Political Entrepreneurs

The Economic Engine of Political Change

Better Living Through Political Entrepreneurship

June 27th, 2013 by Edward Lopez

Today I discovered a book the old fashioned way: while browsing the stacks at a brick-and-mortar library.

Published in 2010, Better Living Through Economics is a collection of essays that documents the impact of basic economic research on improving public policies. The collection is edited by John J. Siegfried, who is Professor of Economics at Vanderbilt University and the Secretary-Treasurer of the American Economic Association. All the contributors to the volume are top economists in the profession.

Better Living has a very direct connection to Madmen and our ongoing project, including this blog. As John Siegfried writes in the introduction to Better Living:

“Contributions to human welfare in the biological, medical, engineering, and electronics fields usually move from research to consumers through private-sector initiatives. Those contributions tend to be well documented through either our system of patents or academic endeavors to document systematically the history of science. In contrast, contributions to human welfare in economics often, but not always, move from research results to consumers through government policy decisions, and the steps from innovation to the adoption of economics to policy decisions remain a mystery. ” (p.2, my emphasis)

Solving that mystery is what Madmen and our ongoing project is all about. Of course new ideas can have beneficial consequences through the chain of events just described. But no idea has ever written itself down, and no idea has ever fought for itself in the public discourse or the halls of Washington. It takes people to make ideas matter. It takes political entrepreneurs, as we define it. That’s because in order for a different idea to take hold, it must first overcome the forces of the status quo. Vast areas of public policy remain wasteful and unjust because proponents of better ideas have yet to overcome the two main forces protecting the status quo: vested interests and prevailing belief systems.

It is one thing to trace beneficial policy changes back to the academic scribblers who first penned the ideas. It is a richer, more general task to explain why certain ideas have consequences but others do not—why certain bad policies get repealed and replaced while others endure. This is the motivation behind the framework that Wayne and I are building. By reminding us that the top of the economics profession is silent on this question, Better Living Through Economics shows just how ripe the time is to fill this niche.

Our answer, ultimately, is that basic research in economics plays a foundational role in political change. But economic ideas must be understood within a richer, more general understanding of political change. We need to go further than Better Living Through Economics. We need to extend to “Better Living Through Political Entrepreneurship.”

 

Note: Better Living seems to have gotten zero attention in the blogosphere until now. However, interested readers should definitely consume Ohio University economist Richard Vedder’s review at the Economic History Association. In a mere 1,000 words, Vedder conveys “the good, the bad, and, unfortunately, the ugly” with this book. Hint: some economists are rent seekers too!

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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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.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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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.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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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.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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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.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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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.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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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.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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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?

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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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.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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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.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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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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