Political Entrepreneurs

The Economic Engine of Political Change

Category: Core Concepts

Why License a Tour Guide? Some Final Thoughts on the Economics of Political Change

July 8th, 2014 by Gary McDonnell

I have discussed in some detail airline deregulation as a case study of political change within the economic framework laid out in Madmen. Interstate trucking, long-distance telecommunications, railroads, banking, stock brokerage, oil and gas, are additional cases where deregulation occurred.  Future research into these cases may suggest ways in which political entrepreneurs were able to “arbitrage between academic ideas and political inefficiencies.”  But political change– or at least the potential– is in the here and the…
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Rodrik on Political Entrepreneurship: Ideas Overcome Interests

July 3rd, 2014 by Gary McDonnell

In my previous posts ( here and here ) I have attempted to highlight some of the important research with respect to the economic theory of politics and how well it explains the deregulation of the 1970s. In one sense, the debate is whether deregulation can best be explained by resorting to government officials acting in the public interest, or whether there was a change in the relative power of interest groups. I have suggested that the…
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Guest Blogger Gary McDonnell

June 30th, 2014 by Edward Lopez

Next up as a guest blogger is Gary McDonnell. Gary is an assistant professor of economics at Northern Michigan University whose teaching and research interests include the economics of regulation, antitrust, and public choice. Gary’s dissertation discussed the role of ideas and economics in the deregulation of airlines, trucking, and telecommunications industries. I first met Gary through the Association of Private Enterprise Education , where he presented an excellent paper on 1970s airline deregulation (which is now forthcoming in The Independent Review ). Chapter 6 of Madmen has…
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Guest Blogger Todd Nesbit

June 20th, 2014 by Edward Lopez

The Political Entrepreneurs Blog is starting a guest blogger series. Our first guest blogger is Todd Nesbit. He is a senior lecturer in economics at Ohio State University. Here is his Google Scholar page . He’s going to cover some interesting angles on being effective competitors in academic and commercial labor markets. He’ll also share some info about using Madmen in the classroom, among other topics. Welcome Todd!

Property and Contract Rights in High Frequency Trading?

April 30th, 2014 by Edward Lopez

Robert Levy, Chairman of the Cato Institute, responds to Burton Makiel and Aurthur Levitt’s Wall Street Journal op-ed on the most recent firestorm over high-frequency trading (HFT). Highlighting its downsides, critics have called for bans and regulations to stem or eliminate the practice. These critics allege the practice lends unfair advantage to large and inside traders relative to small and retail traders, worsens market volatility such as flash crashes, and amounts to “front-running”. Levy’s approach is to…
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Better Living Through Political Entrepreneurship

June 27th, 2013 by Edward Lopez

Today I discovered a book the old fashioned way: while browsing the stacks at a brick-and-mortar library . Published in 2010, Better Living Through Economics is a collection of essays that documents the impact of basic economic research on improving public policies. The collection is edited by John J. Siegfried, who is Professor of Economics at Vanderbilt University and the Secretary-Treasurer of the American Economic Association. All the contributors to the volume are top economists in the profession. Better Living has a…
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And Lo! The Social Costs of Rent Seeking

April 30th, 2013 by Edward Lopez

Page 96 of Madmen offers a practical definition of that commonly misused term: The investment of valuable resources into activities that are counterproductive is what economists call “rent seeking.” Theft is a particularly vivid example. So is much of politics. This morning Tyler Cowen, via Mark Thorson, points to a vivid example in a Guardian news article, “ The Vending Machine Robot that Can Steal Free Sodas .” An enterprising young French man, however, has solved the problems of anyone who has encountered a malfunctioning vending…
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The Rise of the Political Entrepreneur

April 22nd, 2013 by Wayne Leighton

RootsHQ, an online resource for the conservative movement, recently published an article with a title we use for this post: “ The Rise of the Political Entrepreneur .” The article is by Allen Fuller, the group’s managing partner. You don’t have to be a conservative to appreciate his observations on shifting influences in politics. In short, how people influence the process of political change has evolved tremendously over the last few decades. It’s an argument that Ed and I make in Madmen….
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The Limits of Madmen in Authority

February 26th, 2013 by Wayne Leighton

This Washington Post interview  is a must-read on the power — and especially, the limitations — of the U.S. president. The interviewee, Professor George Edwards of Texas A&M University and Oxford University, argues that “the traditional view of the persuasive presidency is wrong.” Here’s the opening, which also serves as summary: Years ago, the notion of leadership was that you get in front of potential followers and shout “follow me.” If you were a good leader,…
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Buchanan and Yoon on Commons and Anticommons

February 1st, 2013 by Wayne Leighton

In “ Symmetric Tragedies: Commons and Anticommons ,” James Buchanan and Yong Yoon discuss two ways that poorly defined property rights can cause inefficient resource use. The familiar tragedy of the commons can occur when rights to use a valuable resource are overassigned, which creates the incentives for overuse. For example, in this TED Talk (specifically minutes 0:00-3:30) Rob Harmon explains why rivers and streams throughout the country turn into dry creek beds every summer. Because water rights have historically evolved into a first-come,…
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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.

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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