What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. --Adam Smith I. Introduction
Political entrepreneurship has recently become a significant topic in economics, political science, and managerial science (e.g., Agarwal et al. 2009; Bernier and Hafsi 2007; Bjerregaard and Lauring 2012; Bysted and Jespersen 2014; Kivleniece and Quelin 2012; Klein et al. 2010, 2013; Leyden and Link 2015; Martin and Thomas 2013; McCaffrey and Salerno 2014; McGinnis and Ostrom 2012; Ostrom 2005; Skarbek 2016). Studies of political entrepreneurship take insights from market entrepreneurship and apply them to politics to understand the dynamics of institutional change. Theoretical studies advance our understanding of political entrepreneurship in ways that increase its applicability; empirical studies advance our understanding of specific historical episodes where political entrepreneurs were significant drivers of social outcomes. In this paper, I advance the theory of political entrepreneurship by exploring a historical source hitherto neglected by the literature. Specifically, I analyze the role of the political entrepreneur in Frederick the Great's Anti-Machiavel. My novel contribution concerns the institutional underpinnings of political entrepreneurship. Given the correct context, it can be more than a mere "mantra" (Beckett 2000) that political entrepreneurship should mimic commercial entrepreneurship; it can be fact.
Frederick II of Prussia (1712-1786, reigned 1740-1786), popularly known as Frederick the Great, is chiefly remembered as the monarch who established Prussia as an international power. An exemplar of the political philosophy that scholars have since dubbed "enlightened absolutism," Frederick modernized the Prussian army, spearheaded bureaucratic and judicial reforms that both increased managerial efficiency and enabled non-nobles to play a greater role in governance, and was a generous patron of the arts. His innovations in military tactics and strategy enabled him to achieve victories against great odds during the Silesian Wars and the Seven Years' War, and his writings on military science are still read in many armed forces academies. In Frederick's time, studying the writings of Niccolo Machiavelli, and especially The Prince, was a necessary component of a ruler's education. In 1739, Frederick finished writing a treatise that challenged Machiavelli's theories of statecraft. Written in French and published anonymously in 1740, Anti-Machiavel was widely read in its time, due in no small part to Voltaire, one of Frederick's favorite intellectuals, who distributed the manuscript in Amsterdam.
Whatever one's views of his reign, Frederick must be regarded as one of modernity's most skillful political entrepreneurs. His philosophy of governance, expressed most cogently in Anti-Machiavel, contains many insights that are relevant to the theory and practice of political entrepreneurship. My goal is not to conduct an exhaustive exegesis of Anti-Machiavel. Instead, I consider Frederick's philosophy in light of political entrepreneurship theory. Frederick's insights are not only of historical interest; they are inputs that can be used to advance modern political entrepreneurship studies. These insights also suggest how political entrepreneurship can contribute to good governance. To show this, the paper situates Frederick's thought in the context of eighteenth-century Germanic policy science and shows how interpreting Frederick in light of this intellectual context yields actionable ideas for future research.
In addition to political entrepreneurship and management, I contribute to two distinct literatures. The first is the literature on private governance and political property rights (Anderson and Hill 2004; Barzel 1997; Boettke 2011; Caplan and Stringham 2008; Ellickson 1991; Friedman 2014; Leeson 2011, 2014; Powell and Stringham 2009; Salter 2015a, b; Stringham 2015; Stringham and Zywicki 2011). Frederick ruled during a period of significant innovation in governance, and in particular the expansion of the state beyond its feudal confines. During this time, the state acquired an institutional identity distinct from the private holdings of its rulers. But despite extending governance roles to non-nobles, the state in Germanic polities such as Prussia was still characterized by hierarchical rule under the ultimate authority of a prince. Statecraft was equated with the prudent stewardship of political property rights. Studying Frederick's approach to political entrepreneurship thus yields the intriguing combination of public entrepreneurial insights derived from private management practice. These insights can help us understand not only political entrepreneurship in the abstract, but the institutional foundations that specify for political entrepreneurs what the payoffs are for various courses of action, and what feedback loops exist to discipline political-entrepreneurial behavior.
The second literature is the political economy of state formation and growth, with special emphasis on state capacity (Besley and Persson 2009, 2010, 2011; Acemoglu, Ticchi, and Vindigni2011; Acemoglu, Garcia-Jimeno, and Robinson 2015; Acemoglu, Moscona, and Robinson2016; Gennaioli and Voth 2015; Johnson and Koyama 2017). This literature argues that modern, centralized states created the conditions necessary for the extraordinary rise in Western living standards experienced in the late eighteenth century. According to this literature, these conditions included a uniform and nondiscriminatory rule of law, as well as an efficient bureaucracy that oversaw the provision of public goods and reformed taxation in a way that reduced its economic burden.
While this literature is valuable in understanding Western economic prosperity, it has not yet developed beyond "institutional morphology." These studies describe the outward changes in governance institutions, but not why those who governed behaved in a socially beneficial manner. The connection between private payoffs and social payoffs is missing. This oversight stems, in part, from the neglect of political entrepreneurship. Introducing the political entrepreneur as an agent of social change can provide the missing link between outcomes (e.g., sustained increases in income per capita) and institutional forms (e.g., efficient bureaucracies). If we can understand what information and incentives political entrepreneurs confronted that reconciled private interest with social interest, then we can understand why political entrepreneurs found it prudent to behave in a manner conducive to broad-based economic growth. This paper is a first attempt to understand that missing link.
I proceed as follows. Section 2 reviews the relevant political entrepreneurship literature. Section 3 provides hermeneutical context for Frederick's writings by detailing the intellectual environment surrounding those writings. This section covers the Germanic policy science known as cameralism, and the political philosophy of enlightened absolutism. Section 4 analyzes Anti-Machiavel and reconstructs Frederick's insights as inputs into the study of political entrepreneurship. Section 5 discusses the lessons for political entrepreneurship studies that follow from the previous two sections. Section 6 concludes by considering implications for political entrepreneurship within today's states, and how we should think about states themselves.
The Literature on Political Entrepreneurship
There are three main paradigms within which theories of entrepreneurship fall. The first focuses on opportunities. In this paradigm, which derives chiefly from the writings of Israel Kirzner (1973, 1997), entrepreneurship is alertness to hitherto uncaptured gains from exchange, and acting to capture those gains. In management and entrepreneurship studies, the unit of analysis is the entrepreneurial opportunity and the facets of human action relevant to alertness, such as the qualities of individual entrepreneurs (e.g., Shane and Venkataraman 2000; Shane 2003).
The second paradigm focuses on innovation. In this paradigm, which derives chiefly from the writings of Joseph Schumpeter (1911, 1939), entrepreneurship is the injection of novelty into methods of producing and distributing goods and services. Entrepreneurship results in creative destruction: the entrepreneur creates new methods of production, or even new markets, fundamentally changing the economy's "patterns of sustainable specialization and trade" (Kling 2016). In management and entrepreneurship studies, the unit of analysis is instances of economic innovation, with special focus on how particular entrepreneurs disrupt existing modes of production and distribution, what predicts such disruptions, and what effects such disruptions have on economic performance (e.g., Block, Fisch, and Praag 2017; van Stel, Carree, and Thurik 2005). The focus is on judgment.
In the third paradigm, which derives chiefly from the writings of Frank Knight (1921) and Ludwig von Mises (1949), entrepreneurship is purposeful human behavior under conditions of genuine (nonprobabilistic) uncertainty. The entrepreneur is an active creator of opportunities, rather than a discoverer only. When manifested in action, entrepreneurship necessarily involves resource ownership, control, and allocation. In management and entrepreneurship studies, the unit of analysis consists of human action in the context of a plan, a future-oriented structure of actions by which the entrepreneur deploys means to achieve ends (e.g., Foss and Klein 2012).
Political entrepreneurship refers to entrepreneurship in the specific nonmarket environment of the state. Of course, political entrepreneurs are not completely divorced from exchange institutions. But there is a meaningful difference between political entrepreneurs and market entrepreneurs: the former has direct recourse to a...