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 narrative put forth in Madmen provides a synthesis of these two scholarly approaches with the political entrepreneur a key player.
In a recent Journal of Economic Perspectives article Dani Rodrik weighs in on the manner in which ideas trump interests. Policy innovators use ideas to overcome interest group opposition to change:
“Just as we think of technological ideas as those that relax resource constraints, we can think of political ideas as those that relax political constraints, enabling those in power to make themselves (and possibly the rest of society) better off without undermining their political power” (p. 197).
Inefficiencies create opportunities for political agents to use ideas in order to enhance their power, and this may include policies that increase efficiency. I contend that 1970s deregulation is a case that fits well with this model.
During the 1970s an unpopular war was winding down, political scandal was fresh in the minds of many; there was inflation, oil embargos, recession, and a rising mistrust of government. Moreover, the cartel-like nature of economic regulation was becoming more apparent, even to the untrained eye. These factors created an environment ripe for political entrepreneurship and policy innovation. It is well-known that Senator Edward Kennedy was one of the individuals who brought regulatory issues into the government arena and is credited as a key political entrepreneur. Even to this day, Senator Kennedy gets much of the credit for airline deregulation (Madmen, p. 151).
Making legislation, like the Airline Deregulation Act of 1978, has been compared to sausage-making—it is messy. In other words, what was the process that brought about this important political change? As Rodrik notes,
“[P]olitical entrepreneurs are the ones who ultimately arbitrage between academic ideas and political inefficiencies. It would be nice to know the circumstances under which such arbitrage actually takes place . . . ” (p.202)
In my next post I will discuss some of the ways in which Senator Kennedy and others were able to overcome obstacles to change, to “arbitrage between academic ideas and political inefficiencies.”