Economic Power, the State, and Post-Keynesian Economics

Abstract

The notion of power is pretty much absent in contemporary economics. To the extent that neoclassical economists worry about power, their concern is about excessive government power hindering the market. This can occur directly, for example when macroeconomic policies try to affect aggregate economic outcomes, or when government regulations keep firms from producing goods at maximum efficiency. Market distortions can also occur indirectly. As the public-choice school has argued, firms may attempt to influence political decisions in their favor, and these rent-seeking activities are inefficient even when they are totally ineffective (Buchanan, Tullock, andTollison 1980). In contrast to this standard view, post-Keynesian economists see power as an integral part of modern economies. They see an economic world populated by large firms that possess a great deal of economic power. These firms are neither restrained nor controlled by the market, and their production decisions are not responses to the market. To the contrary, large oligopolies seek to control the market and frequently succeed in doing so.

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