Political Entrepreneurs

The Economic Engine of Political Change

Richard Nixon as a Madman in Authority

March 14th, 2013 by Wayne Leighton

This year marks the 100th anniversary of Richard Nixon’s birth, so it’s not surprising that the 37th President of the United States has been in the press. This post argues that Nixon is interesting and relevant as a madman in authority — that is, as a political leader who was both brilliant and deeply flawed. His influence continues to permeate American politics.

Recent additions to the Nixon genre focus relatively early in this politician’s career, with stories about formative experiences. Kevin Mattson’s Just Plain Dick: Richard Nixon’s Checkers Speech and the ‘Rocking, Socking’ Election of 1952  and Jeffrey’s Frank’s Ike and Dick: Portrait of a Strange Political Marriage are the latest examples. The February 4th New Yorker reviews both books.

Moving from the president’s formation to his legacy, a recent essay by Martin Hutchinson argues that every citizen of China owes Nixon a debt of gratitude for his efforts to open their country to the West. China had a unique opportunity to sell to the U.S. market following economic reforms by Deng Xiaoping in 1978, which in turn put the country on a path to industrialization and rapid growth.  The World Bank estimates that over 600 million people have been lifted out of poverty in China since that time.

What about the Nixon legacy at home?

For starters, he added to our political vocabulary. “Nixon goes to China” is a well-known metaphor. It means more than a “hawk” who engages a country’s traditional enemy. As Tyler Cowen and Dan Sutter explain in a 1998 Public Choice essay with the title “Why only Nixon could go to China,”

Nixon, a right-wing President, occasionally receives private information that a left-wing course of action is preferable. The information cannot be communicated to the public by mere announcement. Nixon’s choice credibly signals the desirability of a left-wing course of action for individuals of all political persuasions. The same course of action, if taken by a left-wing President, appears to be ideological shirking and fails to command bipartisan support.

Many Democrats who saw Nixon going to China already supported this policy and thus had an incentive to support the president, even if they disagreed with his other policies. And Republicans who knew Nixon to be a “hawk” had reason to trust the president in his policy in a way they never would have trusted a Democrat.

The logic extends beyond international relations and applies just as well to domestic issues. Significant deregulation by a left-wing government in New Zealand in the 1980s is an example. Bill Clinton’s welfare reform in the 1990s is considered by some to be that president’s “Nixon goes to China” moment, though he actually campaigned on the issue and used it to his advantage.

Another enduring aspect of Nixon centers on the power afforded to the president. Today, many Americans agree that he abused his executive power and attempted to stay above the law, a reasonable conclusion from a review of the Watergate transcripts. During the Nixon administration, Congress clearly held this view, at least on foreign affairs, resulting in the War Powers Resolution of 1973. A supermajority in Congress voted to override Nixon’s veto. Similarly, the Supreme Court unanimously ruled against the president in U.S. v. Nixon (1974), a case in which the president had claimed executive privilege in order to withhold potentially damaging material from a special prosecutor.

And yet, as Ed and I point out in Chapter 2 of Madmen, both presidents George W. Bush and Barack Obama have used their executive powers to conduct the war on terror in ways that almost certainly would not have been accepted bypublic opinion during earlier eras, perhaps as recently as Nixon’s presidency. People’s beliefs about the proper scope of government — what it should and should not do — changes over time.

In some ways, this change is gradual, such as the current expectation that governors and presidents will visit sites of natural disasters and promise to send taxpayer money to rebuild. In other ways, people’s expectations change rapidly, such as the Patriot Act and other laws that followed in the wake of the September 11, 2001, terrorist attacks on the United States. Madmen in authority respond to, and try to shape, these evolutionary and revolutionary changes in public sentiment.

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.

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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.

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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.

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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