Power can flummox even the best economist. A typical explanation of events in an economy makes scant reference to the way in which power distorts the wondrous smooth motions that so obsess the discipline. It’s almost as if human relationships don’t exist in those wonderful models they are all so proud of. For the rest of us, power is central. It takes little time to realize that establishing an imbalance can have all sorts of advantages. They most notable being that it defeats or undermines the consequences of the classic impersonal marketplace. Fair is out. Asymmetry is in.
Conventional economic models are based on economic liberalism (capitalism), a chief assumption of which parties produce for markets and consumers consume through markets in which quantities of scarce goods are rationed by price. Included in this assumption is that markets are "perfect" in the sense of completely symmetrical, no party having an advantage over others based on the ability to influence market forces. This includes information and power.
On the other hand, all competitors seek advantage and are thereby incentivized to encourage asymmetry that gives them an advantage. In the real world, asymmetries are endemic in socio-economics systems subject to politics where parties vie for political power owing this is incentive, for example.
Economic liberalism is based on opportunity and incentive. For it to operate properly, opportunity must be relatively equal and incentives should not produce asymmetry. Neither are the case in contemporary systems. As a result, key assumptions of conventional economics is overly simplistic, which vitiates the application of the models to real-world conditions due to overly narrow scope.
This leads to the question, why are we doing this. The answer is that suggests itself is that this arrangement benefits those who gain advantage and it is they that support and promote it, and denigrate other approaches. It is part and parcel of capturing power to influence outcomes in the favor of some parties over others.
The other possibilities are stupidity or some combination thereof. Where ignorance does enter is in fooling the parties that are disadvantaged by controlling the narrative. This is a weakness of political liberalism (liberal democracy).
The conclusion would indicate either forcing reality to conform to the idealistic models, which is impossible to do, or else to give up the conventional approach as flawed. The conventional approach is trying to force reality to conform to the models, but selectively in a way that still favors the advantaged parties and further disadvantages the losers. This leads to social unrest as those that are disadvantaged by the resulting conditions get fed up and protest.
The Radford Free Press
Power Shifts, or Not?Peter Radford
