The brewer, the baker, and the monopoly maker
| Pages | 84-95 |
| DOI | https://doi.org/10.1108/20452101211208371 |
| Published date | 20 April 2012 |
| Date | 20 April 2012 |
| Author | Diana W. Thomas,Peter T. Leeson |
| Subject Matter | Strategy |
The brewer, the baker, and the
monopoly maker
Diana W. Thomas
Department of Economics and Finance, Utah State University,
Logan, Utah, USA, and
Peter T. Leeson
Department of Economics, George Mason University, Fairfax, Virginia, USA
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.
Keywords Entrepreneurship, Rent seeking, Regulation, Innovation, Reregulation, Brewing
Paper type Research paper
1. Introduction
How do productive entrepreneurial activities, such as innovation, affect unproductive
ones, such as regulatory rentseeking?[1] Productive and unproductive entrepreneurship
clearly influence one another. For example, productive entrepreneurial activity
that creates additional wealth increases the payoff of political maneuvering that
expropriates wealth. This is one very simple way in which productive entrepreneurial
activity can affect unproductive entrepreneuria l activity. There are many others.
Despite this, almost no work has examined the potential channels of influence
between kinds of entrepreneurship. One important exce ption is Diana Thomas’ (2009)
work on entrepreneurial innovation and the transitional gains trap. Thomas argues
that productive entrepreneurial innovation not only benefits society directly. It may
also benefit society indirectly by reducing unproductive entrepreneurial activity
manifested through regulatory rent seeking.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/2045-2101.htm
Journal of Entrepreneurship and
Public Policy
Vol. 1 No. 1, 2012
pp. 84-95
rEmeraldGroup PublishingLimited
2045-2101
DOI 10.1108/20452101211208371
Peter T. Leeson would like to thank the Mercatus Center at George Mason University for
financial support.
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