With Great Power Comes Great Fear

With Great Power Comes Great Fear
Fix, Blair. (2021). Economics from the Top Down. 30 August. (Article - Magazine; English).

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https://economicsfromthetopdown.com/2021/08/30/with-great-power-comes-great-fear/, https://rwer.wordpress.com/2021/09/04/weekend-read-with-great-power-comes-great-fear/

Abstract or Brief Description

Here are three stories about how the stock market works. The first story says that the stock market reflects the productivity of the underlying economy. When stocks go up, the thinking goes, everyone should celebrate because the tide of productivity is rising. This is the story that neoclassical economists believe. The second story is that the stock market is actually disconnected from the ‘real’ economy, fluctuating in ways that have nothing to do with actual productivity. Stock prices represent ‘fictitious capital’. This is the story Marxists believe. The third story is that stock prices are neither about productivity nor are they ‘fictitious’. They are about power. This is the hypothesis proposed by Jonathan Nitzan and Shimshon Bichler. The basic idea is that what capitalists really care about is not productivity. They care about income. Capitalists look at their income and then, through the ritual of capitalization, turn it into a lump sum — the capitalized value.


If great (capitalist) power does bring great fear, the systemic fear index ought to rise and fall with the power index — Bichler and Nitzan’s measure of capitalist power. Looking at the United States, Bichler and Nitzan find that this is exactly what has happened.


Impressed by Bichler and Nitzan’s findings, political economists Joseph Baines and Sandy Hager wanted to know if the results generalized beyond the United States. They assembled data to calculate both the power index and the index of systemic fear in France, Germany, Great Britain and Japan. Their results poured cold water on the concept of ‘systemic fear’.


Intrigued by Baines and Hager’s results, James McMahon (who cut his empirical teeth researching Hollywood) recently took another look at the idea of ‘systemic fear’. He was able to assemble a dataset that was both wider in scope (including 12 countries) and had greater historical depth than anything used before. With this more expansive dataset, McMahon subjected the idea of systemic fear to a bevy of tests.



Publication Type

Article - Magazine

Commentary on

Reconsidering Systemic Fear and the Stock Market: A Reply to Baines and Hager
McMahon, James. (2021). Review of Capital as Power. Vol. 2. No. 1. August. pp. 30-70. (Article - Journal; English).


capitalized power stock market systemic fear


BN International & Global
BN Money & Finance
BN Value & Price
BN Business Enterprise
BN Capital & Accumulation
BN Comparative
BN Conflict & Violence
BN Distribution

Depositing User

Jonathan Nitzan

Date Deposited

09 Sep 2021 22:39

Last Modified

09 Sep 2021 22:39



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