Political Entrepreneurs

The Economic Engine of Political Change

Category: Core Concepts

Reforming the NCAA on Player Compensation

January 7th, 2013 by Edward Lopez

Tonight — at last — Notre Dame and Alabama take the field to decide this year’s college football champion. An estimated 36 million viewers will tune in, and both schools will receive paychecks of $18 million. The winning team promises to have its assistant coaches descended upon with lucrative job offers. Alabama’s Nick Saban is already college football’s highest paid coach, at an annual salary of $5.5 million . And Notre Dame’s head coach, Brian Kelly, is already fending off rumors that…
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Learning from Failure

December 23rd, 2012 by Wayne Leighton

How do political entrepreneurs learn from failure? Among market entrepreneurs — especially in Silicon Valley and other high-tech areas — evaluating mistakes is popular as a learning tool. It is hard to find new and better ways to add value for others — the essence of entrepreneurship — without being a good learner. Fortunately, an emerging body of resources is providing more information about failure, more stories from which to learn, and more insights on what…
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Bill Gates and “Catalytic Philanthropy”

December 22nd, 2012 by Wayne Leighton

Continuing with the story on Bill Gates, Warren Buffet and other billionaire philanthropists in the Forbes 400 issue, the richest person in the United States adds a commentary on opportunities for philanthropic investment. Gates begins by observing that the market will not provide goods and services without earning a return, which explains why the poorest people on the planet cannot get access to life-saving medicines and other essentials. Investment will focus on innovation that is likely to earn…
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Economic Thinking in Philanthropy

December 19th, 2012 by Wayne Leighton

Imagine you are a billionaire who very much wants to change the world for the better. A big question for  you is what to do. This is the type of question Ed and I ask in chapter 7 of Madmen. It entails applying economic thinking to make sure you allocate your resources to where they can do the most good. A related question is how to organize your efforts. Should you set up a foundation? Should it be…
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Incentives Matter (French Edition)

December 18th, 2012 by Wayne Leighton

Gerard Depardieu is giving up his French citizenship due to his home country’s oppressively high tax rate.   Bloomberg reports that the French Prime Minister Jean-Marc Ayrault called the move “pathetic” and that other ministers joined in the condemnation. But Depardieu is not alone. The famous (and increasingly infamous) actor was preceded by French billionaire Bernard Arnault, chief executive of LVMH Moet Hennessy Louis Vuitton, who also found the country’s tax rate to be unbearable. The French government…
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Bootleggers and Baptists (or, “Why Politics Makes Strange Bedfellows”)

December 17th, 2012 by Wayne Leighton

Bruce Yandle has spent a career combining sound analysis of current economic trends with a deep understanding of public choice theory. What else would you expect from the man who brought us “Bootleggers and Baptists”? His argument was first made in a 1983 article in Regulation , then updated in 1999 in  a follow-up article  in the same magazine.  Similar pearls of wisdom are found in Yandle’s latest quarterly economic outlook written for the Mercatus Center at George Mason University. In all of these…
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The Intellectuals and Torture

December 15th, 2012 by Wayne Leighton

A core argument in Madmen is that “intellectuals” play a significant role in political change. They find and adapt and make their own the ideas that they think are most important. Then they promote these ideas to the rest of us. If they are successful, those ideas become widely-held beliefs and eventually take shape in a society’s rules. For this reason, Ed and I argue that the most influential intellectuals in a society are tremendously powerful. The…
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Why Rules Matter, and Meta-Rules Matter More

December 13th, 2012 by Wayne Leighton

A key argument in Madmen is that in any given society the rules of the game matter; they determine the incentives that shape human behavior. In Chapter 4, Ed and I introduce public choice theory, which pioneered the study of rules in politics. After public choice, no longer would political decisonmakers be viewed as acting according to some ill-defined standard of public interest. Of particular importance are the rules or principles that apply to the rule-making process…
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Calling Political Entrepreneurs: San Francisco Ride-Share Edition

December 12th, 2012 by Edward Lopez

Like many cities, San Francisco limits the supply of taxi cabs and town cars. This keeps cabbies out of the red, but it creates shortages along the way. As with any shortage, entrepreneurial folks tend to find ways around. At Radical Social Entrepreneurs, Jeff Fong (my former student) draws attention to the emergence of ride-sharing start-ups Ride-sharing start-ups Lyft , SideCar and Tickengo are helping San Franciscans get around faster and cheaper than ever before…much to the chagrin of local cabs. But…
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What do we mean by “Framework”? Ask Elinor Ostrom

December 7th, 2012 by Edward Lopez

On the publisher’s website , Madmen is described as a book that “offers up a simple, economic framework for understanding the systematic causes of political change.” That description follows the language that Wayne and I use throughout the book. For example, in the Preface we say we “offer a framework to think about how ideas matter, when it is that political change happens, and why at other times the status quo endures.” In brief, our framework (laid out…
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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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