Political Entrepreneurs

The Economic Engine of Political Change

Category: Core Concepts

Bryan Caplan’s “Idea Trap” as a key to understanding the election

November 16th, 2016 by Vlad Tarko

In The Myth of the Rational Voter Caplan observed that two main factors make people think more like economists: education and income growth. Education is hard to change quickly, but income can. Based on this, he proposed that the following dynamic between ideas and economic conditions may be at work: (a)     Virtuous cycle of growth: When income increases, people’s ideas about the economy are, for some reason, better, which, in turn, leads them to favor good policies, which, when adopted, lead to further…
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Reflections on the Political Economy and Development of Ideas in Free Trade

October 22nd, 2016 by James Caton

Mercantilists formulated a system of political economy that put the strength of the state as the primary end. Economists supporting this doctrine, whether or not they realized, were defenders of the existing order. The mercantile system inverted the preference ordering appropriate for science, submitting the search for truth to some alternate end. Investigation was in the service of enriching and empowering the state and agents connected to it.  Much as still occurs today, the status…
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Cook Book Authors: Originators or Codifiers of Ideas?

April 9th, 2016 by Edward Lopez

Cook book authors influence how ordinary people cook and think about food. Here is an illustration, from a recent piece in the Charlotte Observer about the variety of ways Southerners make corn bread  (HT: Daniel Green): Toni Tipton Martin’s new book, “The Jemima Code,”  on the history of African-American cookbooks, shows that in the 19th century, books by Malinda Russell and Abby Fisher showed no sugar in the cornbread recipes. By 1912, in “The Kentucky Cookbook” by Mrs. W.T. Hayes, the cornbread called for 1 tablespoon sugar….
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Austrian Public Choice: An Empirical Investigation

July 23rd, 2015 by Edward Lopez

That is the title of a paper that examines some of the same main subjects that we do here, including an empirical look at political entrepreneurship, and the confluence of public choice with Austrian economics. The authors do not use political entrepreneurship in the institution-changing sense that we tend to use the term here, but instead as a descriptor of policymakers, legislators, regulators, and others decision units within government. Abstract: The purpose of this paper is to…
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Pure Protectionism, Texas Style

June 8th, 2015 by Edward Lopez

Three basic questions motivate our building the  framework of political change in Madmen.  Why does politics generate wasteful and unjust policies? Why do such failed policies persist even when superior alternatives are known and  available? Why do certain failed policies get replaced with other ideas? While most of this blog focuses on question 3, it’s always helpful to come back to the first two questions, both of which are answered by traditional public choice theory (1 by…
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Spotted: Political Change Analysis on the Streets of San Francisco

December 8th, 2014 by Edward Lopez

A delightful story , “Our night as an Uber driver — Using a $500,000 Rolls-Royce,” appears in the current issue of Car and Driver. One passage, in particular, reveals that the writer may have read Madmen. Either that, or the writer has arrived at sound public choice and political change analysis through reasoned examination: In Uber’s mind, the company is Doing Good. In the eyes of the cabbies, their lunch is being eaten by a bunch of amateurs not subject…
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My Review of The Elgar Companion to Public Choice

August 25th, 2014 by Edward Lopez

Chris Coyne, the book review editor at Public Choice, asked me to write a review of the new Elgar Companion to Public Choice, Second Edition , edited by Michael Reksulak, Laura Razollini, and William Shughart. This book is a second edition of the first version that came out in 2003. It consists of 29 chapters The published version of the review is gated, but below I offer a link to the pre-publication version. Here are the first few paragraphs:           Co-Editors…
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Why We Need the Madmen in Authority

July 31st, 2014 by Edward Lopez

Did you know that Oklahoma is ranked 28th in population but in 2011 had one of the nation’s largest unfunded pension liabilities? The Reason Foundation’s Pension Reform Newletter carries  an interview  with Oklahoma state legislator Randy McDaniel, who explains: OPERS is the state’s second largest retirement system. In 2010, the system had a $3.3 billion unfunded liability, … The big picture is the state had over $16 billion in total unfunded liabilities. In a reform process entering its fifth…
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Why License a Tour Guide? Some Final Thoughts on the Economics of Political Change

July 8th, 2014 by Gary McDonnell

I have discussed in some detail airline deregulation as a case study of political change within the economic framework laid out in Madmen. Interstate trucking, long-distance telecommunications, railroads, banking, stock brokerage, oil and gas, are additional cases where deregulation occurred.  Future research into these cases may suggest ways in which political entrepreneurs were able to “arbitrage between academic ideas and political inefficiencies.”  But political change– or at least the potential– is in the here and the…
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Rodrik on Political Entrepreneurship: Ideas Overcome Interests

July 3rd, 2014 by Gary McDonnell

In my previous posts ( here and here ) I have attempted to highlight some of the important research with respect to the economic theory of politics and how well it explains the deregulation of the 1970s. In one sense, the debate is whether deregulation can best be explained by resorting to government officials acting in the public interest, or whether there was a change in the relative power of interest groups. I have suggested that the…
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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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