Political Entrepreneurs

The Economic Engine of Political Change

Peter Gordon reviews Madmen

February 19th, 2013 by Edward Lopez

Peter Gordon, an urban/regional economist and Professor of Public Policy at the University of Southern California, has posted a brief review of Madmen. Describing Madmen as a “superb read” and “pure joy,” Professor Gordon’s review emphasizes one of the book’s subtle yet important points: if the ideas of economists and philosophers do matter, then we should have a good grasp of the history of those ideas. This is essentially why we include a history of philosophy and economics in Chapters 2 (The Never-Ending Quest for Good Government), 3 (Economists Join the Battle of Political Ideas), and 4 (Public Choice: How We Choose Bad Policies and Get Stuck with Them, or Not). While our main purpose is to deploy this history of ideas to understand political change and the role of political entrepreneurs, we will certainly take as deep praise the association made in Professor Gordon’s conclusion:

Mark Blaug’s Economic Theory in Retrospect has long been the go-to book to learn about the origins of many key ideas in the field.  I would pair it with Leighton and Lopez.

Professor Blaug passed away in November, 2011, after a long and successful career that began as a Ph.D. student of George Stigler. Wayne and I benefited greatly from Professor Blaug’s work while writing Madmen, and we are honored to be mentioned in his company.

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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