A Return of Political Economy: Why Economists Should Consider Theories of Power

Review of “Power and Neoclassical Economics: A Return to Political Economy” (2016), by Adam Ozanne, Senior Lecturer in Economics at The University of Manchester. Basingstoke: Palgrave Macmillan.

Please note that students at UoM can access the book online via the library.

Something is changing within the field of economics. The Financial Crisis beginning in 2007 has left academics, students and politicians wondering why so few economists were able to predict it. Many have since pointed towards an aggressive tendency within the discipline to marginalise anyone who attempts to deviate from the neoclassical mainstream. Various movements have emerged: The University of Manchester hosts two student-led societies, the Post-Crash Economics Society and the Diversifying Economics Network, which work to change this culture of exclusiveness.

It is therefore significant that Adam Ozanne’s book “Power and Neoclassical Economics: A Return to Political Economy” happens to be published now that its central arguments are gaining momentum. Political economy, the study of wealth distribution not just as a result of trade on a market but also as a product of government and social power relations, was pushed aside when ‘economics’ became professionalised and increasingly mathematical. While philosophers as well as political scientists welcomed it back into their discussions decades ago, economists are still reluctant to admit their own narrow-mindedness. This has negative consequences for all social sciences, not just economics.

Ozanne’s aim is to make economics care about what used to be its most central questions – for whom are we producing goods? How do power relations influence economic processes? And which tools exist to allocate things to various people? These questions have been approached in one way or another by virtually all social sciences, and also by heterodox economics. Here is why Ozanne’s approach stands out: he attempts to build the study of power into neoclassical frameworks, which are heavily based on equations, graphs, and positivist perspectives on society. It is this reforming tone of the book that bears the potential to appeal to mainstream economics. Using language that economists are willing to listen to while simultaneously challenging some of their most fundamental assumptions is what makes Ozanne’s strategy attractive – economist Diane Coyle (2016), a former colleague of Ozanne’s, agrees with that.

To economists, the book can serve as a reminder of political economy and the importance of power; to other social scientists, it introduces the key struggles within economics today. A combination of clear language and short chapters make it easy to give it a try, no matter which academic background one wishes to approach political economy from. It is argued that power is not just a factor to be taken as given, but is, in fact, something that is lived and reproduced in day-to-day experiences.

Someone who has extensively studied power in the context of policy making is likely to perceive the literature review, given in chapter 6 and later touched upon in chapter 8, rather critically. Here, a distinction is made between ‘behavioural’ and ‘economic’, or asset-based, theories of power. At first, this distinction seems intriguing – it is true that the ‘active’ forms of power, power as something to be exercised over another person, are often emphasised. However, no substantial argument is made for the existence of this distinction in academic practice. As Ozanne rightly points out himself (2016: 42), heterodox economics – in particular Marxian economics – has always been built on power as control over material things, whether consumption goods or means of production. Since the scholars who influenced such approaches have usually been based in more than one social science – Marx himself is seen as one of the most influential writers of not just economics, but philosophy, sociology, and politics – it is not clear where ‘the sociologists’ reject wealth as a pivotal form of power. In fact, seeing this kind of economic power as central to any comprehensive account of power is something a lot of sociologists seem to have in common (ibid.).

I want to look more closely at two theories of power that are brought up but dismissed in the literature review of the book. Firstly, there is Steven Lukes, who defined three dimensions of power: decision-making, agenda setting, and preferences influencing. Ozanne claims that Lukes’ ‘agenda setting’ dimension “applies mainly to organisations and committee meetings” (2016: 43) and hence is not of much interest to economists. This is an interesting starting point for debate – how much power over economic outcomes do those who set the political agenda really have? Essentially, this can be seen as the power of lobbying groups like trade associations, unions, or protesters. Many would argue that their influence on the final distribution of goods is even higher than the influence the demos exercises through elections.

Secondly, Ozanne claims that Daron Acemoglu and James Robinson (known, in particular, for a theory on institutions as a determinant of economic growth) make an effort to include power into their models but do not manage to define it (Ozanne 2016: 36). Acemoglu et al. (2005: 390 ff.) classify two kinds of power, which play nicely into Lukes’ dimensions. On the one hand, they outline de jure political power, which is derived from political institutions; political institutions such as a constitution assign power to ‘the demos’ in a democracy, whereas institutions remove restrictions on a dictator’s power in a dictatorship. On the other hand, they introduce de facto political power, which stems not from a legally assigned role but from the resources available to someone. One could, for instance, exercise political influence by using weapons or by funding protests and campaigns. This distinction is a highly relevant one for the field of political economy as it provides a simple framework for the analysis of power and sees power itself as endogenous. Political power, then, shapes economic and political institutions.

Ozanne’s book finally addresses an issue that mainstream economics has been ignoring, in a way that neoclassical economists can agree with. This has not just the potential to make economics more diverse – it also, perhaps more importantly, has the potential to make mainstream economics better. As argued, even this approach could still do with more courage to look into power theories from other social sciences and some fields within economics – a decentralised approach to power, or even an approach based on disciplinary power like the one Foucault brought forward, could help in answering the question of how distributions of goods and utility come about.


Acemoglu, D., Johnson, S. & Robinson, J. (2005). “Institutions as a fundamental cause of long-run growth”, in P. Aghion & S. Durlauf (eds.) Handbook of Economic Growth Volume 1A. Amsterdam: Elsevier.

Coyle, D. (2016). “Power and economics”, The Enlightened Economist. Available at: http://www.enlightenmenteconomics.com/blog/index.php/2016/04/power-and-economics/, (Accessed: 2 April 2019).

Diversifying Economics Network. Available at: https://diversifyeconomics.wixsite.com/home, (Accessed: 2 April 2019).

Ozanne, A. (2016). Power and Neoclassical Economics: A Return to Political Economy in the Teaching of Economics. Basingstoke: Palgrave Macmillan.

Post-Crash Economics Society. Available at: http://www.post-crasheconomics.com/, (Accessed: 2 April 2019).