Michael Perelman — The Power of Economics vs. The Economics of Power

Most of the other papers at the conference were of a similar bent, showing how markets evolve naturally and work efficiently. Nowhere was there any consideration of power. The participants clearly understood the discipline of economics very well, but that was their problem. Part of the training of economists is the development of an instinct to avoid any consideration of power, other than presumptive abuses of government, which interfere with the functioning of markets. In conventional economics, power is reduced to a metaphor. We have the power of the market or the power of competition, but corporate power is nowhere to be found. 2

This exclusion of power from economics has a long history. In researching The Invention of Capitalism, a study of classical political economists' attitude regarding primitive accumulation, I was struck by their cavalier treatment of this abusive exercise of raw power....

Although the political economists were too much concerned with showing the justice of markets to address such obvious exercises of power, in their more private writings -- diaries and letters -- they applauded the forces that pushed workers off the land and into wage labor. Contemporary economists generally follow this tradition describing the evolution of markets as a purely voluntary phenomenon, virtually universally understood as beneficial to all.

As a partial corrective to this problem, I recently published a book, The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers. As the title suggests, an important part of the book is to show how both business and economic theory have destructive consequences. The other main thread of the book describes how economists have gone out of their way to create a theory that excludes all considerations of work, workers, and working conditions.

The main benefit of this exclusion is that it conveniently eliminates all considerations of power from the discipline of economics. In this sense, the participants at the conference were blameless. They did exactly what "good" economists are supposed to do. The problem is that "good" economists do not make good economics, except to the extent that their work provides useful ideological cover.

This cover, however, is incapable of covering up all of the intractable problems of capitalism. Once the damage becomes obvious, power may briefly enter into the picture. After the crisis passes, power quickly becomes invisible again. What is most remarkable is that a clear consideration of mainstream economic theory should be enough to alert economists to the inherent contradictions of the capitalist economy. Such a perspective, might, at least, be capable of moderating some of the more destructive results of untrammeled capitalism.

The Power of Economics vs. The Economics of Power
Michael Perelman
(h/t Chris Dillow at Stumbling and Mumbling)

This is good. Brief and to the point. The subtitle might be, "What's reallly going on with the myth of the market." 

My first mentor used to say the understanding power is key.