The brewer, the baker, and the monopoly maker

Diana W. Thomas (Department of Economics and Finance, Utah State University, Logan, Utah, USA)
Peter T. Leeson (Department of Economics, George Mason University, Fairfax, Virginia, USA)

Journal of Entrepreneurship and Public Policy

ISSN: 2045-2101

Publication date: 20 April 2012

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

Citation

Thomas, D. and Leeson, P. (2012), "The brewer, the baker, and the monopoly maker", Journal of Entrepreneurship and Public Policy, Vol. 1 No. 1, pp. 84-95. https://doi.org/10.1108/20452101211208371

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2012, Emerald Group Publishing Limited

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