The Political Economy of the Ultimate Resource: Essays on Institutions and Entrepreneurship

Peter Jacobsen

Major Professor: Christopher Coyne, PhD, Department of Economics

Committee Members: Peter Boettke, Rosolino Candela

Online Location, Online
November 17, 2020, 12:30 PM to 02:30 PM

Abstract:

This dissertation explores the relationship between the ultimate resource, which is human creativity in the form of entrepreneurship, and the institutional environment which surrounds entrepreneurs.

In the first essay, I focus on how humans’ entrepreneurial capabilities confound optimal population models and consequent policies. Recent scholarship by natural scientists has renewed the call for population policies in response to climate change. Likewise, economic scholarship has increasingly focused on the optimal population policy given climate considerations. I argue it is impossible for either natural scientists or economists to determine a welfare-enhancing population policy. Creative individuals alert to opportunities in their interest contribute to the economy in ways not captured by standard models. This chapter examines this relationship between population and economic growth with entrepreneurship considered. The implication is policies seeking to curb population growth may inhibit economic growth by reducing potential entrepreneurs. Politicians cannot measure the opportunity cost of forgone entrepreneurs, and therefore the costs of such policies are unseen. I use a case study to highlight this point.

In the second essay, we answer the question, “does the entrepreneurial market process reflect an equilibrating or disequilibrating tendency in the allocation of resources?” We address this question with the case of Malcom McLean, who pioneered and introduced modern container shipping. By realizing containerization as a lower cost method of shipping goods internationally, we argue that McLean acted simultaneously as a Schumpeterian and Kirznerian entrepreneur, illustrating that these notions of entrepreneurship are different segments of the same equilibrating market process. Containerization had a disruptive effect on previous methods of ocean shipping, but its adoption was introduced through an act of arbitrage, namely by redeploying existing resources, such as cranes, ships, ports, and storage facilities from lower-valued uses to perceived higher-valued uses. In the process, McLean was able to realize previously unnoticed profit opportunities by correcting previously existing inefficiencies in intermodal transport.

Lastly, we focus on how individuals make decisions when they are embedded in institutions without profit in loss. We focus on Amazon’s HQ2 campaign which drew both large support at the possibility of job creation and backlash for perceived cronyism. In this paper we evaluate corporate tax incentive policies considering the Austrian contribution to the problem of economic calculation. In doing so we highlight the contextual nature of the knowledge problem associated with policy packages and potential cronyism arising from such a problem. We argue that because political decision-makers lack the knowledge generated via competition in the market process, they are unable to allocate resources in a way that achieves economic growth. In the place of this knowledge, they tend to gain knowledge from the political process which helps them respond to political incentives and rent-seeking behavior by special-interests.