Crony Capitalism Undercuts Entrepreneurs' Mastery Motivation

Economic competition can often usefully be compared to sports. As many jaded sports fans know, economics plays a chief role in the decisions made by their favorite teams and athletes. But sports can teach us about economics as well: For example, how crony capitalism – or government favoritism toward preferred firms and industries – may be even more costly than commonly perceived.

Competition for NFL roster spots among thousands of players will ideally lead to the highest quality play possible in the upcoming season. Similarly, competition never ends in the business world. Financial rewards for success, including football contracts and business profits, incentivize effort.

But few would argue that certain athletes and entrepreneurs at the tops of their professions – think Michael Jordan or Steve Jobs in their primes – were in it strictly for the money. Each chased something harder to define: the challenge of competition, of striving for one's personal best and succeeding against the best efforts of others. We certainly found this to be true in our recent working paper, "Mastery vs. Profit as Motivation for the Entrepreneur." Yet society tends to associate this internal drive with sports, but not entrepreneurship.

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