Political Entrepreneurs

The Economic Engine of Political Change

Reading recommendations on luxury goods markets

January 11th, 2019 by Edward Lopez

A RL and FB friend writes: “A friend is looking for books/articles on markets for luxury goods. Can anyone suggest some reading? I know you were working on IP and fashion. Have you published that work? Might it be appropriate?”
 
My post on his FB thread:
There’s an economics literature on status goods that your friend can investigate. Some of it is pure theory of consumer behavior. Some of it involves counterfeiting and by implication IP policy. In certain strainds of this stuff we get nice but admittedly arcane discussions about price as indicator of quality, and whether lux goods are microeconomic anomalies because people seem to be willing to have greater demand at higher price. A favorite piece on status is Roger Congleton’s “Efficient Status Seeking” in JEBO 1989.
 
The Deluxe book recommended on this thread is a journalistic piece from a high-culture perspective. It’s an attempt to cut against the inevitable and insurmountable trend of “democratized” fashion. In my opinion, it’s good story telling, but fails as a sound argument. It fails because it depends too much on the normative point of view that design goods ought to be elite in consumption and artisanal in production. Anything else is — pshaw! There’s nothing wrong with that point of view, for the precise reason that it can’t be shown to be wrong. Heavy on opinion, light on argument. Published in something like ’07, it’s also very late in the game. Avoid.
 
A better piece, in my view, is the 1920’s (ish?) book Fashion is Spinach, by an author whose name escapes me right now. It’s by an American fashion designer who goes to Paris with tons of talent, and finds herself in the lucrative “knockoff” business. It’s a tell all and highly realistic tale. I like it because it shows, among many other cool things, to today’s readers that copying in design goods, especially fashion, is nothing new. Copying in fashion has been around at least as long as haute couture has. The Raustiala and Sprigmen recommendation, also on this thread, is masterful in demonstrating that copying in design goods (again, especially fashion) is actually critical to the success of the industry. See their follow-up book, The Knockoff Economy, for much more. Also better than Deluxe is Teri Agins’s 1990s-ish book, The End of Fashion. She’s a WSJ writer and takes a pretty sober approach to the trend of democratized and commercialized fashion.
 
More broadly, you can’t go wrong with Tyler Cowen‘s In Praise of Commercial Culture, which tackles the high-low culture divide in an early chapter, and which shows how markets generate tons of creative output. It’s his masterpiece, in my opinion (as one of his Ph.D. students, maybe that opinion counts?). Also of course, read everything by Virginia Postrel, backwards from The Power of Glamour, to The Substance of Style, to The Future and its Enemies. She has a book on textiles coming out at some point, too.
 
If your friend is truly desperate, they can take in my essay on IP and copying in fashion here: “Fashion Design and Copyright,” FEE Online, November 2010.

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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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