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).

Part II: Can cultural values explain freedom levels?

 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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The aim of this essay is to consider the extent to which differences in economic and personal freedom in different countries can be attributed to differences in underlying cultural values rather than to other factors – most particularly, the influence of political entrepreneurship and the ideologies adopted by governments.

There are reasons to expect interactions between economic and personal freedom to be mediated by economic development, change in cultural values and democratization. As discussed in Part I, there are strong grounds to argue that changes in the rules of the game which expand economic freedom often enable countries to experience more rapid economic development. There is also evidence that economic development leads to greater demand for democratization and cultural values supporting personal freedom.

Research by Ronald Inglehart illustrates some steps in the process by which an increase in economic development may generate pressure for greater personal freedom. He writes:

“Economic development seems to bring gradual cultural changes that make mass publics increasingly likely to want democratic institutions and to be more supportive of them once they are in place. This transformation is not easy or automatic. Determined elites who control the army and police can resist pressure for democratization. But development tends to make mass publics more trusting and tolerant and leads them to place an increasingly high priority on autonomy and self-expression in all spheres of life, including politics, and it becomes difficult and costly to repress demands for political liberalization” (Inglehart 2000, p.95).

Figure 1 suggests the existence of a weak positive relationship between economic freedom and an index of facilitating values developed by the author. The index of facilitating values reflects the priority that people in different countries place on autonomy, and the extent of interpersonal trust in different countries. Autonomy was allocated 75% of the weight and trust was allocated 25%. The index was constructed using values data derived from the latest round of the World Values Survey. Economic freedom is measured using recent data from the Fraser Institute. This index reflects many different indicators relating to size of government, legal systems and property rights, sound money, freedom of international trade and regulation. Further information relating to construction of Figure 1 is available elsewhere on this blog.

Figure 2 suggests the existence of a strong positive relationship between emancipative values and personal freedom levels. The concept of emancipate values was developed by Christian Welzel to measure the beliefs that people hold about such matters as the importance of personal autonomy, respect for the choices people make in their personal lives, having a say in community decisions, and equality of opportunity (Welzel 2013). Welzel’s research, using data from the World Values Survey, suggests that as economic development has proceeded, larger numbers of people have tended to adopt emancipative values in an increasing number of societies. The personal freedom component of the Fraser Institute’s Human Freedom Index incorporates indicators of rule of law, security and safety, freedom of movement, freedom of religion, freedom of association and civil society, freedom of expression and information, and relationship freedom (Vásquez et al. 2024). Further information relating to the construction of Figure 2 is also available elsewhere on this blog.

Economic freedom and personal freedom are strongly correlated (Vásquez et al. 2024, p.26). As discussed above, that can be partly explained by cultural intermediation. However, other processes may also be involved. For example, Milton Friedman suggested that economic freedom “promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other” (Friedman 1982, p.9).

The outlier data points in Figures 1 and 2 have been labelled to draw attention to countries that have substantially different economic and personal freedom ratings than might be predicted from their underlying cultural values.

The historical role played by individual political leaders in bringing about some of those outcomes is obvious to anyone with a rudimentary knowledge of the political history of some of the labelled countries, e.g. Venezuela, Argentina, Iran and China. However, those are all countries with economic and/or personal freedom ratings substantially lower than might be predicted by underlying cultural values. It is more difficult to identify the contributions individual political leaders with institutional outcomes in countries with greater freedom than might be predicted from underlying cultural values. For the jurisdictions where that is possible, e.g. Chile and Singapore (for economic freedom) and Taiwan and South Korea (for personal freedom) the political leaders who come to mind are not libertarians – they are authoritarian figures who held power several decades ago. 

Similar conclusions about the influence of political entrepreneurship are obtained by identifying countries which have experienced greatest change in economic and personal freedom since 2000. It is generally much easier to identify individual political entrepreneurs who have contributed to institutional outcomes in jurisdictions that have experienced the greatest contraction of freedom than in jurisdictions that have experienced the greatest expansion of freedom (Bates 2025).

It should not be surprising that it is easier to identify individual political leaders who have contributed to low or declining freedom ratings. Political leadership in the countries concerned is, by definition, authoritarian, or becoming increasingly authoritarian. When governments have relatively high regard for individual liberty, political entrepreneurship tends to be more subtle, and less focused on national leaders.

The ideas reflected in underlying cultures, as represented in Figures1 and 2, clearly account for only a portion of the ideas (including ideologies) which influence institutional change. And the power of ideas is not the only factor involved. Interest groups also seek to change the rules of the game in their favour.

The issue of whether interests dominate ideas, or vice versa, has been discussed in the past. (See, for example, Barry 1985.) It is important to emphasize, however, that there are no automatic mechanisms to translate ideas and interests into institutional changes. Political entrepreneurs play a crucial role in determining which ideas and interests have greatest impact on the rules of the game.

The following essay considers similarities between political and economic entrepreneurship.

References

Barry, Norman. "Ideas Versus Interests: The Classical Liberal Dilemma” in Hayek's Serfdom Revisited." Essays by economists, philosophers, and political scientists on The Road to Serfdom after 40 years (The Centre for Independent Studies, 1985).

Bates, Winton, (2025) Freedom and Flourishing: What role has political entrepreneurship played in changes in human freedom this century?

Friedman, Milton, Capitalism and Freedom (University of Chicago Press, 1982).

Inglehart, Ronald, “Culture and Democracy”, in Culture Matters, edited by Laurence E. Harrison and Samuel P. Huntington (Basic Books, 2000).

Vásquez, Ian, Matthew D. Mitchell, Ryan Murphy, and Guillermina Sutter, The Human Freedom Index 2024 (Cato and Fraser Institute, 2024).

Welzel, Christian, Freedom Rising: Human Empowerment and the Quest for Emancipation (Cambridge University Press, 2013).

Part I: How is human flourishing linked to liberty?

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, the purpose of the following discussion of the links between freedom and flourishing is to explain why this series of essays is focused on institutions relating to economic and personal freedom.

I adopt Douglass North’s definition of institutions as “the rules of the game in a society”, along with his more formal definition of institutions as “the humanly devised constraints that shape human interaction” (North 1990, p.3). North observed that institutions can be formal or informal. Formal institutions include constitutions, laws, and regulations. Informal institutions include codes of conduct, norms of behavior, conventions, and customs (North 1990, p.4).

The institutional changes that are of most interest for the purposes of this essay are changes in formal institutions that are reflected in levels of economic and personal freedom at a national level.

My understanding of the links between freedom and flourishing has been presented in Freedom, Progress, and Human Flourishing (Bates, 2021). In broad terms, the perspective adopted in that book is that institutional changes that result in greater freedom are generally desirable because they expand opportunities for individual flourishing. That perspective reflects my understanding of the nature of human flourishing and evidence of the importance of liberty to individual flourishing. A brief outline of the main points in that line of argument is presented below.

1. Human flourishing is the process by which individuals actualize the potential that is inherent in their human nature. It entails the exercise of one’s practical wisdom, with integrity, in the pursuit of happiness in an objectively worthwhile life (pp.4-5).
2. The basic goods of a flourishing human are a matter for ongoing reflection and discussion. I argue that individuals are flourishing when they are exercising wise and well-informed self-direction, accompanied by good physical health, psychological well-being and positive relationships with others, and are living in harmony with nature (pp.6-7).
3. Wise and well-informed self-direction is of central importance to human flourishing because of the nature of humans as creatures who have potential to direct their own flourishing, in pursuit of goals which they determine for themselves. The exercise of self-direction helps individuals to maintain other basic goods that are necessary for the pursuit of chosen goals (pp.7-8, 12). The Neo-Aristotelian viewpoint in the first three points builds on earlier work by several different authors.
4. Individuals flourish in mutually beneficial interactions with others. Adam Smith made a particularly important contribution in promoting that view (pp.49-50, 60-62, 68-9).
5. Given the nature of individual flourishing as an inherently self-directed process, it is not possible for individuals to flourish unless their natural right to self-direction is recognized in social and political structures (pp.22-3). This discussion references a conceptual framework developed by Edward W. Younkins (Younkins, 2019).
6. Norms of liberty solve the social problem of making it possible for individuals to flourish in different ways without the flourishing of one individual being given structural preference over that of others (pp.23-25). This discussion relies heavily on the views of Douglas Rasmussen and Douglas Den Uyl (Rasmussen and Den Uyl 2005).
7. International comparisons of opportunities to obtain the basic goods of flourishing humans point to the importance of liberty, a culture of trust and high incomes as common elements explaining why opportunities have been greater in some countries than others. Liberty is of utmost importance to provide opportunities for well-informed self-direction. High incomes appear to be the most pervasive element, but liberty and a culture of trust have played an important role in facilitating the underlying development process that has enabled incomes to rise. (pp.65-76). 

The existence of a positive relationship between economic freedom and economic development has been well documented elsewhere (for example, Gwartney et al. 2024, pp.27-33 and the chapter by Kevin Grier and Robin Grier, pp.35-49).

The preceding discussion has focused on links between formal rules of the game and human flourishing. Informal institutions are also of interest because they can interact in important ways with the formal rules that determine economic and personal freedom. North observes that a change in formal rules or their enforcement “will result in a disequilibrium situation” and “give rise to efforts to evolve new conventions and norms” (North 1990, pp.87-8). He also makes the more fundamental suggestion that “constitutional forms are typically derivative”. In response to the claim that “the reason we are a free people is that we have certain constitutional forms”, North suggests that “it may just as easily be the case that the reason we have these constitutional forms is that we are a free people” (North 1990, p.60). North notes that informal constraints “come from socially transmitted information and are part of the heritage that we call culture" (North 1990, p.37).

In the following essay, I discuss the extent to which international differences in levels of economic and personal freedom reflect differences in cultural values rather than the influence of political entrepreneurship and accompanying ideologies.

References

Bates, Winton, Freedom, Progress, and Human Flourishing (Hamilton Books, 2021).

Gwartney, James, Robert Lawson, and Ryan Murphy, Economic Freedom of the World: 2024 Annual Report (Fraser Institute, 2024).

North, Douglass C., Institutions, Institutional Change and Economic Performance (New York: Cambridge University Press, 1990).

Rasmussen, Douglas B., and Den Uyl, Douglas J, Norms of Liberty (Pennsylvania State University Press, 2005).

Younkins, Edward W. ‘Freedom and Flourishing’, Chapter 2 in The Dialectics of Liberty: Exploring the context of human freedom, edited by Roger Bissell, Chris Matthew Sciabarra and Edward W Younkins (Lexington Books, 2019).

What impact does political entrepreneurship have on freedom and flourishing?

 

Preface to a Series of Essays

“Entrepreneurship necessarily takes place within culture, it is utterly shaped by culture, and it fundamentally consists in interpreting and influencing culture.”

-        Don Lavoie (Lavoie 2015, p. 50)

A few months ago, a kind person told me that “Freedom and Flourishing” had become more than just a blog. With that thought in mind, I have decided to try something new. I am proposing to present here a series of linked essays that can be read in much the same way as a journal article. Readers who wish to do so will be able to start at this Preface and read all the way through to the end, or alternatively, just read the essays that are of most interest to them. There will be links at the end of each essay to help readers to find their way to the next one and links at the beginning of each essay to help readers to find their way back to this Preface.

Some readers may notice that some of the material presented here has been published previously on this blog. The views presented in this series of essays have been more carefully considered but are still subject to revision.

As always, I welcome comments from readers.

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Some readers will come to this series with the prior belief that political entrepreneurship has a negative impact on freedom and flourishing. Those of us who believe that people tend to flourish most fully when governments refrain from interfering with their lives may hold that belief. We certainly have good reasons to be skeptical about the impact of political entrepreneurs on human flourishing.

Nevertheless, if we are serious about promoting libertarian ideals, we cannot avoid considering the possibility that political entrepreneurship might have a role to play in getting us from where we are now - or where we seem to be heading - to a political and legal order that is more conducive to human flourishing.

In my view, it is important to obtain a better understanding of political entrepreneurship at this time because many voters in liberal democracies seem to have become increasingly dissatisfied with conventional centre-left and centre-right political leaders. Unfortunately, there seems to be increasing support in liberal democracies for leaders who propose rule changes which are likely to have detrimental impacts on prospects for freedom and flourishing. That support seems evident on both the progressive and conservative sides of politics.

In that context, it is particularly important to understand the contribution that political entrepreneurship has made to the problems that voters perceive, and the likely consequences of the alternative approaches to political entrepreneurship that are currently on offer.

The analytical approach adopted here has been influenced by entangled political economy as explained by Richard E. Wagner. According to that approach, both “polity and economy are arenas of practical action that operate in similar but not identical fashion” (Wagner 2016, p. 64).

Wagner’s approach recognizes the importance of individual action:

“The framework of entangled political economy accommodates recognition that societies change only through individual action inside those societies, and with those actions spreading within the society according to the receptivity of other members of that society to those changes” (Wagner 2016, p. 138).

As Chris Matthew Sciabarra has suggested, to understand institutional change we need to recognize interactions between personal, cultural and structural (political-economic) considerations. Sciabarra has discussed the nature of those interactions using a Tri-Level Model which builds on Ayn Rand’s conceptual framework (Sciabarra 2000, pp. 379-83). He emphasizes that although the personal, the cultural, and the structural can be analyzed separately, they can never be “reified as wholes unto themselves” (Sciabarra 2000, pp. 379-80).

I believe that the concept of political entrepreneurship is necessary to an understanding of institutional change for much the same reason that the concept of economic entrepreneurship is necessary to an understanding of technological change. The focus of the series is on how political entrepreneurship shapes the formal rules that govern economic and personal freedom across jurisdictions.

These essays draw heavily upon the insights of Don Lavoie in considering the nature of political entrepreneurship. In the passage quoted in the epigraph, Lavoie was writing about economic entrepreneurship. He argued that the “seeing of profit opportunities is a matter of cultural interpretation” (Lavoie 2015, p. 51). However, the idea that entrepreneurship consists in “interpreting and influencing culture” seems particularly relevant to political entrepreneurship.

What Lavoie means by culture is “the language in which past events are interpreted, future circumstances are anticipated, and plans of action are formulated.” (Lavoie 2015, p. 49).

He explains that he views culture as a discourse. In that context: “entrepreneurship is the achievement not so much of the isolated maverick who finds objective profits others overlooked as of the culturally embedded participant who picks up the gist of a conversation” (Lavoie 2015, p. 51).

Essays in this series will discuss the implications of significant differences that exist between political and economic entrepreneurship. In politics, voter choices are weakly linked to individual outcomes, decision-making often involves triadic relationships, and political marketing allows greater scope for deception. Moreover, political deal-making lacks a clear success metric comparable to profit in markets, and institutional incentives may attract opportunists rather than principled leaders.

I acknowledge, however, that many political entrepreneurs are motivated by a desire to achieve economic and social objectives that are widely supported in the communities they live in. They are confronted by information constraints. It is often impossible for a central authority to possess and process all the knowledge needed to achieve social and economic objectives without producing adverse, unintended consequences. As new policy initiatives are implemented to reduce those adverse consequences, economic freedom is often further reduced, and adverse economic and social impacts tend to multiply.

Political leaders seeking to restore economic freedom face challenges including entrenched interests and institutional path dependence. Changing formal rules is insufficient without corresponding changes in norms and incentives. I maintain that institutional reform is not solely about electing better leaders at a national level.

In advocating that the social sciences should pay more attention to the role of political entrepreneurship, I am certainly not attempting to promote a “great man theory” of institutional change. Political entrepreneurs rarely act alone, and their influence is constrained by a range of factors that are present to varying degrees in the societies in which they function.

Crucially, libertarian political entrepreneurs are unlikely to have a lasting impact on freedom and flourishing if their influence is confined to national politics. A national leader may play a pivotal role in sweeping away accumulated regulation but a culture supporting liberty and individual flourishing cannot be established and maintained unless many individuals undertake frequent acts of political entrepreneurship in their day-to-day interactions with others.

The structure of the series is as follows:

Part I provides a brief discussion of the links between freedom and flourishing to explain my reasons for focusing on institutions relating to economic and personal freedom. It also explains the meaning of institutions, institutional change, and political entrepreneurship.

Part II considers the extent to which differences in economic and personal freedom in different countries can be attributed to differences in underlying cultural values. It concludes that prevailing culture at a national level offers only a partial explanation of differences in economic and personal freedom levels. There is much left to be explained by other factors, particularly the influence of political entrepreneurship on the ideologies adopted by governments.

Part III discusses similarities between political and economic entrepreneurship.

Part IV discusses the incentives that political entrepreneurs are faced with in the context of the characteristics of politics that make it a peculiar business.  

Part V discusses the motives of political entrepreneurs and the impact of information constraints on pursuit of economic and social objectives.

Part VI considers the consequences of institutional path dependence, first in slowing the emergence of interest group politics and associated detrimental impacts on economic dynamism, and second in making it more difficult for reform-minded political entrepreneurs to restore economic freedom.

Part VII considers whether heroic political entrepreneurship has potential to promote freedom and flourishing. It urges that political entrepreneurship be perceived more broadly than in terms of government leadership.

Part VIII summarizes the series and concludes.

Acknowledgement

I would like to thank Chris Matthew Sciabarra for helpful comments on earlier drafts of some of the material presented in this series. The usual caveat applies. Please do not assume that Chris endorses the views presented here.

References

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).

Sciabarra, Chris Matthew, Total Freedom: Toward a Dialectical Libertarianism (Pennsylvania State University Press: 2000).

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