Daniel Little has a nice summary and analysis of a book written in the 50s (which I had never heard of) called The Power Elite, by C. Wright Mills.
The central idea is that the United States democracy — in spite of the reality of political parties, separation of powers, contested elections, and elected representation — actually embodied a hidden system of power and influence that negated many of these democratic ideals.
However, Little notes the lack of empiricism in Wright’s contribution, both in terms of description and mechanism. Regarding the latter, Little writes, that there is “relatively little analysis of the social mechanisms that reproduce this social order.”
Perhaps economics can both contribute to and benefit from an analysis of these mechanisms. Regarding the contribution part, Little writes,
But even more compelling would be a study that doesn’t exist yet — a social network map that represents something like the whole population of a community, linking individuals to the institutions in which they occupy a position of power. The vast majority of the population would exist in single points at the bottom of the map; most people don’t have a position of power at all. But, if Mills is right, there will be a small subset of people who are interconnected through many relationships to institutional sources of power…
I’ve heard a lot in the wake of the financial crisis about the concept of network mapping, and I’m also momentarily inspired by the work of Saez and Piketty, which uses a wealth of statistical analysis tools to show, in a fine-toothed manner, distributions of income. The only problem, and this is something that Little observes, is that power, and not money, is ultimately what we are interested in. Community organizing 101, as I learned it from the IAF handbook, is about organized money and organized people. I’m not sure you go about quantifying the behind-the-scenes relationships that define power, or if you would even want economists to bring their inevitably utility-dominated tools to bear.
More important, in my opinion, is what economics can gain from such an analysis (and by no means do I fancy this thought to be original). A recognition of power structures will change not only how one thinks about democracy, but also how one thinks about the economy. Market power, regulatory capture, and other issues abound from a veritable Pandora’s Box once we think in these terms. Social policy, especially with regards to our views on income taxes, estate taxes, public education, social safety nets, et al. would certainly change if we came to the conclusion that Wright’s hypothesis about reproduction is correct, and so as Little writes,
at a given time there is a small subset of the population who occupy most of the positions of power; and the probability is great that the sons and daughters of this group will occupy similar positions of power in the next generation. And in fact, it is perfectly visible in our society that the likelihood of occupying a position of power in one generation is highly influenced by the power status of the antecedent generation.
Open Economics 