Economists and other thinkers have long thought about the nature of economic and political power in a capitalist system. One of the large concerns since the advent of the industrial economy has been the potential for producers and firms to wield power and influence and disrupt the economic system to their advantage. Adam Smith wrote in the Wealth of Nations that producers rarely gather together except to determine the course of events in their own favor. Economists have long regarded this as a difficult challenge to confront. The typical perfectly competitive market model assumes price taking as opposed to price making power for stability and equilibrium.
Hayek talk about power as, "the capacity to achieve what one wants". He wants to contrast power from coercion. Hayek does not per se see a problem with power we can be put to good use. He uses the example of people coming together and submitting themselves to the power of a manager to do more together. This would be an example of Common's managerial transaction. For Hayek, power becomes problematic when it turns to coercion. Here he defines coercion as the lack of freedom or the "absence of freedom". He is intent on saying that as long as a person has options to choose from they are not being coerced. These ideas have an important influence on how Hayek thinks about the issue of how to address a situation where coercion may exist whether it be a state or a private entity.
Thorstein Veblen also discussed power in his concept of "vested interest". Veblen defined the vested interest as"the marketable right to get something for nothing". What does he mean by that? He simply means that they are strategies employed by those who are benefiting under the status quo to prevent or block changes form the status quo. They engage in limiting and constricting commerce to their own benefit regardless of the social consequences. Veblen is particularly concerned with the fact that in the modern industrial economy of his time, business control of intangible assets is crucial to profitability and economic power.
John Commons talked about coercion as well. In the chapter efficiency and scarcity in Institutional Economics, he discusses the important distinction between coercion and persuasion. Quoting him he writes, "it is economically the issue of ascertaining the reasonable limits of coercion" (pg. 332, IE, Commons). In Commons work , we can see him working out how to balance the power of industrial interests versus the power of the working class. common also writes extensively about how the courts determine these questions in many different fields of venue between unreasonable and reasonable discrimination or coercion.
much more to come on power. In most economic models, power does not appear, maybe because the math is too hard or its just not in the focal lens. At the same time, power cannot be ignored in thinking about economics and society as a whole.
Hayek talk about power as, "the capacity to achieve what one wants". He wants to contrast power from coercion. Hayek does not per se see a problem with power we can be put to good use. He uses the example of people coming together and submitting themselves to the power of a manager to do more together. This would be an example of Common's managerial transaction. For Hayek, power becomes problematic when it turns to coercion. Here he defines coercion as the lack of freedom or the "absence of freedom". He is intent on saying that as long as a person has options to choose from they are not being coerced. These ideas have an important influence on how Hayek thinks about the issue of how to address a situation where coercion may exist whether it be a state or a private entity.
Thorstein Veblen also discussed power in his concept of "vested interest". Veblen defined the vested interest as"the marketable right to get something for nothing". What does he mean by that? He simply means that they are strategies employed by those who are benefiting under the status quo to prevent or block changes form the status quo. They engage in limiting and constricting commerce to their own benefit regardless of the social consequences. Veblen is particularly concerned with the fact that in the modern industrial economy of his time, business control of intangible assets is crucial to profitability and economic power.
John Commons talked about coercion as well. In the chapter efficiency and scarcity in Institutional Economics, he discusses the important distinction between coercion and persuasion. Quoting him he writes, "it is economically the issue of ascertaining the reasonable limits of coercion" (pg. 332, IE, Commons). In Commons work , we can see him working out how to balance the power of industrial interests versus the power of the working class. common also writes extensively about how the courts determine these questions in many different fields of venue between unreasonable and reasonable discrimination or coercion.
much more to come on power. In most economic models, power does not appear, maybe because the math is too hard or its just not in the focal lens. At the same time, power cannot be ignored in thinking about economics and society as a whole.
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