Political Entrepreneurs

The Economic Engine of Political Change

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 trade agreements:

The three big barrier-bashing opportunities are the Trans-Pacific Partnership (TPP), a free-trade agreement that straddles the Pacific; an Atlantic-spanning free-trade deal between America and the European Union; and a true single market in services within Europe. Each of these initiatives has recently moved from the politically fanciful to the just-about plausible, with serious progress possible over the next year or two.

How did these projects become “just-about plausible” at this time and in these regions? The article doesn’t say. And yet recognizing this opportunity — and seizing it — is the essence of political entrepreneurship.

The editors of the Economist are playing the role of “intellectuals” — as Ed and I define them in Madmen, and as Hayek defined them in his 1949 essay, “The Intellectuals and Socialism.” They are the traders and promoters of ideas. And in the case of the Economist, this publication’s origins trace back to the promotion of free trade and a corresponding opposition to the Corn Laws in the 1840s in Britain. It is an impressive history of political entrepreneurship in the marketplace of ideas. (The Corn Laws were repealed in 1846.)

And now, for these modern trade initiatives to go forward, political entrepreneurs must emerge among the madmen in authority.

 

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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