We explore the exercise of power in perpetuating status quo institutions. We give empirical examples of the economic importance of power and offer a definition of this elusive term. We then investigate the role of power in a modern capitalist economy, borrowing ideas from the classical economists (unproductive labor, profit-driven investment), Marx (the labor-disciplining effect of unemployment) and the contemporary theory of incomplete contracts(the role of monitoring and enforcement rents). Our model suggests that a significant portion of an economy's productive potential may be devoted to the exercise of power and to the perpetuation of social relationships of domination and subordination. We then measure these resources in labor units using the concept of guard labor, finding it to be a significant and growing fraction of the U.S. labor force. We also document substantial cross national differences in the extent of guard labor and the strong statistical association between the extent of income inequality and the fraction of the labor force that is constituted by guard labor. We close with some speculations concerning the role of guard labor in the process of economic development and how economies might function better with more carrot and less stick.
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Paper provided by University of Massachusetts Amherst, Department of Economics in its series Working Papers with number
2004-15.
Find related papers by JEL classification: O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements P50 - Economic Systems - - Comparative Economic Systems - - - General N32 - Economic History - - Labor and Consumers, Demography, Education, Income, and Wealth - - - U.S.; Canada: 1913- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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