1.3.9 Power in the economy

• Rules, institutions, and coordination: Power also comes from the ability to set and enforce rules. Laws, contracts, property rights, and regulations made by the state decide who is allowed to do what, and under what conditions. These rules coordinate economic activity and shape people’s options. They are not neutral. Rules can protect some groups or expose others to risk. Laws and policies can lock in existing power relationships or shift them by opening space for new voices and forms of participation that disrupt existing power relationships.

• Ideas, norms, and legitimacy: Power can also work through ideas, social norms, and shared beliefs often spread through narratives (Section 1.3.11). Some economic arrangements appear natural or inevitable because they are familiar or widely accepted as ‘the way things are’ or ‘common sense’.. When people believe that markets always produce the best outcomes, or that success always reflects effort and talent, they may overlook how power shapes opportunities and barriers for people. In this way, power can operate invisibly by shaping what people see as normal, possible, or fair.

These foundations of power are closely connected. Control over resources can influence which rules are made. Rules can protect certain ideas. Ideas can make unequal control of resources seem legitimate. Together, resource control, rules and ideas shape how power is held and exercised within an economy. Understanding these three foundations of power help us see that economic outcomes are influenced by people.

Power rooted in control of resources, rules, and ideas is not fixed. It shifts as conditions change and as relationships between people and institutions evolve.

One place where these shifts are easy to see is in markets. Changes in demand and supply for products and resources (Section 3.1.2) are often driven by social or environmental conditions, and can alter the balance of power between consumers and producers. For example, when a famous pop star comes to town, demand for hotel rooms increases. This shifts power towards hotel owners, who may choose to use their stronger position to raise prices. These shifts reflect changing dependencies linked to control over limited resources. In markets, this kind of advantage is often described as market power (Section 3.2.4). Market power refers to the ability of sellers or firms to influence prices or conditions because others depend on what they control, especially when alternatives are limited.

Whether such shifts remain temporary or turn into lasting advantages depends largely on the rules that shape economic relationships. Laws and regulations set by states influence who can use power, how they can use it, and for how long. When rules limit concentration of power and protect weaker individuals or groups, power can be rebalanced. This is why many countries protect workers’ rights to form trade unions and negotiate wages and conditions collectively. These rules recognise that employers usually hold more power and create ways for workers to shift the balance.

Because these processes unfold gradually, they can seem natural or inevitable. Large firms often justify their size by pointing to innovation, and extreme wealth is often explained as the result of talent, effort, or ‘the market.’ However, looking at the system over time suggests power accumulates because economic systems are often structured in ways that reinforce early advantages.

Research from outside economics supports this. Simplified computer models of voluntary, fair exchange still tend to produce rising wealth concentration unless balancing rules are built in. But without deliberate balancing forces, power will tend to concentrate in ways that benefit the few over the many.

In all economies, power is uneven. Some people and institutions have more influence because they control resources, make rules, or shape ideas. Even within these unequal relationships, people and institutions still make choices about how they use their power. These choices shape whether economic relationships become more extractive or more regenerative over time.

You will often hear people say that ‘the market’ has decided something, such as rents rising or wages falling. This language makes it sound as if markets act on their own. In reality, markets do not make decisions. People do. Prices, wages, and contracts reflect choices made by landlords, employers, managers, investors, and people working for states, within the (human-made) rules that shape what options are available.

Consider housing. A landlord who owns rental property has the power to raise rents or evict tenants during a housing shortage. The landlord can use their power to maximise profit, or they can keep rents stable or invest in long-term relationships with tenants. Market conditions and laws influence these choices, but they do not fully determine them.

Similar choices exist for firms. Managers of large companies can use their power to pressure suppliers to accept lower prices or risky contracts. They can also choose to support suppliers through fair payment terms, longer contracts, or shared investment. Both approaches operate within the same economic system, but they lead to very different outcomes for workers and communities.

People working in states also exercise power through choice. Politicians can design laws and policies that favour powerful interests or weaken protections for workers and the environment. But they can also choose to protect vulnerable groups, invest in public services, and stop harmful behaviour. While people working for states face real constraints and trade-offs, they are never completely without agency.

Power is unevenly distributed, and not everyone has the same range of options. But choices made by people with greater power matter more, because they shape the conditions under which other people live and work. Whether an economy becomes more extractive or more regenerative depends both on how power is structured, and how it is exercised by individuals and the organisations they are a part of.

People working towards regenerative economies focus on shaping how power flows, so that it does not become concentrated and self-reinforcing and that it is exercised for the public good. They do this by designing balancing forces that limit accumulation and widen participation in decision-making, helping power circulate rather than become locked in place.

• Countervailing power limits domination by ensuring that no single actor can act without constraint. Laws that protect workers and free speech, prevent monopolies, and set environmental standards all act as counterweights to those individuals and institutions that accumulate power. Civic participation, trade unions, and community organisations also strengthen collective voice, enabling people to join together to balance power in the economy.

• Democratic ownership and decision-making reduce dependence by spreading control over assets such as land, housing, businesses, and infrastructure. Cooperative businesses, universal public services, and community-managed resources can help distribute benefits, control and choices more widely in the population.

• Transparency and accountability make power visible. When decisions are open for people to see and decision-makers can be questioned or removed when they do not act in the public interest, it becomes harder to use power in ways that harm others. Independent media, open data, public decision-making processes, and clear rules on conflicts of interest among decision-makers all help expose hidden power.

Together, these balancing mechanisms help stabilise economic systems by limiting unhealthy imbalances of power. When power is limited and shared widely, more people gain real choices over their lives and greater ability to act together. Managing power carefully is therefore central to building economies that serve both people and planet.

Concept: Power

Skills: Thinking skills (transfer, critical thinking)

Time: varies, depending on option

Type: Individual, pairs, or small groups

Option 1: Reviewing the key ideas in Section 1.3.9.

Time: 30 minutes

Working individually or in pairs, read the five 'key ideas' below. Each one captures a key idea from Section 1.3.9. For each statement:

• Explain it in your own words (2–3 sentences).

• Add one concrete example (from the text, your own life, or the news).

Then choose one statement that you think is most important for understanding how economies work. Be ready to explain why you chose it.

Share your ideas with another student, or pair of students. Where did your ideas overlap? Where were they different?

Key ideas:

• Power is relational and unavoidable

• Power works through control of resources, rules, and ideas

• Power tends to accumulate through reinforcing feedback loops

• Power always involves human choice and agency

• Regenerative economies design countervailing and distributed power

Option 3: Reflection and discussion

Time: 20-40 minutes, depending on how many questions are addressed

Choose one question from the list below and discuss it with a partner:

• Where do you see power shaping your own life in the economy?

  • Where does that power come from (resource control, rules, culture/norms, or other factors)?

  • Do you think that power is used fairly or well? Why or why not?

• What might shared or balanced power look like in your school, neighbourhood, or country?

• Can you think of a situation where power was exercised differently than you expected? What made that possible?

• Which forms of power are easiest to see, and which are hardest to notice? Why do you think that is?

Option 4: How power is exercised

Time: 30–40 minutes

In this section, you learned that power is uneven, but that people and institutions still make choices about how they use it. Power can be used in ways that limit others’ choices, or in ways that expand them. Below are three short situations. For one situation, work through the steps individually, in pairs or a small group.

Situations (choose one)

• A landlord owns several apartments in an area with a housing shortage.

• A large company relies on many small suppliers to produce its products.

• A school administration decides how a limited budget will be spent.

Step 1: Identify the power - Briefly describe:

• Who has more power in this situation?

• Where does that power come from (resources, rules, ideas, or a combination)?

Step 2: Explore different ways power can be exercised

For the same situation, describe three different approaches:

• Using power over: How might power be used to control or dominate others?

• Using power with: How could power be used cooperatively, with shared decision-making?

• Using power to: How could power be used to enable positive change or new possibilities?
  
  

Step 3: Reflect on consequences - For each approach, discuss:

• Who benefits?

• Who is harmed or excluded?

• Which approach seems most supportive of a regenerative economy, and why?

• Is it possible to exercise power over, power with, and power to for positive or for negative aims and outcomes?

Be ready to share one key insight with another student, pair or small group.

Option 5: Famous social scientists on power

Time: 30-40 minutes

Social scientists have long tried to understand how power works in the economy, by asking questions like: Who has power? Where does it come from? How does it shape people’s choices and opportunities? The ideas in this Section 1.3.9 come from social scientists who lived in different times and noticed different forms of power, but all of them connect to how economies work today. 

Answer the questions below for each of the thinkers and their big idea on power. Clicking on the arrow will reveal more information:

• Where does power come from in this idea? Resources, rules, ideas, or a combination?

• How does this idea help explain power in today’s economy? Use one example from the text, media or your own life.

• What might this idea help us notice that we would otherwise miss? For example, hidden power, unequal choices, or reinforcing advantages.

• How to Understand Power - A short animation that explains where power comes from and how it works in everyday civic life, including six sources of power and why understanding them matters for citizenship. Difficulty level: easy

• How Elites Captured Capitalism - An interview with economist Grace Blakeley where she discusses how economic and political elites reinforce each other. She explains how state action can protect corporate power (subsidies, bailouts, self-regulation, lobbying), how monopolies and corporate welfare weaken the idea of free markets, and why organising, especially unions, matters for building countervailing power. Difficulty level: medium

• Finally, an Economist Takes on the Topic of Power - In this interview with the Institute for New Economic Thinking, economist Alessandro Roncaglia explains why power has been pushed to the margins of mainstream economics and why this is a serious problem. Drawing on history, politics, and lived experience, he argues that power shapes who gets resources, whose ideas matter, and which policies are possible. Roncaglia challenges the idea that markets alone can balance power and shows why deliberate institutional change is needed to reduce inequality. Difficulty level: easy

• Is Inequality Inevitable? This challenging article from Scientific American uses mathematical and physics-based models to show how wealth can become increasingly concentrated even when market exchanges are voluntary and appear fair. Boghosian explains how small early advantages, chance, and repeated transactions can create reinforcing feedback loops that push wealth upward over time, leading to oligarchy unless strong redistributive rules are in place. The article is demanding, but it offers a powerful systems-based explanation of why inequality can grow without deliberate action to rebalance power. Difficulty level: very high

Blakeley,  G. (2024). Vulture  capitalism: How to survive in an age of corporate greed. Bloomsbury.

Boghosian, B. M. (2019, November). Is inequality inevitable? Wealth naturally trickles up in free-market economies, model suggests. Scientific American. https://www.scientificamerican.com/article/is-inequality-inevitable/

Britannica Editors. Power (political and social science). Britannica. https://www.britannica.com/topic/power-political-and-social-science

Parramore, L. (2024, January 16). Finally, an economist takes on the topic of power. Institute for New Economic Thinking. https://www.ineteconomics.org/perspectives/blog/finally-an-economist-takes-on-the-topic-of-power

Reardon, J., Caporale, M. M. A., & Cato, M. S. (2018). Introducing a new economics: pluralist, sustainable and progressive. Pluto Press.

van Staveren, I. (2015). Economics after the crisis: An introduction to economics from a pluralist and global perspective. Routledge.

Stiglitz, J. (2019). People, power and profits: Progressive capitalism for an age of discontent. Penguin Books.

Link to Quizlet interactive flashcards and terminology games for Section 1.3.9 Power in the economy

collective action: when people act together to influence decisions, rules, or outcomes that affect them, especially in situations where individuals acting alone have limited power.

power: the ability to influence decisions, actions, or outcomes that affect other people

household: a system where people living together care for each other and do domestic work. It is often called the “core economy”

commons: a system where people self-organise to co-produce and manage shared resources.

market: a system where people self-organise to co-produce and manage shared resources.

state: an institution that sets and enforces laws, provides public services, and governs and regulates other economic institutions

economy: an institution that sets and enforces laws, provides public services, and governs and regulates other economic institutions

institution: a set of formal or informal rules, norms, and organisations that shape how people behave and interact in the economy

system: a set of interdependent parts that organise together to create a functional whole

wage: payment for work

landlord: a person or organisation that owns property and rents it to others in exchange for regular payments

contract: a written or spoken agreement enforceable by law

property right: the legal right to own a resource and determine how it is used

regulation: a rule that guides individual or group behaviour and enforced by an authority

legitimacy: when people accept a government’s right to rule because they see it as fair, lawful, or serving the common good.

norm: a social rule for accepted and expected behaviour, can be stated or unstated

narrative: the stories we tell about how the economy works, how we should study the economy and participate in it

demand: the quantity of a product that consumers are willing and able to purchase at various prices

supply: the quantity of a product that producers are willing and able to supply at various prices

balance of power: how power is distributed between different people or groups, and whether anyone has too much influence over others

consumer: someone who uses resources and products to meet needs

market power: the ability of a firm to influence the price of their product in a market, as well as other market conditions

trade union: an organisation of workers that defends their rights, pay, and working conditions

success-to-the-successful: a system trap where early success gives some people or organisations more advantages, allowing them to keep winning while others fall further behind

system trap: occurs when a system’s structure causes persistent problems, even when people try to fix them

reinforcing feedback: a situation where a change in a system causes effects that strengthen the original change, often leading to growing advantages or disadvantages

income: money received from work or investments

profit: total revenue minus total cost

wealth: the total value (stock) of someone’s assets such as money, property, or investments

lobbying: seeking to influence a politician on an issue

corruption: use of power for personal gain

corporation: a large business or company that is treated by law as a single organisation, separate from the people who own it

investment: a system where people self-organise to co-produce and manage shared resources.

tax revenue: money collected by a government from individuals and organisations used for public spending and investment

extractive: taking something from other humans or from nature without trying to replace it or avoid harm

regenerative: making something grow strong again

rent: a payment made for the use of someone else’s property or asset, such as housing, land, or equipment

investor: an individual that puts money into an entity such as a business for a financial return

tenant: a person or household that rents property from a landlord in exchange for regular payments

regenerative economy: an economic system that meets human needs in a way that strengthens social and ecological systems

countervailing power: power used to balance or limit the power of stronger groups, such as trade unions balancing big companies

monopoly: a market structure where a single seller or producer is dominant and has price-setting power

democratic ownership: forms of ownership where control over assets is shared among many people, rather than concentrated in a few hands

infrastructure: large scale physical systems that a society needs to function (roads, railways, electricity networks, etc)

cooperative: an organisation owned and controlled by people to meet their common economic, social, and/or cultural needs

universal public services: when the state provides key services like healthcare, transport, or education to everyone, free or at low cost

transparency: the condition in which decisions, rules, and actions are open and visible, allowing people to see how power is used

accountability: he requirement that people with power must explain their decisions and can be questioned or removed if they misuse that power

conflict of interest: a situation where someone’s private interests could influence, or appear to influence, decisions they are meant to make in the public interest