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Learn about groundbreaking new research, commentary and policy ideas from the world's leading economists. Presented by Tim Phillips.
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- 5 days ago19 min
S9 Ep33: Did the Sewing Machine Liberate Women?
In January 1860 the New York Times gave its blessing to a new machine: the sewing machine. These "iron needle-women", it wrote, were the only invention that could be claimed “chiefly for women's benefit”. Sewing was women's work in the nineteenth century, rich or poor, and a machine could now do it in a fraction of the time. So did it set women free?Philipp Ager and Davide Coluccia have traced the adoption of the sewing machine in Massachusetts between 1850 and 1900, using census records and digitised business directories to work out who was exposed to it, in the factory and in the home. For poorer women the machine meant work, in garment factories and in boot and shoe production; they married later, had fewer children, and many never married at all. For wealthier women, who had few acceptable jobs open to them, the hours it saved went into earlier marriage and earlier motherhood. Philipp tells Tim Phillips the story of a machine that had very different impacts in different social classes.The research behind this episode:Ager, Philipp, and Davide Coluccia. 2026. "Liberation Technology? The Impact of the Sewing Machine on Women." CEPR Discussion Paper No. 21496. CEPR Press, Paris and London. CEPR Discussion Papers are gated; CEPR members and subscribing institutions can download the paper at the link.To cite this episode:Phillips, Tim, and Philipp Ager. 2026. "Did the Sewing Machine Liberate Women?" VoxTalks Economics (podcast). Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestsPhilipp Ager is professor of economics at the University of Mannheim, a Research Fellow of the Centre for Economic Policy Research, and an editorial board member at Explorations in Economic History. His research spans the economic history of the United States, technological change, and the long-run effects of crises and disasters; his work on the Great Fire of London of 1666 featured in an earlier episode of VoxTalks Economics.Research and sources cited in this episodeThe Song of the Shirt. Thomas Hood's poem about a destitute seamstress was first published anonymously in Punch in December 1843. Hood based it on the case of Mrs Biddell, a London widow prosecuted after pawning clothes she had been given to sew. Godey's Lady's Book. The most widely read women's magazine in the US at the time crowned the sewing machine "the queen of inventions" in 1860, having calculated that a man's shirt took 20,620 stitches and 14 hours to sew by hand, against an hour and a quarter by machine. Singer and the Sewing Machine: A Capitalist Romance. Ruth Brandon's 1977 biography of Isaac Singer (Google Books) is the source for both Singer quotations read in this episode. .How the Other Half Lives. Jacob Riis, a Danish-born police reporter in New York, published his account of tenement and sweatshop life in 1890 (free at Project Gutenberg). The shirtmaker's testimony read in this episode was given to the State Board of Arbitration during the shirtmakers' strike and reported by Riis in his chapter on the working girls of New York.The household appliance revolution. Philipp contrasts the sewing machine with the washing machines and vacuum cleaners that arrived two generations later, which economists have credited with freeing women to join the workforce; "Engines of Liberation" by Jeremy Greenwood, Ananth Seshadri and Mehmet Yorukoglu, Review of Economic Studies, 2005, covers this topic. The sewing machine saved time in the same way, but in the 1860s far fewer acceptable jobs awaited the women whose time it saved.More VoxTalks Economics episodesThe economic effect of the Great Fire of London. Philipp Ager's previous visit to VoxTalks Economics, with Paul Sharp, on what contemporary records reveal about London's uneven recovery after 1666.Related reading on VoxEUGender norms and the labour market, a VoxEU column on how norms, both internalised and enforced by peers, constrain women's labour market outcomes; the modern counterpart of the stigma that kept married women in Massachusetts out of paid work.
- 1 weeks ago27 min
S9 Ep32: The digital money supply
Every day, billions of transactions settle between strangers who have no idea which bank the other uses. That lack of friction is not automatic. Nine-tenths of the money in daily circulation has been created by commercial banks, but it stays trustworthy only because central banks stand behind it, and keep the system in balance.In this week’s episode Tim Phillips talks to Stephen Cecchetti (Brandeis University, CEPR) about what happens when new forms of digital money test that architecture. Cecchetti is one of the authors of the eighth Barcelona Report in The Future of Banking series, part of the Banking Initiative at IESE Business School, just published by CEPR as a free download.Will retail central bank digital currencies, tokenised deposits, and stablecoins upset the delicate balance of system that has been running for decades? Stablecoins, for example, do not create money, but they claim the status of money without the institutional guarantee that makes money trustworthy. Three jurisdictions — the US, the EU, and the UK — are each resolving the same underlying contradiction in different ways. None has fully resolved it.The research behind this episode:Niepelt, Dirk, Stephen G. Cecchetti, Hélène Rey, and Xavier Vives. 2026. Digital Money: The Future of Banking 8. London: CEPR Press. Available as a free download from CEPR.To cite this episode:Phillips, Tim, and Stephen G. Cecchetti. 2026. “The digital money supply.” VoxTalks Economics (podcast). Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestStephen Cecchetti is the Rosen Family Chair in International Finance at Brandeis University, a Research Fellow of the Centre for Economic Policy Research (CEPR), and a Research Associate at the NBER. He was previously Economic Adviser and Head of the Monetary and Economic Department at the Bank for International Settlements, and Director of Research at the Federal Reserve Bank of New York. His research spanning monetary policy, financial stability, and banking regulation has shaped both academic and policy debate over three decades. He blogs at moneyandbanking.com.Research cited in this episodeWalter Bagehot's lender of last resort doctrine. In Lombard Street: A Description of the Money Market (1873), Bagehot argued that a central bank under stress should lend freely against good collateral at a penalty rate. The prescription remains the intellectual foundation for how central banks manage runs and systemic crises. Cecchetti invokes it to make the point that no private substitute for a central bank backstop has ever proved durable, and that the doctrine is now, one hundred and fifty years on, being tested by instruments its author could not have imagined.Monetary uniformity, mobility, and elasticity. The three institutional conditions underpinning general acceptance of money, developed in analysis by the Bank for International Settlements and discussed extensively in the report. Uniformity means a pound is a pound regardless of which bank holds it. Mobility means claims move between users and institutions at low cost and settle with finality. Elasticity means the supply of money can expand when it is under stress. Together they explain why we accept a deposit at face value without doing any analysis of the bank that issued it; and together they identify exactly where new forms of digital money create institutional gaps.Silicon Valley Bank failure, March 2023. SVB's collapse illustrates both the lender of last resort functioning and the limits of no-bailout commitments. Cecchetti notes that SVB's liabilities were still trading at par on the Thursday before its Friday failure because the Federal Reserve stood behind them. He also notes that Circle, the issuer of USDC, held $3.3 billion of its reserves at SVB and was effectively bailed out in the resolution. The episode is one of two occasions in the past twenty years where money market fund-like instruments have been backstopped by the Federal Reserve under stress.Genius Act (United States). Principle-based stablecoin regulation expected to come into effect in the US around 2027. Under its provisions, only stablecoins issued by bank-affiliated issuers will have access to the Federal Reserve; only those will therefore have the institutional backing needed to function as money. Stablecoins issued by non-bank entities will not.Markets in Crypto Assets Regulation (MiCA), European Union. The EU framework for crypto assets, which entered into force in 2024. For st
- 2 weeks ago32 min
S9 Ep31: How well does patent screening work?
Someone once held a patent on the swing. A piece of wood. Two ropes. The US Patent Office granted it. How often does that actually happen, and what does it cost when the system gets it wrong? Or, how often is a valid patent claim rejected?Until now, no one knew. Tim Phillips talks to Mark Schankerman of LSE and CEPR, who with co-authors William Matcham spent eight years building the tools to find out. Using natural language processing across a dataset of around one million patent applications, twenty million claims, and fifty-five million examiner decisions, they measure how similar each incoming claim is to the hundred million claims that preceded it, going back to 1976. They find that 81% of initial patent claims fall below the patentability threshold; examiners must negotiate that figure down round by round. And they do a pretty good job. But around a third of all abandoned applications contain at least one valid claim the system failed to protect. You don’t see patents that aren’t awarded, so those errors have, until now, been invisible.The research behind this episode:Matcham, William, and Mark Schankerman. Forthcoming. "Screening Property Rights for Innovation." Econometrica. Available as CEPR Discussion Paper DP18334 (gated). Current version dated January 2026.To cite this episode:Phillips, Tim, and Mark Schankerman. 2026. “How “well does patent screening work? VoxTalks Economics (podcast). Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestMark Schankerman is Professor of Economics at the London School of Economics, where his research spans innovation, intellectual property, and the economics of technology. His work has examined how patent rights shape R&D incentives, the market for technology, and the behaviour of innovative firms, with particular attention to the institutions that govern how property rights are allocated and enforced.Research cited in this episodePrior art. In patent law, prior art is any publicly available knowledge that predates a patent application. Examiners are required to search prior art and reject claims insufficiently distinct from it. The concept defines the outer boundary of what can be granted protection; the closer a claim is to prior art, the weaker the case for granting it.Type I and Type II errors in patent screening. A Type I error occurs when an examiner grants a claim that should have been rejected, typically because it is too similar to prior art. This allows the holder to charge royalties and, in the US context especially, to bring litigation. A Type II error occurs when a valid claim is refused or abandoned, depriving the applicant of protection they deserve and reducing future incentives to innovate. Schankerman argues that Type II error is systematically under-discussed in public debate: you can point to a patent that should not have been granted; you cannot point to the invention that was never protected.Structural model. The paper uses a dynamic structural model, meaning it models the actual institutional rules, incentives, and decision sequences that govern patent prosecution at the USPTO. Structural models allow researchers to run counterfactual experiments, asking what would happen if specific rules or incentives were changed, without running those experiments for real. This is the methodological basis for the paper's policy analysis.Patent distance measure. The paper's key methodological innovation is a quantitative measure of how similar a patent claim is to existing claims, constructed using natural language processing. The algorithm is trained on existing patent documents and compares the textual content of each incoming claim against all prior claims, covering roughly a hundred million filings going back to 1976. This produces a scalar distance figure that can be compared against an estimated patentability threshold.Deadweight loss. The standard economic term for the welfare cost created when prices are raised above competitive levels. In the patent context, a wrongly granted claim allows its holder to charge higher licensing fees than the market would otherwise bear, generating a cost for users without a corresponding social benefit.Request for Continued Examination (RCE). A procedural mechanism in the US patent system that allows applicants to re-open a finally rejected application in exchange for a fee. Unlike the European Patent Office or China's patent system, the USPTO places no hard limit on how many times an applicant can return. Schankerman's counterfactual analysis fi
- 3 weeks ago26 min
S9 Ep30: Redefining the monetary standard
The fiat money system has survived the Great Inflation, the global financial crisis, and a pandemic. But can it survive digital currencies?Bitcoin and the blockchain solved a genuine problem in computer science: how to stop people spending the same money twice. Forty years of successful inflation control means central bank money is stable; that is the stability in stablecoins, attempting to solve the volatility problem. What's next? What if the unit of account itself were indexed to consumer prices? Digitalisation might finally make that approach viable at scale. Price stability, by design.Will we still need cash? Maybe not now, But if you never use it, it may not be there if the blackout comes.The research behind this episode:Stracca, Livio. 2025. Redefining the Monetary Standard in the Digital Age: Digital Innovations and the Future of Monetary Policy. Springer Nature.To cite this episode:Phillips, Tim, and Livio Stracca. 2026. "Redefining the monetary standard." VoxTalks Economics (podcast). Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestLivio Stracca is Deputy Director General for International and European Relations at the European Central Bank, where he has worked for more than two decades. His research spans monetary economics, international finance, and the implications of digitalisation for central banking, with extensive work on exchange rates, capital flows, and the architecture of the international monetary system. Research cited in this episodeThe double-spend problem. The fundamental challenge in any decentralised digital payment system: how to prevent a participant from spending the same unit of money twice when there is no trusted central authority to verify transactions. Bitcoin's 2008 white paper offered an innovative solution by making the transaction ledger public, cumulative, and computationally expensive to rewrite. The trade-off is that transparency sacrifices privacy; every transaction is visible to all participants in the network.The blockchain. A distributed ledger in which transactions are grouped into sequential blocks, each cryptographically linked to the one before. Reversing any transaction requires rewriting every subsequent block, which demands enormous computational effort. This design solves the double-spend problem in a decentralised network but makes the system slow and costly to operate at scale.The payment trilemma. A framework discussed in the episode and in Stracca's book: any digital payment system can optimise for at most two of three properties simultaneously (universal access, security against fraudulent transactions, and privacy). Cash is the only instrument that escapes the trilemma; digital systems must accept a trade-off among the three, and the choice is often made implicitly by the designer of the system rather than through democratic deliberation.Hayek, Friedrich A. 1976. Denationalisation of Money. London: Institute of Economic Affairs. The classic argument for currency competition: let currencies compete freely and the one providing the most stable prices will win. Economists, including Milton Friedman, largely rejected the proposal on the grounds that money exhibits strong network externalities; the more people use a currency, the more attractive it becomes to the next user, producing a natural tendency towards monopoly. A formal modern revisitation, finding similar conclusions, is Fernández-Villaverde, Jesús, and Daniel Sanches. 2019. "Can Currency Competition Work?" Journal of Political Economy 127 (3): 1017 to 1058.Irving Fisher's compensated dollar. A proposal published in Fisher, Irving. 1913. "A Compensated Dollar." Quarterly Journal of Economics 27 (2): 213–235 (the same year the Federal Reserve was created). Fisher argued for a dollar whose purchasing power was held constant by adjusting its gold content in line with prices. The mechanical details of his proposal are no longer relevant, but its animating idea (indexing the unit of account to a price level) has gained new plausibility in a digital context.The Unidad de Fomento. Chile's inflation-indexed unit of account, in operation since 1967 and updated daily against the consumer price index. It is used widely in long-term contracts, including mortgages, and functions as a security that can be traded. Stracca cites it as evidence that an indexed monetary standard is operationally feasible, and as a prototype for what a digital equivalent might look like at larger scale.The Great M
- May 15, 202621 min
S9 Ep29: Guns and Butter
Europe's NATO members have pledged 3.5% of GDP to rearmament. The political argument is already about which social programmes will be sacrificed to pay for this, when the government chooses guns instead of butter. What does history tell us about what politicians will do?Christoph Trebesch and Johannes Marzian spent four years assembling the Global Budget Database: 150 years of primary government budget documents from 20 countries, with 116 identified military spending booms in peace and war. They find that governments almost never cut social spending when they rearm; they expand both military and welfare budgets simultaneously. The bill arrives later, as higher taxes. Top income rates typically rise by 10 to 15 percentage points in the decade following a military boom, funded mainly through broad-based income and value-added taxes. With rearmament underway, will history repeat itself?The research behind this episode:Marzian, Johannes, and Christoph Trebesch. 2026. "Guns and Butter: The Fiscal Consequences of Rearmament and War." CEPR Discussion Paper 21193. [Gated]To cite this episode:Phillips, Tim, and Christoph Trebesch. 2026. "Guns and Butter." VoxTalks Economics (podcast). Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestChristoph Trebesch is Director of the Research Center on International Finance at the Kiel Institute for the World Economy and Professor of Macroeconomics at Kiel University. His research spans sovereign debt, financial crises, China's role in global finance, the economics of populism, and the long-run fiscal history of military spending. He is a Research Fellow of the Centre for Economic Policy Research (CEPR). In 2024 he received the Hermann Heinrich Gossen Award, Germany's leading economics prize for economists under 45.Research cited in this episodeThe Global Budget Database is the primary dataset introduced in this paper. Marzian and Trebesch constructed it from primary archival sources, including national parliamentary budget documents, for 20 countries from 1870 to 2022. Unlike existing datasets that rely on planned rather than realised expenditures, it records what governments actually spent, broken down by ministry and purpose. The Switzerland case illustrates the stakes: standard sources record Swiss military spending at around 2% of GDP during the World Wars. The archival record shows actual spending reached 10% once off-budget items are included; five times the apparent figure.The Correlates of War (COW) Military Expenditures Dataset is one of the most widely used secondary-source datasets for historical military spending, maintained by the Correlates of War Project. Trebesch uses the Swiss case to illustrate the limitations of secondary-source data: the COW series misses off-budget military items that primary archival documents capture, producing a significantly distorted picture of wartime mobilisation in a number of countries.Credit booms methodology provided the template for identifying military spending booms. Trebesch and Marzian define a boom as an increase of at least 6.5 percentage points of military spending as a share of GDP over two consecutive years, ending when spending growth falls to zero. This approach, adapted from the literature on financial credit expansions and their economic consequences, allows systematic cross-country and cross-period identification without relying on retrospective classification alone. Each algorithmically flagged episode was then verified against historical sources.Local projections are the main statistical technique used to trace the long-run fiscal path following military booms. The method estimates how a variable (here, tax revenues and top income rates) evolves over time following an identified shock. It is well suited to the protracted dynamics Trebesch and Marzian observe: tax rates rising over a decade or more after a military buildup and, critically, not returning to pre-boom levels once the spending episode ends.Exogenous military shocks are the basis of the paper's causal identification strategy. To separate the fiscal effects of military spending from broader economic conditions, the authors distinguish episodes triggered by external geopolitical events from those driven by domestic factors. France's rearmament in the mid-1930s, forced by Nazi Germany's military expansion regardless of French domestic politics, is used as an example of an exogenous peacetime boom. Germany's own rearmament in the same period would not qualify as exogenous, since Germany
- May 8, 202625 min
S9 Ep28: Immigration and integration in Europe
More than one in eight people living in the EU today was born in another country. In fourteen of the bloc's largest economies, it is closer to one in six. For ten years, the same team of researchers has asked what happens to those people next: do they find work, close the gap with their native-born neighbours, and build a settled life? The tenth Migration Observatory report is about to be published, and the decade-long picture it paints is not what the political debate might lead you to expect.Tommaso Frattini of the University of Milan, one of the report's editors, joins Tim Phillips to examine what a decade of consistent, comparable data actually reveals about immigrant integration across Europe. Who are Europe's immigrants, and has that changed? Is the employment gap between migrants and natives closing, stable, or widening? And does it matter whether a migrant arrives from inside the EU or out? The politics of migration is often poisonous, but the data tells a different story.The research behind this episodeFrattini, Tommaso, and Anissa Bouchlaghem. 2026. "Immigrant Integration in Europe." Migration Observatory Annual Report, 10th edition. Collegio Carlo Alberto / LdA / CEPR Press. Free download from CEPR Press, forthcoming on 18 May.To cite this episodePhillips, Tim, and Tommaso Frattini. 2026. "Immigration and integration in Europe." VoxTalks Economics (podcast).Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestTommaso Frattini is Professor of Economics at the University of Milan and a member of the CEPR Research Policy Network on the Political Economy of Migration. His research spans labour markets, immigration economics, and the long-run integration of migrant populations in Europe. He is one of the founding editors of the Migration Observatory Annual Report series, now in its tenth year, and a co-author of the Collegio Carlo Alberto / LdA reports that underpin this episode.Research cited in this episodeEuropean Union Labour Force Survey (EU-LFS). Eurostat, collected annually by national statistical offices and harmonised across EU member states. The EU-LFS is the primary source for the Migration Observatory's comparative analysis of employment outcomes across countries and over time. The figures cited in this episode are drawn from the 2024 edition, the most recent available at the time of publication.The employment gap. A measure of labour market integration defined as the percentage-point difference in the probability of being employed between migrants and native-born residents of the same country. A gap of zero would indicate full employment parity. The Migration Observatory computes the gap both raw and adjusted for observable characteristics such as age, education, and gender; the adjusted figure isolates the portion of the gap that cannot be explained by differences in workforce composition between the two groups.Migration Observatory Annual Report series. Published annually since 2016 by the Collegio Carlo Alberto and the LdA (Laboratorio di Economia Applicata), in partnership with CEPR. Each edition uses the EU-LFS to benchmark migrant labour market outcomes against those of natives across EU member states. The tenth edition, published in 2026, is the first to offer a consistent decade-long comparison across the full series.The EU Pact on Migration and Asylum. Agreed by EU member states in 2024, the Pact is the EU's most significant attempt to harmonise migration and asylum policy across member states. Frattini describes it as a step forward on harmonisation; he also notes that European policy continues to prioritise border control over integration, a balance he argues the data does not support.More VoxTalks Economics episodesImmigration and Public Goods (June 2023). Do immigrants put pressure on local schools, hospitals, and public finances? Research from the United States tests the most common fears directly. The findings have only become more relevant since the episode aired.
- May 1, 202623 min
S9 Ep27: The right to choose to die
Content note: this episode discusses assisted dying, end-of-life choices, and suicide. Some listeners may find the content distressing.In April 2024, Daniel Kahneman — one of the most influential psychologists of the twentieth century — emailed his close friends to say goodbye. He was 90 years old, his kidneys were failing, his mental lapses were increasing, and he had decided it was time to go. He flew to Switzerland to end his life at an assisted dying clinic there, because New York, where he lived, did not permit it. Thirteen American states currently allow medical assistance in dying; most require a terminal diagnosis with death expected within six months. Canada, Belgium, and Switzerland allow it on broader terms. The UK introduced a bill to parliament, but it failed to pass. The debate on whether we have the right to end our own lives has not been resolved. This week Tim Phillips talks to Al Roth of Stanford University about how economics can contribute to the debate on medical aid in dying (MAID). Roth, a Nobel Prize laureate, has written a new book that argues this, and similar debates, often miss the key insight: the binary choice of “allow” versus “ban” rarely reflects reality. For example, in the United States, he explains that physicians in jurisdictions where assisted dying is illegal are familiar with the practice of administering doses of drugs that will relieve pain, but also end life. Roth's argument is not that assisted dying is always right. It is that a moral position that ignores the costs of a ban is not more ethical — it is less honest. Economists, he says, bring one specific thing to this debate: the insistence that trade-offs be made explicit.The book discussed in this episode:Roth, Alvin E. 2026. Moral Economics: What Controversial Transactions Reveal about How Markets Work. Basic Books. Published 21 May 2026.To cite this episode:Phillips, Tim, and Alvin Roth. 2026. “The right to choose to die." VoxTalks Economics (podcast).Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestAlvin Roth is the Craig and Susan McCaw Professor of Economics at Stanford University. He was awarded the Nobel Prize in Economics in 2012, shared with Lloyd Shapley, for the theory of stable allocations and the practice of market design. He is one of the architects of modern matching market design, having redesigned the systems used in the United States to match medical residents to hospitals and students to schools. A previous book, Who Gets What — and Why, was published in 2014. Research cited in this episodeRepugnant transactions is Alvin Roth's term for a class of transactions that are controversial not because no one wants to engage in them — that would be disgust — but because some people do want to engage in them and others believe they should not be allowed to, typically on moral or religious grounds. The key feature is that the objectors suffer no direct externality from the transaction; their objection is to the thing happening at all, regardless of whether it affects them. Roth's examples across the book include medical aid in dying, kidney sales, paid blood plasma donation, surrogacy, and access to certain drugs. The policy implication is that repugnant transactions, unlike ordinary market failures, cannot be resolved by standard economic tools; they require explicit engagement with the moral contest and careful mechanism design to decide what is permitted, to whom, under what conditions.Oregon's Death with Dignity Act (1997) was the first US state law permitting physician-assisted dying. It requires a terminal diagnosis with death expected within six months, confirmation from two physicians, a waiting period, and self-administration of the medication by the patient. According to the 2024 report of the Oregon Health Authority, assisted dying accounts for roughly 0.9% of all deaths in Oregon; many patients who obtain a prescription never use it. Oregon's 27 years of data make it the most-studied model for the policy, and its take-up rates and population demographics have informed both advocates and critics in other jurisdictions.Ezekiel Emanuel and vulnerable populations: A 2016 paper by physician and bioethicist Ezekiel Emanuel and co-authors examined the demographics of patients who access assisted dying in jurisdictions where it is legal and found no evidence that vulnerable populations — defined by disability, age, mental illness, or socioeconomic status — accessed it at higher rates tha
- Apr 24, 202631 min
S9 Ep26: The public origins of American innovation
The standard story of American innovation features Silicon Valley, venture capital, and the heroic startup founder.When you trace the history of the internet, GPS, mass-produced penicillin, or the COVID vaccine, the starting point is not a term sheet but a government grant. How much does this matter, and can we measure it?Tim Phillips speaks to Paolo Surico of London Business School and CEPR who, working with Andrea Gazzani, Joseba Martinez, and Filippo Natoli, has built the first systematic empirical account of how government-funded innovation has shaped US productivity since the Second World War. The headline result: government-funded patents account for roughly 2% of all patents filed in the post-war period, but explain around 20% of medium-term fluctuations in total factor productivity and GDP growth. The return on every dollar of public R&D is more than double the return on every dollar of private R&D. The key mechanism is not that government crowds out private investment; it crowds it in. For every dollar of public research, roughly another dollar of private investment follows, as talent from universities and research institutes moves into startups that commercialise what the public sector seeded. The logic is high-risk, high-reward: the government takes on the uncertainty and fixed costs that the private sector will not bear, accepting a large number of failures in order to find the breakthroughs that private capital would never have funded. The model is now under pressure: 2025 brought the largest cuts to US federal science funding in the post-war period. AI adds a further complication: for the first time, a general-purpose technology is being driven primarily by private capital, and that capital is now pulling the best scientific talent out of research institutes and universities and into industry. If that shift becomes permanent, the direction of innovation will be shaped by profitability rather than by broad productivity and living standards. The paper discussed in this episode:Gazzani, Andrea, Joseba Martinez, Filippo Natoli, and Paolo Surico. 2026. "The Public Origins of American Innovation." CEPR Discussion Paper DP20788. Centre for Economic Policy Research. [gated]To cite this episode:Phillips, Tim, and Paolo Surico. 2026. "The Public Origins of American Innovation." VoxTalks Economics (podcast/video). Assign this as extra viewing. The citation above is formatted and ready for a reading list or VLE.About the guestPaolo Surico is Professor of Economics at London Business School and a Research Fellow of CEPR. [verify URL before publishing] His research focuses on macroeconomics, monetary policy, and the economics of innovation and growth. He has advised central banks and governments on macroeconomic policy and is one of the leading empirical macroeconomists working on the aggregate effects of technology and public investment.Research cited in this episodeScience: The Endless Frontier (Vannevar Bush, 1945) is the report commissioned by President Roosevelt as the Second World War was ending. Bush, Roosevelt's chief scientific advisor, was asked to distil what the wartime mobilisation of research had taught, and how it could be translated into a peacetime innovation ecosystem. The report identified three pillars: government, to set the direction of innovation by funding areas of strategic importance; research institutes and universities, to push the frontier of knowledge without the constraint of commercial goals; and the private sector, to transform new knowledge into new products. The framework became the organisational blueprint for post-war American science and, Surico argues, is the institutional foundation of American technological and economic leadership. The report is in the public domain and available online.The NIH and NSF are the two federal agencies whose funded innovations show the strongest subsequent links to productivity growth in the paper's results. The NIH (National Institutes of Health) funds health and biomedical research; the NSF (National Science Foundation) funds basic research across science and engineering. Both are predominantly funders of university and research-institute work — which is, Surico argues, precisely why their output generates larger productivity gains than defence-funded innovation. The result is not that health research is inherently more productive than defence research; it is that both the NIH and NSF fund more basic, frontier-pushing work, and that basic research generates the largest spillovers regardless of the department that pays for it.Crowding in versus
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