ABSTRACT
Political entrepreneurship occurs when an individual observes and acts on a political profit opportunity. As with market entrepreneurship, entrepreneurial actions require, first, that a profit opportunity exists; second, that someone is alert enough to spot the opportunity and recognize the opportunity for profit; and third, that the individual is willing to act on the opportunity once it is spotted. Each of these three requirements are common elements of political and market entrepreneurship, yet in each of these requirements there are both subtle and substantial differences between entrepreneurship in markets and in politics. The fundamental differences arise from the fact that market exchange is based on voluntary agreement, whereas political action always has an element of compulsion behind it. The fact that force can be used to generate political outcomes produces two key differences in the nature of political versus market entrepreneurship. First, opportunities for political entrepreneurship will always exist. One might imagine an economy in complete general equilibrium, implying that there are no unexploited profit opportunities in the market, but there will always be opportunities for political profit from the forced transfer of resources from some to others. Second, whereas successful entrepreneurial acts are welfare-enhancing in markets, that may not be true in politics, because the costs forced on the losers may be greater than the gains to the gainers.
