Political Entrepreneurs

The Economic Engine of Political Change

Leighton and Lopez Appearing on Stossel

May 16th, 2013 by Edward Lopez

Tune in to John Stossel’s show on the Fox Business Network, tonight at 9:00 p.m. Eastern, as Wayne and Ed will be interviewed about their new book, Madmen, Intellectuals, and Academic Scribblers. The eipsode will air again several times over the weekend.

This episode of Stossel covers “The War on Small Business.” After interviewing other guests about unnecessary regulations that harm “the little guy,” Stossel then asks Wayne and Ed to explain how government sometimes deregulates. We describe how sometimes politics does change for the better!

Stossel’s promotion for the episode has more detail:

Government is at war against the little guy.

Bureaucrats pass thousands of regulations to “keep people safer” and “make the marketplace more fair.” Today 170,000 pages of federal regulations are on the books. Break just one rule, and government may wreck your life.

So Wisconsin Senator Ron Johnson started a “Victims of Government” website that features victims of overregulation.

Nevada bureaucrats tell people who teach movie make-up that they must get an expensive license or close.

Stossel has two empty rooms in his house now that his kids moved out. Using sites like Roomorama, he could make a little money and rent the rooms out. But two years ago, New York passed a law that makes most of what apartment rental sites do illegal. Stossel debates Liz Kreuger, who sponsored that bill.

Is there any hope for the little guy? Authors of “Madmen, Intellectuals, and Academic Scribblers”, Edward Lopez and Wayne Leighton, point out that deregulation did happen once. Americans pay much less to fly and to ship something because the CAB and ICC no longer exist. And we have cell phones because the FCC finally allowed spectrum auction. They say the only time things change is when the right people, the right ideas and the right circumstances all come together to repeal the bureaucrats rules.

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

Buy the Book
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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