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The brewer, the baker, and the monopoly maker

Author

Listed:
  • Diana W. Thomas
  • Peter T. Leeson

Abstract

Purpose - This paper seeks to examine how productive entrepreneurial activities, such as innovation, influence unproductive entrepreneurial activities, such as regulatory rent seeking. Design/methodology/approach - To investigate the argument the authors consider Bavaria's brewing industry in the fourteenth through sixteenth centuries using an analytic narrative approach. Findings - The example of Bavaria's brewing industry suggests that productive entrepreneurial activities may increase unproductive entrepreneurial activities. Confronted with a situation in which innovation erodes their monopoly returns, legally protected producers and policymakers reregulate industry to recapture lost rents. Regulation policy under such reregulation tends to be more encompassing, and thus produces more unproductive entrepreneurial activity, than pre‐innovation regulation policy. This reflects the greater number or variety of producers that new regulation policy must encompass for reregulation to recreate rents. Originality/value - The paper builds on Thomas’ work, which suggests that innovation can undermine existing regulatory institutions and result in deregulation. This paper identifies an alternative channel through which productive entrepreneurial innovation may influence unproductive entrepreneurial rent seeking. It argues that productive entrepreneurial innovation by legally unprotected producers in an industry can also increase, rather than decrease, the extent of unproductive entrepreneurship in that industry.

Suggested Citation

  • Diana W. Thomas & Peter T. Leeson, 2012. "The brewer, the baker, and the monopoly maker," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 1(1), pages 84-95, April.
    • Handle: RePEc:eme:jepppp:v:1:y:2012:i:1:p:84-95
    DOI: 10.1108/20452101211208371
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    References listed on IDEAS

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    1. Christopher Coyne & Russell Sobel & John Dove, 2010. "The non-productive entrepreneurial process," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 23(4), pages 333-346, December.
    2. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    3. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    4. Diana W. Thomas, 2009. "Deregulation despite transitional gains," Public Choice, Springer, vol. 140(3), pages 329-340, September.
    5. Israel M. Kirzner, 1997. "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 60-85, March.
    6. Leeson, Peter T. & Boettke, Peter J., 2009. "Two-tiered entrepreneurship and economic development," International Review of Law and Economics, Elsevier, vol. 29(3), pages 252-259, September.
    7. Sam Peltzman, 1989. "The Economic Theory of Regulation after a Decade of Deregulation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1989 Micr), pages 1-59.
    8. Gordon Tullock, 1975. "The Transitional Gains Trap," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 671-678, Autumn.
    9. Benson, Bruce L, 2002. "Regulatory Disequilibrium and Inefficiency: The Case of Interstate Trucking," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 15(2-3), pages 229-255, June.
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    3. Clara Jace, 2019. "An economic theory of economic analysis: the case of the School of Salamanca," Public Choice, Springer, vol. 181(3), pages 375-397, December.

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