What Metric Determines Market Power?

[John Creighto]

There is a theory that money is power and people or corporations that control large amounts of wealth yield more influence. However, how do we measure this power. When companies are ranked based on such things as market capitalization, revenue, assets, the rankings very greatly depending on the criteria used. For instances banks tend to have large amounts of assets but because they are highly leveraged they may not be valued the great as some non finical institutions by the market. Still the fact that they own a lot could mean that they wield significant power even if they aren't the most profitable companies. Based on the above ways we can rank a company what metric would best determine market power?

 

[imiyakawa]

Define "market power".

 

[John Creighto]

Define "market power".

That's a good point. The simplest form of market power as most commonly discussed in economics is that ability to control prices. However, in "Power Economics" as coined by JON HANSON† & DAVID YOSIFON††, the power extends to being able to influence, culture politics, academics and other beliefs, values and desires of the time.

The problem with this claim is it is difficult to measure and test as power is often elusive:

Perhaps that is what political scientists Herbert Kaufman and Victor
Jones were driving at when they wrote:

There is an elusiveness about power that endows it with an almost
ghostly quality. It seems to be all around us, yet this is “sensed” with
some sixth means of perception rather than with the five ordinary
senses. We “know” what it is, yet we encounter endless difficulties in
trying to define it. We can “tell” whether one person or group is more
powerful than another, yet we cannot measure power. It is as abstract
as time yet as real as a firing squad.244

This is an insight of critical realism. As the quotation indicates, it
is hard to think of anything more “real” than power. And, yet,
despite its undeniable existence, the mechanisms of power are often
hidden, ghostlike, in the setting. Hidden there, they tend to be
disregarded, literally overlooked.

http://www.pennumbra.com/issues/pdfs/152-1/HansonYosifon.pdf

There are various types of ways companies exert influence. They are marketing, lobbying, advertising, creating a corporate culture, funding scholarships, giving research grants. Additionally ownership creates the potential for power and control. We could consider social networks of corporate ownership and measure the direct and indirect ownership companies have though networks. There are various types of ownership, common shares, corporate shares, preferred shares, debt. There is also buying preferences. Some assets are intangible like "good will" and sense of authority. Additionally corporations aren't the only players, there are also governments, bureaucrats, regulators and special interest groups. Finally their is the question of weather people are exerting their influence or simply reacting to the influence of others.

With regards to ownership, for a given capatilization the companies which own the most are indebted to the most (high leverage). However, ownership is often considered one of the greatest measures of corporate power:

""The Growing Concentration of Economic Power. Statistics of the Bureau of Internal Revenue reveal the following amazing figures for 1935: "Ownership of corporate assets: Of all corporations reporting from every part of the Nation, one-tenth of 1 percent of them owned 52 percent of the assets of all of them."[60][62]""
http://en.wikipedia.org/wiki/Corporatism#U.S._corporatism

 

[Skrambles]

" A GREAT country is like the lowland toward which all
streams flow. It is the Reservoir of all under heaven,
the Feminine of the world.

The Feminine always conquers the Masculine by her
quietness, by lowering herself through her quietness.

Hence, if a great country can lower itself before a
small country, it will win over the small country; and if a
small country can lower itself before a great country, it
will win over the great country. The one wins by
stooping; the other, by remaining low.

What a great country wants is simply to embrace
more people; and what a small country wants is simply
to come to serve its patron. Thus, each gets what it
wants. But it behooves a great country to lower itself."

- Lao Tzu

I don't know if any of that helps, but this thread reminded me so much of this poem from the Tao Teh Ching that I couldn't resist. Power isn't entirely about pushing things the way you want. Companies may push the market, but they are also pulled by it. The same goes for consumers. Instead of any absolute measure of power, it may be better to define it relative to the market at that point in time.

 

[John Creighto]

" A GREAT country is like the lowland toward which all
streams flow. It is the Reservoir of all under heaven,
the Feminine of the world.

The Feminine always conquers the Masculine by her
quietness, by lowering herself through her quietness.

Hence, if a great country can lower itself before a
small country, it will win over the small country; and if a
small country can lower itself before a great country, it
will win over the great country. The one wins by
stooping; the other, by remaining low.

What a great country wants is simply to embrace
more people; and what a small country wants is simply
to come to serve its patron. Thus, each gets what it
wants. But it behooves a great country to lower itself."

- Lao Tzu

I don't know if any of that helps, but this thread reminded me so much of this poem from the Tao Teh Ching that I couldn't resist.

Sounds like a justification for imperialism. There is always a considerable amount of people devoting effort to justifying the system of the time. Rationlization is human nature. Butchart Russell wrote a book implying that a large part of phillsophy was devoted to justifying god.

the idea of justification though reason was also discussed in brave new world.

"You might as well ask if it’s natural to do up one’s trousers with zippers,” said the Controller sarcastically. “You remind me of another of those old fellows called Bradley. He defined philosophy as the finding of bad reason for what one believes by instinct. As if one believed anything by instinct! One believes things because one has been conditioned to believe them. Finding bad reasons for what one believes for other bad reasons–that’s philosophy. People believe in God because they’ve been conditioned to."

-- Brave New World

The is always a large interest devoted to defending the system.

"At the same time that blacks were perceived as inferior to whites in reason, they were seen as dispositionally superior to whites in doing the sort of work that the slaveholders needed. As Jefferson noted, they seemed to forget their afflictions, required less sleep, and were more resistant to heat. Therefore, they were well-suited as forced laborers."
http://johns243acreighton.amplify.com/2010/07/18/jeffersons-dispositional-characterization-of-african-americans/"

"‎”As we have hinted throughout this Article and as we will
describe in more detail in other work,685 there is considerable and
growing social psychological research indicating that the presence of a
threat to existing systems activates in us a general motive to justify or
legitimate the system, as is.686 That research further reveals that one of the most effective means of legitimating the system is to dispositionalize those groups that might otherwise be seen as unjustly victimized. By increasing fears that the system was at risk, and that any change to the system would be calamitous, the defenders of slavery were, consciously or not, acting to reinforce the system and the dispositionism of slaves on which the system relied. And they were likely having that effect on all groups, regardless of their relationship with the system of slavery, including those who were in fact being
harmed. “"
"[URL
Hanson&Yousifon[/URL]

Power isn't entirely about pushing things the way you want. Companies may push the market, but they are also pulled by it.

I think there is perhaps a concept of movement with minimal force. It is important to understand the beliefs and motivations of the market so these characteristics of the market/society can be used to move it in a beatifically way for the position of the company or group which is trying to move it. To the extent the participants in society will succeed in moving the market will depend both on their power and what they have to gain from it. It is often not the people who have the most apparent power whare are the most active in influence change.

"One of the mostsignificant developments that emerged from this dismal perspective on regulation was a set of insights regarding the sources of political influence—or, as we would put it, power. As Stigler recounts,"economists could explain, for example:

'[W]hy smaller groups do better than large in the political arena. [First, t]he smaller group is more cohesive: It is easier to organize the small group, collect funds for lobbying, and keep it informed. There are only about 70,000 beekeepers concentrated in a few western states (yes, there is a federal program for them) but millions of occasional consumers of honey. And secondly, it pays each member of a small group to invest resources in politics, because the payoff will be larger. Each beekeeper gets hundreds of times as much out of the federal program as each taxpayer loses.280'""[URL
Hanson&Yousifon[/URL]

The same goes for consumers. Instead of any absolute measure of power, it may be better to define it relative to the market at that point in time.

Perhaps. There seems to be a lot of variables, The cost of the action, the reward, the total resources of the group, and The resistance to the action. Of course this get's a way from my original question as to which resources are most important as tools to wield power.

 

[vici10]

There is a theory that money is power and people or corporations that control large amounts of wealth yield more influence. However, how do we measure this power. When companies are ranked based on such things as market capitalization, revenue, assets, the rankings very greatly depending on the criteria used. For instances banks tend to have large amounts of assets but because they are highly leveraged they may not be valued the great as some non finical institutions by the market. Still the fact that they own a lot could mean that they wield significant power even if they aren't the most profitable companies. Based on the above ways we can rank a company what metric would best determine market power?

I would recommend you to read a book "Capital as Power" by Bichler and Nitzan http://bnarchives.yorku.ca/259/" . It is not really about Israel, but about US, israel is used as an example.