Political Entrepreneurs

The Economic Engine of Political Change

Category: Policy Issues

A Proposal to Reform the U.S. Postal Service

January 4th, 2013 by Wayne Leighton

Critics of government inefficiency often point to the U.S. Postal Service as an example of an agency that delivers poor service at high costs. And yet, proposals for reform of the USPS are seldom seen. Today’s Washington Post highlights a study that may offer a serious reform proposal in the future. The review by the nonprofit National Academy of Public Administration will analyze the benefits of restoring the agency’s financial health by using a “hybrid” model, which would…
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Fiscal Reform: Time to Channel Reagan?

January 3rd, 2013 by Wayne Leighton

Daniel Henninger’s article in today’s Wall Street Journal is angry, but it also makes a good point about the opportunity for fiscal reform in the United States. For the short term, it’s looking bad. And yet, as Henninger points out, we know the recipe for success. Reagan applied it in the Tax Reform Act of 1986. The ’86 tax act reduced tax rates on personal income and also famously gutted many nonproductive “tax shelters.” In short,…
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Fiscal Reform: When Will It Come? Will It Require A Crisis?

January 2nd, 2013 by Wayne Leighton

As both sides ponder the results of the “Fiscal Cliff” negotiations, one thing is clear. This was not a major reform. It was a short-term fix. In the opening chapter of Madmen, Ed and I argue that while significant reform often comes about as a result of a crisis, this need not always be the case. (In chapter 6 we discuss airline deregulation as an example of a major reform that did not emerge from crisis.)…
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Expanding Free Trade: An Idea Whose Time Has Come?

January 2nd, 2013 by Wayne Leighton

The lead article for the year-end issue of the Economist (subscription required) offers a simple recommendation to improve economic prospects in 2013: expand free trade, especially between rich-world countries. The editors argue that the world is less economically integrated than most people realize. Opportunities for another global free-trade agreement are slim. On the other hand, in some regions and especially among the rich-world countries, the time may be right for political change. The Economist outlines three potential…
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What Political Change Would You Like to See in 2013?

January 1st, 2013 by Wayne Leighton

Happy New Year! What political change — what meaningful reform — would you like to see in 2013? Watching the current debate in Washington, one might be pessimistic about the possibility of meaningful reform on spending, taxes … the big issues. And yet, the need for reform grows every day. The U.S. Census Bureau’s latest projections are for the population age 65 years and older to more than double by 2060, from 43 million to 92 million…
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Incentives Matter (French Edition)

December 18th, 2012 by Wayne Leighton

Gerard Depardieu is giving up his French citizenship due to his home country’s oppressively high tax rate.   Bloomberg reports that the French Prime Minister Jean-Marc Ayrault called the move “pathetic” and that other ministers joined in the condemnation. But Depardieu is not alone. The famous (and increasingly infamous) actor was preceded by French billionaire Bernard Arnault, chief executive of LVMH Moet Hennessy Louis Vuitton, who also found the country’s tax rate to be unbearable. The French government…
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Bootleggers and Baptists (or, “Why Politics Makes Strange Bedfellows”)

December 17th, 2012 by Wayne Leighton

Bruce Yandle has spent a career combining sound analysis of current economic trends with a deep understanding of public choice theory. What else would you expect from the man who brought us “Bootleggers and Baptists”? His argument was first made in a 1983 article in Regulation , then updated in 1999 in  a follow-up article  in the same magazine.  Similar pearls of wisdom are found in Yandle’s latest quarterly economic outlook written for the Mercatus Center at George Mason University. In all of these…
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Egypt and Institutional Change

December 10th, 2012 by Wayne Leighton

As we outline in Madmen, institutions — also known as the “rules of the game” — shape the incentives for a productive and peaceful society, or a poor and violent one. When these institutions change, the results can be far-reaching. One of the most fascinating and important examples of this today is the struggle to reshape political institutions in Egypt. In the latest issue of Foreign Affairs , George Washington University’s Nathan Brown outlines the terms of the debate,…
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Eminent Domain Has it All (Part 1)

December 8th, 2012 by Edward Lopez

When we look “out the window” and observe political economy in action, what is a useful method for understanding and explaining the outcomes? The framework that Wayne and I develop in the book begins by explaining observable outcomes as the product of incentives, and incentives are in turn shaped by institutional rules. So far that’s pretty standard stuff, thanks to the work of Douglas North and others. These days, political economists today are familiar with…
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When it comes to tax reform, ideas are changing (albeit slowly)

November 29th, 2012 by Wayne Leighton

Today’s Washington Post  highlights the latest twist in the debate over the so-called “fiscal cliff” and how the U.S. government should find new ideas as it tries to balance its budget. The “new” idea: eliminate or substantially modify the mortgage interest deduction. Both Democrats and Republicans have made statements in support, albeit with few specifics. Why is this news? The 1986 tax reform, which substantially removed all kinds of deductions, left mortgage interest untouched. The special interests…
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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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