.
S2: So and I think that there should be many more of those, except my point is that was licensed by the University of Oxford, not by a for profit pharmaceutical company. AstraZeneca, if it had its druthers, would never have done that.
S1: Do I take your point? I take your point. So so if it were just for profit maximization, we would be in trouble because this is endemic. It’s an emergency. It’s a public good that she should be provided. You know, I’m not sure whether Oxford first of all, we don’t know how this is all going to work out. Right. So we know in the interim there are so many problems that have nothing to do with IP, the vaccine hesitancy, the poor rollout and Europe altogether, the coordination within the European Union. There are a lot of things. And then sort of the the stories that overestimate the symptoms associated with the vaccine or misidentify the symptoms associated with the vaccine. So there are many problems associated with the rollout that have nothing to do with IP. So I think we have to think about the scale to figure out and we have to have, you know, the information from two years from now, for example, to be able to say whether this is a good arrangement or a bad arrangement, but it is one that is getting a billion doses out there. And, you know, this Indian company was a big part, along with Brazil, a big part of addressing the HIV AIDS crisis. So I think that in this sense, the arrangement is working. So I really don’t know enough to be able to say whether Oxford should have just allowed this IP to be obtained completely for free. It is still my position. The government see this as a public good. That means that they can invest in and pay for the protection of this. There’s certainly not the need for the kind of intellectual property protection that many companies say there is because they spend more on advertising than they do on IP and when and when.
S2: Like Dolly Parton gives a million dollars to Madonna to produce the Madonna vaccine, you know, she’s doing that philanthropically. She’s not doing that so that they can then monetize that through patent.
S1: Exactly. That’s right.
S2: Whether Oxford should have followed the Dolly Parton example, I I’m not sure the Oxford question is a super interesting one, because there’s lots of rumours which I’ve been trying to get to the bottom of and haven’t really got to the bottom of it. There’s lots of rumours that they wanted to do the Jonas Salk thing. They wanted to just put the IP into the public domain. And the reason they licensed it to AstraZeneca instead was somewhere the the Gates Foundation sort of twisted there or persuaded them that they needed. AstraZeneca is manufacturing know how to be able to maximise the number of doses that were made very quickly. And also the Serum Institute, they could just give the IP to the Serum Institute, but the AstraZeneca wouldn’t go out and manufacture all of the vaccine if it if it didn’t have the licence. Again, I think you’re right. We’ll probably learn more about this story in a few years time when people aren’t trying to be secretive about all of this. But there is a lot of secretiveness going on, all of the contracts between the countries and the pharmaceutical companies being kept secret. And that can’t be good for anyone. I feel like we need lots more transparency there.
S1: I agree. And, you know, that blew up in Germany’s face, right? I mean, no, it was it Germany. It was the European Union’s face because the contract was signed in secret and then it had to be posted on the Internet just for people to be able to see what was in it. So I think that this is you know, you have to be prepared for a crisis outside of the crisis. All right. Our crisis unit was gutted. That was left in the White House, the pandemic unit. And there was a sixty seven page, I believe, playbook that was left behind by the Obama administration that we could have been using. And I think it’s just it’s tragic, really, that this was gutted and that we have. To learn by doing during the pandemic, rather than learn much before, when we could have, for example, mandated face coverings, when the knowledge was available, when it was known that it was transmitted in a certain way, rather than keeping busy cleaning surfaces ad nauseum, for example, a lot of things could have been done better. But we’ve got to believe that a crisis is always around the corner and prepare for that crisis. And that means preparing the IP. I mean, the Serum Institute has it down. I mean, that’s how it came to be. Because of, you know, a horse that was dying, so they they figured this out and they figured out the supply and linkages that they needed. You know, I just think that we we have to think about our modern world, our globalized world, one where there will be pandemics where I was asking you about the avian flu earlier, because that’s something that was introduced to the rest of the world and that we should expect from time to time. But we we know how to deal with it. So we should have a plan for that, given globalization.
S3: I’m not familiar with the Serum Institute, nor do I know the story of the horse. So can you please explain?
S1: So the Serum Institute was originally a place that was taking care of horses and one of the horses was very sick and they couldn’t get the medication for the horse quickly enough. And where they decided to do was to make sure to have something on hand, some sort of medication on hand to treat horses. But they also figured out that they could make it at scale. And I can send you the link for the NPR story that I heard, OK, that I heard last week. I think we’ve exhausted my knowledge of it.
S3: I didn’t mean to put you on the spot. I was just really curious. I have so many thoughts about the pandemic and innovation, because on the one hand, obviously, it was a boon for innovation. All these vaccines were invented and rolled out and we leapt forward in this way. What once took 10 years took a year. So that’s amazing. But then I was thinking of all mostly a lot of the women who have been kind of sidelined for the past year, many because they had to do caregiving at home because the schools were closed, the child care centers were closed. And I’m wondering if you have been thinking, because I certainly have been thinking I know there’s been a little bit of research looking at academics and female academics haven’t published as much over the past year as their male counterparts. And that got me thinking about your research, but then applied to, you know, just the past year and how gender and innovation could possibly be impacted longer term. Have you been thinking about that, too?
S1: I certainly have. You know, labor force participation rates for women are where they were in nineteen eighty seven. We’ve lost 30 years overnight, almost overnight. What I really worry about is reintegration into the workforce. That’s the first thing. So for people who are actually able to work from home, the papers that were produced at record speed and were published sometimes with record speed, they’ll never be able to catch up with. So even if they leave next year, it’s especially for a public university that would be tough because there are all sorts of expense reduction plans being put in place. It’s going to be tough to catch up with that. And it’s going to be tough then to get promoted, to be compared to your peers. It’s going to be tough to get paid because let’s say you’re in a sense, you’re paid due to merit and therefore the number of publications you get out at a research university. So I think that if you’re looking at pay or promotion, there are probably a lot of women who are going to be left behind and may need to take jobs in the much more flexible labor force of non tenure track positions, for example. And as we know, some of those positions pay less than minimum wage, the federal minimum wage, and don’t have protections of all sorts. So I think for a certain sector, that’s the big issue for those who aren’t able to work from home. I would argue that there are psychological costs. There are I mean, there’s psychological costs with the first category two, but certainly they’re juggling a lot more with fewer resources, less paid leave, less flexibility. And, you know, the possibility that they’re bringing covid home to their children and talking about the essential workers that we’re talking about, the upper branch of the K with respect to the academic workers in the lower branch of the K, with respect to home health care workers, for example, some of those jobs may never come back. We have robots in Japan who are taking care of the elderly. So do performing basic functions of the elderly. We might see a lot more adoption of that kind of technology given what we’ve learned from this from this pandemic. Some of these jobs that are labor intensive and public facing may never come back, they may be replaced by by robots or or other, you know, machinery and technology. But I think that we have to think seriously about where the missing eight to 10 million jobs are going to come from because they’re not here right now and not everybody’s going back to work.
S2: Can I ask you about the this idea of, like, if I missed out a year, basically, it’s it’s very hard to to catch up in the fast moving world of science. Obviously, that’s very germane to women who had to look after the kids during covid. But on some level, I feel like that’s happened to the entire country of the United States, that we’ve all kind of been out of our labs. We’ve been working from home. We’ve been home schooling our kids at the same time as it hasn’t been happening in China. And nearly all of China has been going full speed ahead, like over one hundred percent capacity. It’s been fueling the world’s manufacturing R&D, just about everything. Have we allowed China, I mean, not to any particular fault of our own necessarily, but like the way that China got the virus under control so quickly, basically given a sort of one year head start, which it’s going to be very difficult to catch up to.
S1: Well, that certainly depends on everything else. With respect to innovation, I’m quite serious about this. If you don’t have an open society, it’s really hard to innovate. And the industrial espionage that China engages, then I think there’s a limit to how much of that you can do. So, you know, yes. On the one hand, a lot of the manufacturing is is going on, but I think something else has been exposed. We have outsourced. And when I say we I’m talking about the West, I’m talking about the US outsourced certain manufacturing processes to various places like chip production, semiconductor production in such a way that we are so dependent on one or two countries for one or two things. We know now that that’s a national security hazard. We have been using inferior PPE and giving that to our health care workers. And we really should have thought about making sure that we had a supply of our own that was credible and dependable. So possibly, Feliks, possibly one has a head start in that regard, but it really depends on a lot of other things being in place. And if you’re talking about innovation takes many different types of people working together to get to the best ideas. And if those people don’t have the ability for those ideas to flow freely, it might be to China’s detriment.
S2: So let me ask you a little bit about semiconductors, because this is a big story. This is a massive semiconductor shortage, especially in the automotive industry that’s been virtually every single car manufacturer in the world has had to seriously slow down or even cancel production because they can’t get the chips they need because cars are now basically computers on wheels. And these chips are really cheap. They cost like two bucks. But Taiwan Semiconductor, which is the one place that makes all of these chips, has much more expensive chips to prioritize and say, I’m not going to bother making these do the automotive chips. I’m going to make two hundred other graphics chips instead. It’s weird to me, the United States of America, which kind of birthed the idea of semiconductor semiconductor manufacturing that has these great companies like Intel and Motorola and you name it like seems to be incapable of manufacturing basic chips anymore, but it seems to be incapable of manufacturing basic chips anymore. What happened?
S1: Well, OK. I think there are at least two things that happen. First, the idea that companies had to pay less and less for labor was attractive. And even in that setting, American workers turned out to be some of the most productive workers in the world. So if you’re just minimizing price, then this is the outcome that you’re going to get. But what we weren’t planning for is something like a pandemic or not having access to rare earth minerals. We have rare Earth minerals here, but we don’t we don’t mind them because we. I think that the supply from China is always going to be there and China has used this as a negotiation tool in the past, so why would we outsource that in that way if it is so critical to production? We’re using the Defense Production Act to manufacture vaccines now. We probably should have been using it for something else earlier on. And we should have made sure, for example, that there were supplies of PPE. We shouldn’t be talking about reliable supplies of PPY right now. That’s that’s really ridiculous. So that’s that’s a big part of it that we were chasing lower labor costs. I think that went along with the assault on unions and on union membership. And I think what we’re learning is that unions were actually good for something. They protected workers and provided a way for workers to have representation. You heard President Biden’s speech about union membership and supporting unions. And many labor historians have been saying they’ve never heard a speech like that coming from a sitting U.S. president in the modern era. So I think we’re really learning what unions were were good for and where we’re talking about raising wages or we’re talking about workplace climate, which is what the union that that was started at Google is seeking to have better working conditions and not necessarily more money.
S2: You’re saying that, like, if if Intel and Motorola had been unionized, they might not have lost the race with TSMC and forward thinking.
S1: So let me let me get to the second point. There’s a second part of this seeking shareholder value. The quest for shareholder value and maximum share price has also put us in. This situation is not just minimizing labor costs, but thinking in a very short term way. So I think if you were thinking long term, you would start thinking that, you know, one day all labor is going to be competing at the same price because, you know, there’s this never ending hunt for lower and lower labor costs. So you don’t necessarily go to China anymore. You go to Vietnam and now Vietnam, some labor and Vietnam has gotten too expensive. So you go to a place like Madagascar, you know, so so there’s only a finite number of places where you can replicate this. And coming back to this country might minimize some of the uncertainty associated with setting up in those places, especially if some of those places had agreements, subsidized agreements, say, with the EU that are no longer valid and in place. We’re probably going to have to pay the full cost of using that kind of labor. So why not use American labor as well? So either unions or the voice of workers, not necessarily through unions. I think that would have been helpful.
S3: Are you saying essentially tech companies stop making chips domestically because they could get cheaper labor overseas, not taking into account the costs of, say, a pandemic which would screw up the supply chain or something like that? And if labor had had greater power, then manufacturing would have stayed stateside.
S1: I think there would have been longer term thinking.
S3: That’s a longer term thinking.
S1: Yeah, that would have taken into account many of these other factors. Can I go back to your question, Felix? Yeah, because I want to question the the premise you were saying that it’s not just true for women, it’s true for everybody that everybody’s been at home. But what we know from the American Time Use survey is that women are more responsible for childcare and for household activities. And those activities aren’t being shared. That’s the problem. That’s absolutely true. So I’m saying that we still have this empirical evidence of this divide, this asymmetric set of activities, and that is just being heightened in this pandemic. So that means that women skills are atrophy with respect to work, whether we’re talking about academia or whatever they’re typically doing at work. And children possibly are becoming more reliant on them. Right. So it’s it’s not just going to be getting them back in school. It’s addressing this new, more intensive attachment to women who’ve been at home.
S2: It’s a huge problem. I totally agree. Although I want to say I just want to say that I looked up the numbers. Just a couple of days ago, I got my trusty Fred looks at the labor force participation rate for men and women, and you’re absolutely right about the labor force participation rate for women having levels not seen since the 80s. For men, it’s unprecedentedly low levels. And what was interesting to me was that the gap between the two men has been surprisingly kind of constant. It’s about 11 and a half percent. And they’ve both been going down. They both come up a little bit since the sort of March, April. It has hurt women more. This is like the two thousand eight to nine recession was known as the men’s fashion and construction. And this pandemic is like the converse of that for sure. The she session that she says that she.
S1: Yeah, I just want to five dollars every time you say that because I’ve never said it out loud before.
S3: Yeah. I just wanted to echo what you said, Lisa, because I actually spent a lot of today talking for a story, talking to women who left full time jobs this past year to either go part time or not work at all. And yeah, just got me thinking, I mean, this is happening. There’s like two things happening to women that’s affecting innovation and labour force participation. One is they’ve a lot of them have lost their jobs because they were in customer facing industries like retail or whatever. And then there’s this other thing where women are going part time. They’re quitting altogether. And the women I spoke to today, you know, they they said like, I had to stay home, like I’m not going to my kid is sitting there at school on his computer and like, I need to help him. I need to make him breakfast. I used to be the school made him breakfast. Now I make breakfast. Now I make lunch. Now I have to help my child and that’s my priority. But it’s like you’re going to you’re going to lose a year of work. And that means like a year you don’t put your money into your retirement account. It means you don’t get a promotion. And the one woman said, well, I’m going to go back in September, but I’m going back part time. They both said I’m going back part time on contract at like half their former salary. And I’m just thinking and we know that academics aren’t writing the papers. And it’s not like the men who have managed to keep their jobs are working more productively at home, those who can do remote work. So I’m not sure that it’s like the whole everyone in the U.S. is got sidelined for a year. I think some people did and some people were able to to do more.
S1: It’s been a boon for for some. I mean, you saw all the icon covid papers coming out that, you know, just I mean, they were coming out at a dizzying rate. It’s not just women with children. There are older caregiving responsibilities that a lot of women have for people who are not in their home. And this is something that the American Time Use survey partly picks up, but it doesn’t match to the people who are in the household. I spent a lot of time earlier this month and at the end of last month looking for a vaccine for my elderly aunt in Virginia. And there was one corner of Virginia where the vaccine wasn’t getting to in the Hampton Roads area. And it became, you know, an hour day and then two or three hours a day. And then at the end it was about six hours a day trying to help her find a vaccine. And I know that a number of younger people and families are helping their elders find this vaccine. But, you know, once you once you find out how isolated a number of elderly people are, the women in the family are the ones that younger women and family are the ones who are expected to to take up that slack. And that’s, again, what we know. This is consistent with what we know from the American Time Use survey, even though they’re not in the household.
S2: I wanted to pull back a little bit because you were talking about patents and innovation and what that means for the economy. And just talk a little bit about where we’re at and the very big picture and where we should be. And there’s a lot of different aspects of that. And let’s sort of pick the one that you want to go with. But the big questions I have is, number one is the patent regime in the United States as it stands healthy? Is it a good thing or a bad thing? We have this situation where especially tech companies wind up trading patent portfolios between them for, you know, tens of billions of dollars. And sometimes it winds up in extremely ugly court cases which drag on for years. You have Nathan Myhrvold turning into a sort of patent troll. It seems like there’s something broken there. And then the other the other aspect of it is what you’ve been talking about, I think a little bit more, which is coming out of academia. Like what role does academia play in terms of generating patents? What should happen to those patents like Stanford University is famous for, like monetizing patents in the way that other universities aren’t? If we put more public money into universities, especially maybe as part of a new infrastructure bill like should that should that come with like restrictions on the degree to which patents are monetized? Should we have more patents in the public domain? What do you think about all of these sort of big questions?
S1: I think I’d like to think about the question differently. Is the patent system being reformed, is it better than it was before the patent reform was passed in 2011? And I think that there have been some improvements. One of the biggest ones was being the first one to the patent office rather than being the one with the new idea. Now, I told you that during the Soviet period that that was key. But this brings us in alignment with the other patent offices in the world. We’re much more aware of the patent trolls than we used to be, but I’m not sure that we can say that it is fully reformed until we get rid of these frivolous patents. There are already large patent portfolios where companies patent around a certain idea preemptively. Those are still in place. The question is whether we have prevented many more of those portfolios from being created. And I think that would be the mark of success. And I think another issue that is being addressed through the Success Act and through the IDEA Act is figuring out who’s patenting, you know, making sure that the 10 years that I spent trying to identify African-Americans in the data that nobody else has to spend that time. Do you? People wouldn’t spend that much time doing it anyway, because now there’s Google Patent and there are many other tools. But still, we still don’t have a good idea about who’s patenting and how we might increase participation. So, yes, my estimate is that we could have living standards that say GDP per capita, that’s zero point six percent or four point four percent higher if we included more women and underrepresented minorities in that process. But if we don’t have a baseline from which to measure that, then we don’t know how to make sure that more of them get in that pipeline. So I think that that’s one thing that is being corrected, that is long overdue. So I think there are many different pressure points to make sure that our patent system is working better. I would like to add one more thing, though, to broaden the question. You know, is in China and 2015 and I was taken to a number of different firms and I was giving a talk on on IP. Now, who volunteers to do that? I’m not sure, but I did. I gave a talk at university intellectual property and I had one of the most lively conversations and at the same time one of the most combative about intellectual property. Because what I discovered was that the Chinese firms and this is from a broad swath of society and of the economy, they were quite dependent on American patents. So one of them was a wine producer. And he had this process that he’d been developing over, I’d say, three or four decades. And these grapes were so productive and they wanted to compete with Canadian ice wine. And but the winemaker told me was that the piece of paper that he got in China was for show basically that, you know, you needed to get some piece of paper. You need to register this invention and and China. But in order to capitalize on all of the potential of that invention, he needed an American patent and it needed an American patent for five or six different things. And he needed this German machine to be able to produce the wine. So he was using the full range of IP to be able to engage in the international economy. And I saw that again and again. And I saw it with even artwork, the terracotta soldiers, for example. I was there looking at them in Chiun and I was asking the tour guide. So what’s that scribbling at the bottom of the sphere and what’s that scribbling on the uniform? It’s like that’s the signature of the the artist and the weapon maker. I was like, Do you understand what you just told me? Do you understand what you just told me? So Venus’ to my love, one of the oldest pieces of art in the Western world, we still don’t know who is responsible for Venus de Milo, but we know to a person who is not only responsible for the sculpture, for the terracotta soldier, we know who’s responsible for the weapon and you’ve assigned that to a person we don’t have that you’ve been putting. Acting intellectual property for millennia, and you’re over here talking about your poor country and, you know, we need to get rid of the intellectual property rights regime. There’s something funny about that. There’s something deeply contradictory about that. So I appreciate that the again, the lively conversations that I had with them. But every single firm and these random firms, every single firm was quite dependent on intellectual property protection.
S2: But that wasn’t something that China was providing and that’s something they needed in order to participate in the global export market, that the importers wouldn’t accept their produce unless had it been like they’ve sort of ticked off a patent box or why did they need that? Take your wine guy. Like, why did he need the American patent? What did he need it for?
S1: So that nobody would copy his recipe. He’d spent four decades developing these groups that were 60 to 70 percent more productive than comparable groups.
S2: So the idea is that he gets a patent, a US patent on that. And then if anyone else tries to do that anywhere in the world, he can say, no, I’ve got the best he can sue them in an American court.
S1: And that’s considered the gold standard for IP protection. And the ones who were producing for the domestic market were using licensed technology. One was using a pollution reducing machine from Germany, and it had been shut down because it was emitting too much. But it licensed this technology. So, I mean, in almost every activity, whether for the domestic market or for the export market, folks were using IP and IP protection, serious IP protection, American style IP protection, and that’s how it should work.
S3: That’s what IP is for, to protect inventions and to foster innovation. Sometimes it goes too far, like with patent trolls or with vaccines now not going to enough people, but it does have a purpose and fostering and protecting inventors and inventions.
S1: Yeah, and this guy had brought billions of dollars to this little rural economy because of his activities. So it was in China’s interest to let him do exactly what he was doing and the way he was doing it.
S2: We should move on and have a numbers round. We haven’t had enough numbers of people on this show so far. I think we’ll leave your number for the last because I have a feeling it’s going to be a good one. Emily, do you have a number?
S3: Are you saying mine is a bad number?
S2: I’m saying yours is going to be inferior to Lease’s because Lisa. Fair.
S3: That’s fair. Fine, because honestly, I did steal my number from the indicator this week because I had missed it when it came out. So my number is three hundred thousand. There are 300000 fewer births predicted to take place in twenty twenty one because there is a covid baby bust. So there are fewer pregnancies over the past year and the first cohort of covid babies were born in December. And then, you know, the babies will be rolling out for the rest of twenty, twenty one and there are going to be fewer of such babies. We’ve already seen a few signs like in January, births were down in Florida by like something like 10 percent or something. According to this Brookings report, when things are uncertain, people don’t have children. This has always been true even before birth control was widely used, apparently. So that seems bad. But I’m hopeful that perhaps there will be a post covid baby boom that I can have a number for that in the next two years or something like that.
S2: So I have a weirdly related number. The relation is tenuous, but it’s there and the number is fifty nine point four percent. I think it is fifty nine point something percent, which is the degree to which the stock of Canadian mortgages has gone up between the first quarter of 2014. In the last quarter of twenty twenty. There’s a massive Canadian housing boom going on right now and prices are becoming completely unaffordable. We talked many years ago about the housing bubble in Vancouver. The housing bubble in Vancouver became a housing bubble in Toronto. The housing bubble in Toronto basically became a housing bubble everywhere. And Canadian house prices are rising stratospherically in just about every single bit of Canada. And what has this got to do with. Baby bests, I hear you ask, and the answer is the house prices are deeply, deeply connected to supply and demand dynamics. And I learned this when I visited New Zealand after the Christchurch earthquake, and they were in a housing boom where the prices of houses in Auckland, which is completely the other end of the country from Christchurch, were going up incredibly fast because of the Christchurch earthquake, because it had destroyed enough of the housing stock and destroyed that much, but it destroyed enough of the housing stock that the supply and demand dynamics are out of whack. It wasn’t possible to build houses quick enough to really solve that problem. And houses across the country started going up in value. And the connection to Canada is basically they have a healthy immigration system where lots of people immigrate to Canada. That’s increasing demand supply can’t really keep up. And if your increasing demand is even a little bit higher than your increase in supply, then prices can go through the roof because this is a very sort of price inelastic market. Everyone needs to cover their housing short. We are all born with a short position in housing and we all need to cover it every day. And one of the ways we do that is by buying houses. But yeah, babies down and this is bad is what I’m saying, even though even though it’s probably good for house prices, keeping them low is bad for the American economy. We need more immigrants and we need more immigrants, especially now, to make up for all of the babies we’re not having.
S3: Yes, exactly.
S1: We need immigrants to replace the lost baby or something like the baby thing is going to be interesting because now we have in place child tax credits that we haven’t had before and they’re temporary.
S4: I understand that. But they’re more European style. And the reason they were put in place in these various countries in Europe was to not only support families, but also to provide an incentive to have babies and can combat the declining population.
S2: And it failed miserably in all of those countries, which all have now did know doesn’t work.
S4: Yeah, it’ll be interesting to see because I think that several things have been revealed. The actual cost of a child has been revealed when you don’t have child care readily available, readily available and cheaply available. I really think that there’ll be a new calculation, a revised calculation for families with respect to having children. You know, it’ll be interesting to see whether this tax credit has any and and other supports for families have any effect on childbirth because otherwise. Yeah, I mean, it was already the case that folks who’ve seen one financial crisis in their young life and now seem to are not accumulating the kind of durable goods, including housing. And I thought cars. But I think that that turned out to be not true ultimately, but making major purchases that we count on in the long run. And they’re not forming families. They weren’t. I I think that’s still true. I think that was true early on and the Great Recession. And I think it’s still true. So the question is, what’s going to happen to families post this pandemic? I think it’s going to be a big question, but that wasn’t my number. Can I give you my number? Please do. Two hundred and forty two billion. And that is how much was deposited and people’s accounts and stimulus checks by Wednesday. That’s what the IRS paid. And the reason this is important to me is because, as you might know, I was putting forward a proposal to get money to people fast by using mobile money. I still think we could do it more quickly than direct deposit. There are many other ways to make sure that if we have a pandemic again, if we have a crisis again, maybe there is an account for everybody and we can just push out money that way and we can push out money, you know, for various things, not just for direct payments, for Social Security, for all kinds of things, so that we are not in the business of waiting forever for people to get some sort of relief. I mean, a lot of the cheques from the First Carers Act have not gone out. Right. So that should never be the case in an emergency, in a pandemic.
S2: So that’s an excellent number. And I’ve already determined that is what I want to talk to you about in Slate plus because you’ve done a bunch of research in both East and. West Africa, but certainly in West Africa about financial inclusion and I want to ask you basically, who’s better, the United States or Kenya when it comes to getting money around to poor folk? That’s coming up on Slate Plus. But other than that, thank you so much for coming on. Money has been a great, great pleasure having you on. I’m so glad we finally managed to do it. Thank you to Jasmine Muhly for producing. Thank you to everyone for listening and keeping the emails coming on Slate Money and Slate Dotcom. We have another slate. Money goes to the movies on Tuesday. We are talking about There Will Be Blood with Niala Boodhoo.
S5: Will you be drinking milkshakes? We will be we will be drinking milkshakes with no Lubutu on Tuesday and we’ll be back the following Saturday with more sleep money.
S2: Lisa, I need to ask you about mobile money. This is one of your things, you think the government should be able to send us money directly to our phones, right? Yes. To what degree is that actually possible today in Africa?
S1: It is imminently possible and being executed in Africa today for payments. It’s you know, there are some other goals that they have in mind that might be refined better, like increasing savings among people in in Africa so that they can weather various storms so that they can pay for burials, for example, without going into significant debt and just plan plan better financially. So I think that given the mobile penetration here, we really should have we should have done this a long time ago. You know, one of the main concerns for us had to do with cybersecurity. And we had other means, you know, I think, let’s say 15 to 20 percent unbanked and under banked in the US. And typically the places in the world that have significant penetration of mobile money have much less developed financial systems. And that’s even true within Africa. You see less penetration in places like Egypt, South Africa and Nigeria, and they have the most developed banking systems. So so I think that we could do a lot better with respect to addressing the issue of lack of access of the unbanked and the under banked by following this model. The issues turn out to be mainly regulatory.
S2: So it strikes me one of one of the things that I’ve been saying for years is that all financial technology is a form of regulatory arbitrage. And this seems to have been certainly what happened initially with Imposer in Kenya, which then became, you know, started spreading across the the continent and even to India and other places. But you had MP says so. And basically it was the original mobile money system in Kenya. It was very, very advanced. And it was started by Safaricom, by the local telecom monopoly, which had the advantage of being a monopoly and also had the advantage of being powerful enough to be able to tell the government what to do, essentially. And so if there was some financial regulator or telecoms regulator or someone who was worried about Safaricom racking up a bunch of liabilities in the form of deposits on phones, they didn’t really have the ability to rein in this this massive for profit business. And it turns out that was all for the good because it wound up building this incredible payment infrastructure, which, as you say, is going to wind up moving into savings and insurance and various other things. But also, as you say, like where you do have an entrenched banking system, the banks are going to object. They’re going to say, listen, we need to do a whole bunch of New York customer and anti money laundering and all of these other things every time we open an account, if we have to do it and anyone trying to do it on the mobile phone has to do it as well and then it becomes uneconomic. So is that ultimately what’s going to do this in the United States is that we have this incredibly robust infrastructure of regulators and banks and AML and KYC and everything else, and that it’s just never. Never going to allow someone to come in in a sort of crazy, unregulated the way in the way that Safaricom did in Kenya and really sort of bring banking services to the unbanked.
S1: So I think there are several parts to that question. First, one thing that happened was there is participation and Kenya now. And, you know, we see changes in the money supply. We see changes and various money supply variables, velocity, for example. And we also see that. And this is something that I think surprised Kenyan policymakers. Monetary policy was actually a bit more effective. Right. So a very good actress thinking it can actually work because the money was going through the banks. So I think even though it seems it seems like regulatory capture at the outset, it was actually doing some good ultimately. But then the central bankers had to catch up to figure out how to control inflation, which they didn’t really have to figure out how to control in the past, like they had to take monetary policy seriously. So I think that that’s a that’s a good thing, which means that they’re moving further away from demonetization to monetization and modernizing their banking system as a result. So that’s I think that is a good thing with respect to the U.S., I think that, yes, there will be some objections, but there are objections now to whatever arises. So I think that there’s already an effort and I know that I don’t want to get in trouble because there’s one only one mechanism that I know of that is bank to bank and doesn’t involve a third party digital wallet. And that Zell. And I think that that is a real way to try. And that’s what I was proposing, to try to address the issue of the unbanked by using that kind of service. But I think that that’s that’s sort of the timid way to do it. And Zeil has and its universe of banks and financial institutions. Zill has worked out a lot of the issues with respect to the Federal Reserve and those who would be afraid that some entity is undermining the safety and soundness of the financial system. And that’s that’s what I would want to be very careful about. And I’m sure that the bank regulators in Kenya were also worried about the safety and soundness of the system.
S3: Can I ask my basic question, which is like I understand how Tzahal works because I have a bank account and I can shoot the money back and forth with other people who have Zeil in their bank accounts. But you’re talking about unbanked people. So are you just saying the government will figure out a way to text anyone with a phone, the money?
S2: Yes. Yeah. So the idea would be to expand Zeil to include nonbanks, basically.
S3: So you buy a phone already has like the money app on it, like how we get nine one one alert’s. We just have to buy like we just have to accept the nine one one alert’s. We would just accept the money thing and then I get my tax refund zipp to me that way.
S1: Well exactly because it has a large network of banks. So if you don’t have Zelle their financial institution to step into the gap like MasterCard and operate as the payment provider. So all you would have to do, for example, would be to go to a bank and, you know, show your little code that has been sent to your phone, show your driver’s license or some some identity card and get your money in cash from that bank or have that bank open an account for you that is for you to maintain. So that’s what you know in France, if you don’t have an account, a bank is just directed to open one for you. And and there are many ways this could work. It could work that everybody has an account and a bank and a bank isn’t allowed to charge fees on it. Of course, given some constraints, if you know, if you can pay for it, of course you’re going to pay for it. But for those who are unbanked or under banked, they would be charged for this account or everybody at birth being given an account that is at the Federal Reserve. And we don’t have to have these negotiations between payment providers and other intermediaries.
S2: They’ve done it in India. They can do it here. Sounds great. I love this idea. And I bet I’m the kind of person who thinks that Walmart should get a banking license so I shouldn’t be involved in.
S3: Discussions during the pandemic, all the countries with the national health care systems were able to get people vaccinated faster, like everyone says, that’s one of the advantages in Israel and I feel like. The nationalization of health care system is one way you could have a more efficient crisis response, and then Lisa’s idea with the money is another way you could have a more efficient crisis response like it. So, of course, like I’ve spoken to so many people over the past year, had trouble getting their checks once. You know, someone who had to open a bank account to get the stimulus check and then didn’t have enough money in the bank account. And it’s like a whole rolling disaster. But this would solve so many problems for us.
S1: Yeah. Or the unemployment insurance. I mean, why are you waiting for the folks from hidden figures to come back from the dead? And so is Kobol problem that we have created the technology and then, you know, these state systems, you know, I understand state rules, but one payment system to make sure that people wherever they are can get paid, they don’t have to be paid the same thing. That’s that’s irrelevant. It’s how they get paid. That is the issue. I don’t understand why we never want to invest in technology. So I’m hoping that any infrastructure bill includes upgrading our technology so that it’s not just rural broadband and inner city broadband, but is upgrading these systems, including the system at the SBA, so that in the next pandemic there can be participation by all firms, including the smallest firms, the unbanked firms, the undermanning firms, to get their money and get their money quickly. They don’t have to have an account with an established large financial institution.
S3: One of you should write about this, I think it’s very important that the money system upgrade is part of infrastructure. I want to read that.
S2: So, OK, I’ll write that one. Thank you. Thank you. I’ll take I’ll take that advice. Thank thank you, Emily. Thank you for being my assignment editor this week. Thank you, Lisa, for coming on Sleepless. And we’ll have more of this kind of thing next week.