New Horizons in Institutional and Evolutionary Economics series
Chapter 1: Three Types of Power
The ordinary healthy high-schooled graduate, of slightly below average intelligence, has to work fairly hard to produce more than 3000 $ or 4000 $ of value per year; but he could destroy a hundred times that much if he set his mind to it according to the writer’s hasty calculations. Given an institutional arrangement in which he could generously abstain from destruction in return for a mere fraction of the value that he might have destroyed, the boy clearly has a calling as an extortionist rather than as a mechanic or clerk. (Schelling 1963, p. 141) INTRODUCTION There is an important economic fact that tends to be ignored in the conventional economics of production and exchange, namely, the enormous potential for destruction that is available in the face of extortionate threats. Schelling’s example alludes to this great potential. Economic science has extensively studied the creative power of individuals or social groups, but it has largely ignored the destructive power of economic agents. Borrowing Schelling’s example, the creative power of an ordinary healthy high-school graduate does not amount to more than $4000. This creative or economic power measures his capacity to produce or to exchange. However, as an extortionist, he can destroy a hundred times more. The extortionate threat can be used by a criminal, a brigand or a revolutionary. Whatever the extortionist’s personality, he uses a destructive power, namely, the power to destroy use values or exchange values. If our highschool graduate is unemployed, then his creative value or the value of...
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