Political Entrepreneurs

The Economic Engine of Political Change

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, in Egypt and throughout the region. It’s one of the clearer reviews of what’s going on in Egypt. Here’s an observation from early in the essay:

Democracy has failed in the Arab world not because governments have routinely violated their countries’ highest laws (although they have occasionally cheated) but, rather, because their constitutions’ democratic promises have generally been as vague as possible and were left to parliaments to flesh out through regular statutes. European countries first developed that system to ensure that popularly elected bodies, not kings, would define basic rights. When Arab regimes copied the practice — for example, many of them proclaimed freedom of the press but explained that the freedom would be “defined by law” — the effect was that rulers could pledge all kinds of rights and let rubber-stamp parliaments rob them of all meaning.

It is thus important to view the new Egyptian constitution as a political document — a product of specific circumstances that will not merely shape a future set of circumstances but also function within them.

Crafting political “rules of the game” is, in short, a function of the circumstances of time and place. It would be unreasonable for anyone to expect a constitutional democracy to emerge overnight in Egypt (not that Brown does this).

The current debate hinges on Egyptian President Mohamed Morsi’s assumption of significant additional powers, including blanket immunity for himself pending the adoption of a new constitution.

What is surprising is that tens of thousands of Egyptians have flocked to the streets to protest, even as Morsi supporters come out in force, too. (Here’s the NY Times’ chronology of recent events.) For a large portion (but perhaps not a majority) of Egyptians, this move violates a strongly held belief. From where does this belief come? Is it simply a distrust of expansive authority formed over decades (or centuries, or millenia) of authoritarian rule? Or is it a newly formed appreciation for constitutional democracy? And if it is the latter, where did this appreciation — these ideas — come from?

Writing in the Washington Post, Marwan Bishara, an al-Jazeera English correspondent, argues that Egypt and Tunisia are paving the way for a new “consciousness” in political thought, producing “new realities with long-term consequences” for these countries and for the region. He makes several points.

First, the “Arab street” will be replaced by Arab “public opinion” — with significant benefits for peaceful, productive discourse. Second, there is strong support for civil — as opposed to theocratic — government. In other words, Sharia law is largely opposed. Third, those who favor constitutional democracy make up an increasingly large portion of the population.

There it is, public opinion — that conglomeration of ideas about many things, including what government should and should not do.

Do the recent developments in Egypt reflect new “realities”  that bode well for constitutional democracy? Perhaps. Or perhaps these new “realities” are only aspirations. Still, it is encouraging to see ideas circulating with such fury and such effect. Again, from where do they come (in Egypt and elsewhere)?

[This comment was originally posted on Monday, December 10, 2012.]

 

 

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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