Tyler Cowen kicks off a discussion addressing this question:
- Does wealth equal power? (Marginal Revolution)
Spoiler warning: Not really. After providing some counterexamples, Tyler argues:
There are several reasons why wealth does not translate into power so easily. First, effective philanthropy is extremely difficult to achieve, especially if that philanthropy is trying to counteract prevailing social trends. Nor should it be assumed that non-profits are always the drivers of change. Second, the wealthy in groups do not always coordinate very effectively, to say the least. Each is used to being in charge (remember when the Lakers had Karl Malone and Gary Payton as well as Bryant and O’Neal?) Third, many of the very wealthy choose to consume ego rents rather than effectiveness. Fourth, “democracy” and “the market” control large chunks of modern life, and it is hard for outsiders to commandeer those processes. Most of the major functions of government are there because people want them to be there, for better or worse.
The sports analogy is underrated and awesome. Team sports are an arena where highly-paid elites aren’t just not forbidden from coordinating in order to stifle competition, but actually expected and encouraged to do so. The benefits of, say, the 2011 Philadelphia Eagles offense coordinating tightly with each other are obvious to everyone involved, and they still couldn’t manage to cooperate. And yet people who shrug their shoulders at obvious “superstar problems” like these often expect actual competitors in the business world to collude with each other — in a far more tenuous equilibrium (if they manage to achieve it), and at far greater risk — on a regular basis to “fix” the market.
Later, Tyler points out:
Wealth does protect you from the depredations of others, such as being treated very badly by the police or legal system. In this defensive sense wealth can give you a good deal of power.
Overall the quality of argumentation and evidence on this topic is extremely low.
As to that last point, things are improving on the margin. Here’s Karl Smith:
- Wealth and power (Modeled Behavior)
My observation is that people get the causation backwards here most of the time. People are not typically powerful because they are rich, they are rich because they are powerful.
Finally, here’s David Henderson:
- The benefits of wealth (EconLog)
Quoting an old argument with Arianna Huffington, he notes:
In the drug war, most of the people who go to prison for often very minor offenses are poor people because they can’t afford to defend themselves. And if you look, the children of politicians and the children–like Al Gore’s kids for example and Richard Shelby’s kids from Alabama, his son who was caught smuggling cocaine–they get very light sentences, they don’t even get sentences, they just get let off and other people go to prison for the rest of their life when they’re twenty years old for doing the same thing.
That might be a better argument for “power is defensive power” than for “wealth is defensive power”. His commenter Randy has another take:
I think its important to distinguish between political power and purchasing power. Having wealth certainly does give one purchasing power, but the exercise of that power doesn’t hurt anyone. The exercise of political power, on the other hand, nearly always hurts someone, as political power is obtained, maintained, and exercised by the confiscation of wealth and/or liberty.
It seems intuitively obvious that political power is purchasable, but as Tyler notes in the original post the evidence for this proposition is surprisingly poor. (Most people don’t bother looking for evidence and stick to their intuitions. This is a pretty good example of why I’m annoyed by fiction: there are a lot of compelling stories out there in which money really does buy power, which reinforce this intuition.)