Political Entrepreneurs

The Economic Engine of Political Change

On the Economics of Success in the Labor Market

June 25th, 2014 by Todd Nesbit

Despite improvements in many of the macroeconomic statistics, a great many individuals still struggle to find employment befitting of their skill level.  Indeed, much attention has been paid to improvement in national macroeconomic statistics.  For instance, the unemployment rate in May was 6.2%, the lowest its been since Sept. 2008.  However, the employment-to-population ratio–a much more objective and, arguably, accurate measure of the labor market–still sits at 58.9%, well below the roughly 63% average prior to the recession.

I recently published an op-ed in The Cleveland Plain Dealer offering advice to the new college graduates; however, the advice I provide is applicable to workers of all skill and experience level.  My tips for professional success boil down to this: be entrepreneurial in all aspects of your professional life.  Being entrepreneurial does not mean that a person must start or run a business; being entrepreneurial is a different way of thinking and acting.  I summarize below:

  1. Recognize that income is earned by helping others: Whether you want someone to buy your product or pay you for your labor, if it is unclear that you will somehow enhance their lives or reduce their costs, they will not pay you for the product or your time.
  2. Actively seek ways to add value to others’ lives:  The most successful among us actively consider the needs of others and then present a plan for how they can best meet those needs.
  3. Productivity, not effort, is rewarded: Upon graduation, productivity is the key to advancements.  Concise but effective writing saves not only your time but also the time of those who read your report, freeing everyone up to work on other projects.
  4. Only make promises you know you will keep: Only make promises that you know you will keep as your circumstances and incentives change.
  5. Be adaptable: A healthy economy involves a great deal of disruption as antiquated products and business structures are replaced with improved ones.  Individuals must be able to adapt to such disruptions and be eager to learn and grow from an opportunity to work for a new employer and/or in a new industry.

Far more societal problems have been addressed and far more people have risen out of poverty through the actions of those pursuing their own self interests  in the private sector than have been achieved through political redistribution policies.  Political change that better enables individuals to be entrepreneurial–that is, political change toward greater economic freedom–will further enhance societal well-being.  The content of chapters 4 – 6 of Madmen provide some insights as to how such political change takes place (or does not take 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.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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