Austrian economics often focuses on the vital role the entrepreneur plays in driving the economy, through the constant arrangement of the capital structure, in order to provide consumers with a constant stream of goods and services. But the question of what happens when government tries its hand at the same function of ownership, uncertainty-bearing, and decision-making is not addressed much in Austrian theory (see the literature review in the link). To try and close this partial theoretical gap, Joseph Salerno and I recently co-authored a paper on the subject of political entrepreneurship, available for download here.
What we attempt in this paper is to provide a theoretical framework with which to analyze government investment decisions, and furthermore, to see in what sense government can be entrepreneurial. An implication of our argument is that by looking at government in an entrepreneurial way, we can gain additional insight into the nature and effects of government activities. Events of recent years, such as the de facto nationalization of General Motors for example, take on new significance when viewed as acts of political entrepreneurship. What such cases imply is actually a transfer of the entrepreneurial function from the market to government, along with the emergence of problems closely associated with government management, e.g. the lack of recourse to economic calculation, bureaucratic inefficiency, and so on.
There is a great deal of research, both theoretical and applied, which can be done on this topic, and we hope the paper spurs fruitful discussion.
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The area of research is worth while but I dislike the term “Political Entrepreneur”. I immediately thought that statists/fascist coined the term.
The terms “Political Entrepreneur” and “Receiver of Stolen Property” are exactly equivalent. They both use resources stolen from a third party and enrich themselves and/or their friends. The fact that the friends use these resources in addition to resources from exchanges is not relevant.
Matt, you might be interested in “some disturbing aspects of political entrepreneurship” by Winston C. Bush. It can be found in Essays on Unorthodox Economic Strategies: Anarchy, Politics and Population, a Memorial Volume in Honor of Winston C. Bush. The book of essays is edited by Danzau and Mackay and was published in 1976 by University Publications, Blacksburg, VA. My guess is that you can probably find a copy at Center for Study of Public Choice. If not, I can make try to produce a copy from my beat up volume.
Or use the most simple and factual description of political entrepreneurs – “gangsters”. Or “bandits”. The same theoretical framework – namely, human action – can easily be applied to the federal government, highwaymen and pirates.
It’s always fun to find instances where bandits and governments intersect and cross over. The Earp family of Tombstone, AZ were US marshals and deputy marshals, they ran a crooked gambling casino, and they attempted to use strict gun control within town limits in order to protect themselves from their angry victims. Their close associate Doc Holliday was widely believed to be a stagecoach robber. Entrepreneurs in action!
It’s also amusing in “Treasure Island” where the arch-pirate Long John Silver lays out his ultimate plans – find the treasure, murder the officers and crew of the ship, and return to England so he can run for “Parlyment”.
Clarification – is an entrepreneur a owner-occupier/Monarch in the Hoppeian sense with his or her own skin in the [private/public] game? Or is that [juridical[ person merely the top dog /officer/committee managing the capital risk of others? What legitimacy sets boundaries on the ‘homesteading’ acting? How does a libertarian view of private law correspond to public law when the subsidiarity has been compromised as in Europe, consider Gresham’s law WRT collateral deposited at the ECB:
http://seekingalpha.com/article/314938-ecb-s-ltro-experience-a-cautionary-tale-for-the-fed
___LTRO has created a two-tiered market for collateral and the two markets are diverging:
” Simply put, back in the pre-crisis days the two markets worked in tandem. Participants engaging with the ECB did not differentiate on the type of collateral they delivered to the ECB versus the type of collateral they held back for use in private funding markets. The crisis changed all of that.Suddenly the cheapest collateral to deliver became the collateral of choice for ECB use. The most expensive or ‘quality’ collateral was held back for use in private markets.
____A tale of two collateral markets
This is how central bank transmission mechanisms began to be compromised. The private funding markets, dictated by interbank participants, could from now on only be influenced by large quality collateral holdings — which the central banks increasingly lacked. The public funding market, dictated by central banks, became the domain of trash collateral — which no one really cared about. The central bank monopoly on the ultimate cost of money thus became based around access to trashy collateral, not quality collateral — which remained the preferred funding option for private markets. Unfortunately, it’s private liquidity which ultimately determines the scale and depth of the eurozone crisis — and it’s in this market where ECB influence is waning.”
IOW, how can one speak of ‘political’ acts when the central public authority (the ECB?FED) is in ‘private’ hands? This is dictatorship, no? Surely your argument cannot be “The tyrant as entrepreneur with citizens as serfs” aka a political economy of encomienda, might makes right?
Define terms – is the carrier of the stake (entrepreneur) a member of the ‘polis’ or exempt from liability to the harm wrought? Consider the rot at root of all the mutual beneficial societies on Wall Street:
“The huge difference between the returns of GP and LPs and the factors behind this disconnect reinforces the conflict of interest between the fund managers and the investors in the fund.”
Who owned the “missing” collateral at MFGlobal? It would appear the TPTB (‘the powers that be’ ie political authority, courts of law) have no say in the matter – legislation has no traction on the slippery slope of oligarchy of “might makes right”?
http://www.zerohedge.com/news/guest-post-corruption-america
missing citation
http://boombustblog.com/blog/item/5961-the-first-major-real-estate-collapse-in-europe?-ive-the-eu-equivalent-of-ggp-the-largest-real-estate-failure-in-us-history
The public square ie the political marketplace is so much more than mere fiduciary “skin in the game” – when human action directly impacts the common good, the forum is elevated to one of eternal verities and moral hazard becomes that much more contingent on foreign affairs, aka universal or natural law:
Nassim Nicholas Taleb’s chart on Foundational Assymetry and Ethics
http://www.patheos.com/blogs/yimcatholic/2011/12/a-few-thoughts-on-the-political-dimension.html
National debt as an immoral deception
http://www.hli.org/index.php/component/acajoom/?act=mailing&task=view&listid=2&mailingid=778
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