Political entrepreneurs vs the real entrepreneurs

Jobs cc ccWe are regulating our economy to death. One of the main reasons why there is an increasing disparity in wealth in this country is that the crony class is wrapping the middle class and the merchant class – the entrepreneurial class – in red tape. Pay a tax here. Pay a fee there. Do you have a license to do that?  It is harder and harder to build a business – something which is plenty hard to do without the crushing weight of the state.

The reason many people go into government, and I am being politically incorrect here and this is certainly not true across the board, is because they can’t do what entrepreneurs do. They can’t take an idea and make it reality. They don’t want the freedom to create. It’s not important for them. In fact for many people the freedom to create in the economy scares them. It means change. It means dynamism. It means new power emerging from unknown channels. Government people don’t like unknown sources of economic power.

Government much prefers “political entrepreneurs” to real entrepreneurs. Political entrepreneurs and bureaucrats are typically on the same side. Both groups are interested in keeping the establishment established all the while siphoning wealth from the productive part of the economy.

Cronies come in many different forms.

(From Real Clear Markets)

The second challenge arises because the nature of entrepreneurship changes as the role of the state expands. Israel Kirzner, perhaps the most prominent economist in the field of entrepreneurship extols the importance of entrepreneurs as driving the discovery process that is at the core of a market economy. Entrepreneurs live in the world between the equilibria that define neoclassical economics. They are the driving force that move markets, discover opportunities, and coordinate economic activity. Entrepreneurs thrive in the market by identifying new ways to satisfy consumer demand, providing goods and services at the lowest cost. In the real world, however, the line between markets and government has blurred and not all entrepreneurial activity is of equal value.

The entrepreneurial calculus may change in response to institutional changes brought by an expanding regulatory state. Some entrepreneurs will focus more on redistributing existing rents through the political process rather than innovating for the benefit of consumers. But it comes with strings attached, as committees in Washington and an alphabet soup of federal regulators have more to say about the success of these companies than will the consumer. Building a better mouse trap becomes secondary to passing the right law.

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