Part III: How is political entrepreneurship similar to economic entrepreneurship?

 This essay is one of a series exploring the topic: What impact does political entrepreneurship have on freedom and flourishing? The series commenced with a Preface which provides a synopsis of the series and explains why I think it is important to obtain a better understanding of political entrepreneurship.

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As noted in the Preface, Don Lavoie held that entrepreneurship fundamentally consists of interpreting and influencing culture. From Lavoie’s perspective, “entrepreneurial acts are the readings of, and contributions to, different conversations”. He explains further:

“Most acts of entrepreneurship are not like an isolated individual finding things on beaches; they require effort of the imagination, skillful judgements of future costs and revenue possibilities, and an ability to read the significance of complex social situations” (Lavoie 2015, p.63).

It seems to me that political entrepreneurs listen to the discourse of potential supporters about existing policies to discover what they will be likely to find attractive. They use that information to innovate by producing new products and selling them persuasively. The new products are policy proposals. Success is measured, in the first instance, by whether proposed policy proposals are implemented.

Political entrepreneurs respond to public discourse, using it as a basis for policy innovation. However, their ideological agendas may not reflect a society’s underlying cultural values. In democracies, individuals may challenge entrenched interests by creating and participating in new political movements; under authoritarian regimes, such innovation is suppressed.

As I see it, Lavoie’s suggestion that entrepreneurs play an interpretive role in complex systems is applicable to all kinds of entrepreneurship. And Roger Koppl is correct to argue that “entrepreneurs are not a class of people distinct from other persons.” As Koppl says: “Entrepreneurship is an aspect of all human action. Entrepreneurship is a human universal” (Koppl 2006, pp.1-2).

Koppl built on the views of Israel Kirzner to propose a post-Kirznerian theory of entrepreneurial behavior. He suggested that alertness, discovery, and innovation are the key concepts required to understand what entrepreneurs do and what entrepreneurs are. Alertness refers to recognition of opportunities to revise plans and habits. Discovery is finding a profit opportunity, or some other opportunity to achieve a better outcome. Innovation occurs when the entrepreneur acts on the discovery that he or she has made (Koppl 2006, pp.6-7).

It is possible to identify different kinds of entrepreneurship with major contributors to the study of entrepreneurship. While Kirzner recognized the importance of discovery and innovation, he emphasized alertness to profit opportunities (Kirzner 1979). Joseph Schumpeter viewed the entrepreneur as an innovator who does new things, or does things in new ways (Schumpeter 1947).

Some political scientists have suggested a role for political entrepreneurs akin to the role played by Schumpeter’s innovators in the field of economics. Catherine De Vries and Sara Hobolt suggest that competition between political parties in European countries is like competition in economic markets. Long-standing dominant players have been challenged by disruptive new players. The central objective for both challengers and incumbents is the control of government and the delivery of public policies. Political entrepreneurs play a key role because a party that engages in successful political policy innovation can enjoy an effective monopoly on an issue and reap the consequent electoral benefits (De Vries and Hobolt 2020).

De Vries and Hobolt were writing about multi-party systems in which several political parties are competing for power. However, a similar form of competition occurs when an innovator challenges established leadership factions within a major political party by offering a product that is more appealing to a group of party members.

It often makes sense to view political and economic activities as belonging to separate realms. That perspective is helpful in considering the interactions between politics and business. Nevertheless, Richard Wagner makes an important point when he suggests that politics should be viewed as a peculiar form of business because it has many characteristics in common with business. Both attract investors to provide capital, entail competition, offer sources of livelihood for people, and are supported by administrative educational organisations. And both involve entrepreneurship, (Wagner 2016, p.11).

The next essay focuses on the peculiarities of politics as a form of business and discusses the incentives that political entrepreneurs are faced with in their efforts to attain power and introduce policy innovations.

References

De Vries, C.E. and S.B. Hobolt, “Challenger Parties and Populism”, LSE Public Policy Review 1, no.1 (2020), pp. 1–8.

Kirzner, Israel, Perception, Opportunity, and Profit, Studies in the Theory of Entrepreneurship (University of Chicago Press, 1979).

Koppl, Roger, “Entrepreneurial Behavior as a Human Universal” in Entrepreneurship: The Engine of Growth, ed. Maria Minniti (Praeger, 2007).

Lavoie, Don, “The discovery and interpretation of profit opportunities: culture and the Kirznerian entrepreneur”, in Culture and Economic Action, edited by Laura E Grube and Virgil Henry Storr (Edward Elgar, 2015).

Schumpeter, Joseph, “The Creative Response in Economic History”, The Journal of Economic History VII, no. 2 (1947), pp. 149-159.

Wagner, Richard E., Politics as a Peculiar Business: Insights from a Theory of Entangled Political Economy (Edward Elgar, 2016).