Economics
College of Humanities and Social Sciences

An Entrepreneurial Perspective on Regulatory Change in Germany's Medieval Brewing Industry

Diana Weinert

Major Professor: Peter Leeson

Committee Members: Peter J. Boettke, Virgil Storr, Richard E. Wagner

Enterprise Hall, 318
April 13, 2009, 08:00 PM to 07:00 PM

Abstract:

Economic theories of regulation in both, the Chicago and the Virginia tradition, rely on static equilibrium based models of exchange between politicians and interest groups to explain entry into and exit out of regulation. Despite varied efforts, both traditions have a difficult time explaining at least some of the empirically observable instances of deregulation consistently.

A disequilibrium-based perspective on regulation offers a more comprehensive explanation for regulation and deregulation. The first essay discusses the details of an entrepreneurial theory of regulation in a systematic fashion. Applying the Kirznerian concepts of competition and entrepreneurship to the economic theories of regulation, I explain how competition between actors in the political realm can bring about change in regulatory institutions.

The second essay uses a historic narrative surrounding the brewers’ guild of Cologne in the 15th century to illustrate how technological innovation can lead to changes in producers’ opportunity costs. Such changing opportunity costs ultimately undermined brewing regulation in the case of the city of Cologne and lead to de facto deregulation. The example suggests that entrepreneurial discovery can overcome Tullock’s transitional gains trap as long as regulation is geographically constrained.

The third essay illustrates how competition between two groups of political entrepreneurs, the brewers' guild and the bakers'  guild,brought about change in Bavaria’s brewing regulation during the 16th century. The feuds between the two groups lead to the emergence of the German purity law for beer in 1516. This law regulated brewing in Germany until it the European Court of justice struck it down for violating the principle of free movement of merchandise in the Union in 1987.

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