Political Entrepreneurs

The Economic Engine of Political Change

Politics as a Peculiar Business: Richard Wagner Revives a Tradition of Entangled Poltical Economy

September 6th, 2016 by James Caton

In Politics as a Peculiar Business, Richard Wagner explains that the world of the political and the world of the economic are by no means separate. Political and economic theory are complementary components of social theory. A theory that promotes detailed analysis must include both. It must be a theory of “entangled political economy”.

The widespread adoption of neoclassical economics and econometric methods, with deterministic orientation and removal of the political from economics proper, shifted theory away from plausible (open-ended) reasoning and toward demonstrative reasoning (31). No room was left for the creative power of human choice from which springs forth the novelty inherent in society. Agents communicate to one another through the Walrasian auctioneer, interacting only with regard to prices and quantities (Axtell 2005). This move to demonstrative reasoning represents a shrinking of the domain of economic analysis. For classical economics, the institutional environment and agents acting within it “comprised the foreground” of analysis (9-10). By moving institutional arrangements to the background, much of the content of political economy was lost. Economists may have gained clarity by this formalization, but that clarity came at the cost of the loss of context. The conflict and cooperation that comprise and transform the patterns of interaction in society faded to the background of analysis. This outcome is unnecessary, especially as complex methods such as agent-based modeling and network analysis have become available to economists at continually shrinking costs.

Wagner suggests that we move away from simplistic modeling of human agents as automatons who do not express any will or interaction with one another except when motivated by changes in prices. Life within social orders is more complex. Agents themselves drive change within social systems. Absent commitment to a particular ethic or morality, agents see all objects in the world as potential means for accomplishing ends. For better or for worse, they see manipulation of the political order as such means. Political manipulation reverberates throughout society as changes in legal and political structure reorient the payoffs for actions by other agents much as tectonic shifts reshape a physical landscape. The continual integration of the political sphere with the private promotes an empirical system of entangled political economy whose structure is constantly being generated and transformed by the action of agents, especially those who are politically connected. As Buchanan noted, “order [is] defined in the process of its emergence (1999).”

The detailed theory presented by Wagner allows the analyst to more closely approach the use of power in society. Power is the essence of the political. Clausewitz famously stated that “war is the continuation of politics by other means.” The reverse is true. Politics is generated by the orientation of expectations around sources of power. In particular, state politics is generated by action within a network of governance whose nodes have successfully attained a legitimated claim over the use of violence. By this power and others, agents who come into conflict may, to varying degrees, engage in war. Clausewitz Stamp (1980)Such political activity is ubiquitous in society. Competing agents are willing to impose costs on others by use of the power of the state or other political apparatuses. Given this ubiquity, economy and state should not be divided in final analysis.

In sum, Wagner provides a long-needed reformulation of political economy. His framework for analyzing political action moves us away from additive political economy, best represented by traditional neoclassical analysis, to entangled political economy, a framework that recognizes the complexity inherent in society. This framework leaves room for the integration of complex methods, allowing for fine-grained investigation of social phenomena. Entangled political economy returns the theoretical practice of economics to the more robust tradition of social economy that was prominent throughout the substantial majority of the history of economic thought.

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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