Management & Control of Economic Power

Business Directory defines economic power as “Conditions of having sufficient productive resources at command that give the capacity to make and enforce economic decisions, such as allocation of resources and apportioning of goods and services.” This qualitative definition may be sufficient for general discussions, but it doesn’t offer any quantitative measurements for management and control. Is there a way to measure economic power for analysis and synthesis of economic systems in this 21st century? This chapter presents a new theory on quantitative measurement of economic power based on a set of terms from the field of electrical engineering, used in the measurement and control of electrical power systems. Circuit theory concepts are used to show how the relationship between cash and cash flow in finance is analogous to that of electric charge and electric current and how education level, as economic potential, is analogous to electrical potential that causes current to flow in a circuit. An individual is identified as the basic cash flow source in the economy. Circuit models for an individual as well as a typical production facility are developed and demonstrated with couple of examples. Equations for the measurement of economic power, losses, efficiency and power factor are presented. It is shown that the individuals are the basic cash flow sources and producers of economic power. Electrical circuit concepts are summarized in Appendix A. How investments can be made to maximize economic power of firms is presented in Appendix B.