Inequality by Mikayla Novak

Author:Mikayla Novak
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

Consequences of Regulation for Income and Wealth Redistribution

A core insight of entangled political economy is that competitive impulses are prevalent throughout society, and can be conducted in ways traversing the boundaries of economic, social, and political actions. As has been stressed throughout much of the contemporary economic literature, even by theorists who implicitly presume the existence of additive political economy , regulations have the potential to quell market-based competition. It is against this background that “regulations that restrict competition replace genuine accomplishment with faux accomplishment for the beneficiaries of such regulation” (Wagner 2016, p. 25).

It is useful to consider the effects of regulation upon competition amongst economic enterprises through the application of network theory. Differential advantages are gained as a consequence of regulation effectively blocking off possibilities for economic agents to create certain connections within entangled political economy: “regulation is mainly about the creation of alliances within a network of relationships, wherein some nodal positions gain advantage relative to other positions” (Wagner 2010, p. 130). Martin (2015) indicates that sufficient degeneracy underpins the resiliency of a network structure , allowing feasible alternative options to be discovered and implemented should existing connections fail to endure. However, there is the risk that regulation “can eliminate degeneracy by requiring entrepreneurial plans to pass through particular nodes … Such regulatory nodes are almost the exclusive source of monopoly in society, because there is no way that a commercial plan can contract around that node” (Wagner 2010, pp. 116, 130).

James Broughel illustrates how regulations have the potential to stifle certain (inhibited or banned) forms of economically valuable knowledge propagation and diffusion whilst advancing (allowable) others: “[u]nfortunately, if society restricts discovery pathways, it can never be sure if access is being blocked to only harmful innovations or also beneficial discoveries” (Broughel 2017, p. 55). Wagner (2010) similarly shows that an entrepreneurial plan can be represented as a kind of directed graph, extending into the future from some originating point. In the interim, nodes of focused action can be altered and revised by substitutable or complementary plans in the spirit of “utopia competition” (Almudi et al. 2017).

Figure 5.1 presents a modest refinement of Wagner’s portrayal of entrepreneurial amendment to bring it more in line with Broughel’s insights, with the addition of proscriptive regulatory measures which redirect the shape of entrepreneurial planning. The top panel of the figure depicts the path of entrepreneurial planning in an environment whereby no regulation is imposed by government. Different stages of the given actor’s plan are represented by the four nodes on the horizontal line running from the present to some future point in time. Substitute plans are injected at various intervals of the entrepreneurial planning stages, reducing the value of the actor’s plan, whereas complementary plans increase value. The impact of substitutes and complements has the effect of feeding revisions to the actor’s original plan, as shown by the morphing of the original circle initially into a truncated hexagon and, eventually, into a diamond.

Fig. 5.1Entrepreneurial plans as directed graphs affected by regulation.

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