Political Entrepreneurs

The Economic Engine of Political Change

June 2014

Ideas and Political Change: A (Very) Short History of Transportation Deregulation

June 30th, 2014 by Gary McDonnell

  Public choice is a field of study that is a relative new-comer in the discipline of economics. Even more recent is the attempt to incorporate ideas into models of political economy. In Madmen Ed and Wayne have made a giant leap in the development of an economic framework, a “transmission mechanism” if you will, whereby ideas influence political outcomes. This approach offers great potential for helping to explain political change. Transportation deregulation during the…
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Guest Blogger Gary McDonnell

June 30th, 2014 by Edward Lopez

Next up as a guest blogger is Gary McDonnell. Gary is an assistant professor of economics at Northern Michigan University whose teaching and research interests include the economics of regulation, antitrust, and public choice. Gary’s dissertation discussed the role of ideas and economics in the deregulation of airlines, trucking, and telecommunications industries. I first met Gary through the Association of Private Enterprise Education , where he presented an excellent paper on 1970s airline deregulation (which is now forthcoming in The Independent Review ). Chapter 6 of Madmen has…
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Engaging Students Through Op-Ed Writing Assignments

June 30th, 2014 by Todd Nesbit

As much as I and many other economists at teaching institutions take pride is having former undergraduate students go on to earn their PhD in economics and enjoy the “family” photos at professional conferences, the vast majority of students with which we interact will go on to pursue other professions.  This certainly suggests that we academic economists should not evaluate our success purely–or even mostly–as a function of students who go on to earn their…
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Taxi Cab Medallions, Uber, and the Transitional Gains Trap: Part 2

June 27th, 2014 by Todd Nesbit

In my earlier post , I discussed the conditions that led to New York City enacting in 1937 the first policy to establish taxi cab medallions.  In short, the public’s discontent with high taxi fares, the cabbies’ dissatisfaction with their compensation, the relatively few but large fleet owners, and a general tendency to support government intervention in the wake of the stock market crash and depressed economy created an environment ripe for a new idea to change…
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Engaging Students with Madmen

June 27th, 2014 by Todd Nesbit

As someone who has used Leighton and Lopez’s Madmen in multiple sections of a course and for two years, my experiences may be useful for many instructors who are contemplating incorporating Madmen in their courses or for those looking for new ideas in the use of the book.   I’d also be interested to learn of others’ methods of incorporating the book, and I encourage comments in that regard. In short, I have been pleased with the addition…
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On the Economics of Success in the Labor Market

June 25th, 2014 by Todd Nesbit

Despite improvements in many of the macroeconomic statistics, a great many individuals still struggle to find employment befitting of their skill level.  Indeed, much attention has been paid to improvement in national macroeconomic statistics.  For instance, the  unemployment rate  in May was 6.2%, the lowest its been since Sept. 2008.  However, the employment-to-population ratio –a much more objective and, arguably, accurate measure of the labor market–still sits at 58.9%, well below the roughly 63% average prior to the recession….
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Taxi Cab Medallions, Uber, and The Transitional Gains Trap: Part 1

June 24th, 2014 by Todd Nesbit

As Ed Lopez suggested in this post  back in December 2012, the political battles surrounding the emergence of Uber and other ride-share services have proven to be a goldmine for those of us studying and teaching political economy, with the taxi cab medallion at the center of this story of political change.  Both the introduction of the taxi cab medallion and the more recent political struggle in reaction to the entry of ride-share service firms provide for…
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Guest Blogger Todd Nesbit

June 20th, 2014 by Edward Lopez

The Political Entrepreneurs Blog is starting a guest blogger series. Our first guest blogger is Todd Nesbit. He is a senior lecturer in economics at Ohio State University. Here is his Google Scholar page . He’s going to cover some interesting angles on being effective competitors in academic and commercial labor markets. He’ll also share some info about using Madmen in the classroom, among other topics. Welcome Todd!

Buchanan on the Economics and Morality of Deficits: It’s all Public Choice Theory

June 11th, 2014 by Edward Lopez

Here is James M. Buchanan (1919-2013) writing in “The Moral Dimension of Debt Financing,” Economic Inquiry, January 1985. Economists have almost totally neglected moral or ethical elements of the behavior that has generated the observed modern regime of continuing and accelerating government budget deficits. To the extent that moral principles affect choice constraints, such neglect is inexcusable. It is incumbent on us, as economic analysts, to understand how morals impinge upon choice, and especially how…
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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.189, ch.7)

The most successful entrepreneurs know what they do well, they know the market and the opportunities within it, and they choose those activities that create the most value. This is true in economic as well as political markets.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.178, ch.7)

[W]hen the right elements come together at the right time and place and overwhelm the status quo, it is because special people make it happen. We call them political entrepreneurs.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.176. ch.7)

While we started this book with Danny Biasone saving basketball, we end it with Norman Borlaug saving a billion lives. These stories are not that different. Both faced vested interests, which were reinforced by popular beliefs that things should be a certain way—that is, until a better idea came along.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.174, ch.6)

Because there was a general belief that homeownership was a good thing, politicians found the public with open arms.... Everybody was winning—except Alfred Marshall, whose supply and demand curves were difficult to see through the haze of excitement at the time, and except Friedrich Hayek, whose competition as a discovery procedure was befuddled... In short, once politicians started getting credit for homeownership rates, the housing market was doomed.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.166, ch.6)

Everyone responded rationally to the incentives before them. In short, the rules that guided homeownership changed over time, which in turn changed the incentives of these actors. And bad things happened.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.153, ch.6)

They understood the economics. The ideas had already won in ... the regulatory agency itself. All that remained to be overcome were some vested interests and a handful of madmen in authority.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.146, ch.6)

If the idea for auctions of spectrum use rights had been part of the public debate since at least 1959, why didn’t the relevant institutions change sooner? What interests stood in the way?

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.121, ch.5)

When an academic scribbler comes up with a new idea, it has to resonate well with widely shared beliefs, which in turn must overcome the vested interests at the table. Many forces come together to explain political change, even though it may seem like coincidence of time and place.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.120, ch.5)

It’s the rules of the political game that deserve our focus, not politicians’ personalities or party affiliations.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.119, ch.5)

In short, ideas are a type of higher-order capital in society. Like a society that is poor in capital and therefore produces little consumer value, a society that is poor in ideas and institutions will have bad incentives and therefore few of the desirable outcomes that people want.

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