Political Entrepreneurs

The Economic Engine of Political Change

What do we mean by “Political Entrepreneur”?

November 14th, 2012 by Edward Lopez

Wayne and I talked about it a few times before deciding to name this site Political Entrepreneurs. We considered going with something catchy like Madmen in Authority, but we feared  that would draw more focus to policymakers than we intend to. Ultimately we went with Political Entrepreneurs because it puts attention on the driving force of political change in our framework, namely the political entrepreneur.

This of course raises the question: what do we mean by “political entrepreneur”? That question is intertwined with the core question we ask in the book, which is “what creates political change”? In the book, we draw on the history of ideas, both in theory and practice, to build a framework that focuses on the tension between ideas and status quo forces in shaping institutional rules. We tell a complex story, but it can be simply put: new ideas must overcome two forces of the status quo, existing political interests and prevailing ways of thinking; only then will policymakers then have the incentive to change institutional rules.

So how does political entrepreneurship fit in? In our framework, ideas shape institutions, which in turn shape incentives, which therefore determine outcomes we observe. So political change happens when entrepreneurs notice areas of weakness in the structure of ideas, institutions, and incentives, and then find ways to change the institutional rules in those areas. In a democracy, this requires making it in the political interests of the existing powers (the madmen in authority) to change the rules accordingly. Political entrepreneurs strive for that right political moment, for the time when the right idea can take hold. They try to change conditions, to fulfill what John Stuart Mill said in 1845: “when the right idea and the right circumstances meet, the effect is seldom slow in manifesting itself.”

In our view, this form of entrepreneurship has not been clearly explored and tested in social science, much less communicated to broad audiences. That said, we’re nowhere close to the first ones  to take up these questions. Even a quick search turns up a good selection of articles and books on the topic of political entrepreneurship. One question that has come up is whether political entrepreneurs create net positive effects in society. In our framework, the gains to political entrepreneurship are not necessarily positive because rent seeking, for example, can influence changes in institutional rules as much as it can legislation and regulation. Many other interesting issues come up in the several mini-literatures that are developing on political entrepreneurship.

As Wayne and I continue blogging, we’ll draw comparisons to a lot of this other work. I suspect we’ll discover a large degree of overlap between these other contributions and ours. There is likely to be a fair amount of disagreement as well. Bottom line, for us the political entrepreneur is the driving force in political change, the agent who notices, creates and exploits opportunities to overcome status quo forces and change institutional rules.

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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