“A Giant Glob of Oily Ambiguity”: On the Use of the Concept of Power in Economics

Power, as a concept, is an underlying element in economic theory. However, the discipline has historically faced critiques for failing to adequately take it into account. This can lead to economic analyses that fail to fully disentangle the different aspects of a problem that is being modeled or to ineffective policy advice that is not fully connected to the real world. Over the last half century, the field of economics has made great advances in engaging with the concept of power. In 1991, Pranab Bardhan wrote the article On the Concept of Power in Economics, surveying conceptual and empirical advances made at the time. Thirty years later, this chapter seeks to update that review by taking stock of more recent developments in the field. It highlights advances in both macroeconomics and microeconomics and draws in particular on insights from the subdisciplines of behavioral economics and political economy, among others. The chapter is organized in three main parts. In the first part, it tackles “the giant glob of oily ambiguity” that is the concept of power, exploring its evolving definition in the context of economics and reflecting on why economists should care about it. It emphasizes the role that inequalities in power (“power asymmetries”) play in shaping strategic economic interactions and distorting economic decision-making processes. In the second part, it considers how taking the concept of power seriously can shift the way economists conduct their analyses and frame policy advice. It provides illustrative examples from four different economic “spheres”: the household sphere, the societal sphere, the market sphere, and the political sphere. Finally, in the third part, it turns the lens of power inward. It considers how power relations have functioned within the economics profession itself to lead it onto a path where it has too often failed to take the concept of power seriously enough and contends that economists have a responsibility to do so going forward.