Political Entrepreneurs

The Economic Engine of Political Change

Margaret Thatcher: Revolutionary “Madman in Authority”

April 8th, 2013 by Edward Lopez

Margaret Thatcher has died at the age of 87. The New York Times posts an obituary. The Guardian lists some of her most well-known quotations.

The “Iron Lady” leads off Chapter 5 of  Madmen (“How Ideas Matter for Political Change”). We recount a story of Thatcher that we found in John Blundell’s writings. Thatcher is one of the revolutionaries discussed under the heading “Maggie, Mart, and the Madmen,” which are the opening words of Chapter 5:

It happened with Lenin rousing the crowds in Russia. It happened with Mao driving China into the Cultural Revolution and Great Leap Forward. It happened with Che Guevara’s motorcycle ride across Latin America, looking for fights and finding Castro’s revolution in Cuba. It is happening today in Venezuela and Bolivia, where presidents proclaim a “new” revolution in the names of Simón Bolívar and the last Incan emperor, Atahualpa. All these revolutionaries espouse an ideology known as socialism—the same ideology that transformed a third of humanity during the twentieth century. It’s an ideology that took life from the pen of Karl Marx, sitting in a library in London, writing books. Ideas have had their consequences.

On the other side of the revolution spectrum, people have advanced the ideas of economic freedom and prosperity. In 1975 an emerging leader of England’s struggling Conservative Party, Margaret Thatcher, famously slammed a book on the table in front of her colleagues. “This is what we believe,” she declared. The book was Friedrich Hayek’s The Constitution of Liberty (1960), which helped shape many of the policies that Ms. Thatcher would later pursue as prime minister.

Madmen, Intellectuals, & Academic Scribblers

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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.

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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.

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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.

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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.

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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.

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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.

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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?

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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.

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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.

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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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