Modern economics lacks a theory of power. Various subfields acknowledge power’s existence, but these remain disparate approaches without a unifying framework. When economists do measure power, they reach for markups: a firm’s ability to price above marginal cost. This captures something about monopolistic pricing. It captures nothing about power itself.

Economics may be forgiven this theoretical gap. Weber recognized that power is inherently amorphous, that no unified foundation exists from which all power derives. Power flows from heterogeneous sources: information asymmetries, social advantage, economic superiority, organizational capacity. This heterogeneity explains why economics has developed no general theory, treating power instead as domain-specific phenomena scattered across different subfields.

Bargaining theory comes closest to a general approach by formalizing power as superior outside options. Yet even these models take the game structure as given. They model strategic choice within predetermined opportunity sets but cannot address how those opportunity sets came to exist, why certain options appear on the menu while others do not, how the rules constraining strategic interaction were themselves chosen. The mathematics work perfectly for optimization within structures. They remain silent about the power to create structures.

This blindness has a mirror image in International Relations, the discipline studying interactions between states in the global system. The Realist school, dominant from the 1940s onward, emerged from the wreckage of two world wars and the failure of liberal internationalism. Morgenthau’s classical formulation in the late 1940s and Waltz’s structural neorealism in 1979 shared a core conviction: international politics is about power and survival in an anarchic system without overarching authority. This theoretical lens made military capabilities central, the ultima ratio that determined outcomes when cooperation failed. Economic interdependence, by contrast, appeared as “low politics”: important for welfare perhaps, but theoretically secondary to “high politics” of security and survival. The implicit assumption was clear: when push comes to shove, tanks matter more than trade flows.

As Zürn (1994) demonstrates, even sympathetic critics within IR theory recognized this “blindness of traditional realism regarding economic factors.” The failure to theorize how economic structures themselves could become instruments of coercion, how interdependence created asymmetric vulnerabilities exploitable for strategic ends, left a conceptual void. Newer variants in the 1980s and 1990s attempted integration, acknowledging that foreign economic policy was indeed power politics. But the insight remained confined to IR theory. Economists themselves took little notice.

The result is a theoretical gap visible on both sides. IR theory grasps power politics but struggles with economic complexity. Mainstream economics masters efficiency but does not theorize power. From a geoeconomic perspective, this mutual blindness seemed tolerable during the neoliberal order. American hegemony made power one-sided enough that economists could rationalize focusing purely on efficiency. That comfortable assumption has ended. We find ourselves in an interregnum, that unstable period when established arrangements lose authority but no new settlement has crystallized. The global economy is discovering something more complex than deglobalization: states are learning to weaponize the very interdependence that liberalism celebrated. What economists treated as neutral territory now looks like terrain for strategic competition.

Geoeconomics emerges at this disciplinary intersection. It reconquers this conceptual territory by synthesizing insights both disciplines developed in isolation: IR’s analysis of power with economics’ understanding of interdependence. For economists this suggests a look to political theory, which investigated power more deeply.

The dimensions of power: from Weber to Gramsci

Weber defined power as the probability that an actor can carry out their will despite resistance. For geoeconomics, this probabilistic framing matters: power exists even when unused, residing in the credible capacity to impose costs. Weber further distinguished between Macht, a raw coercive potential, and Herrschaft, legitimate authority that subordinates accept as binding. Sustainable economic dominance rarely depends on actualizing threats. It succeeds by structuring the playing field so that compliance becomes each actor’s rational strategy, where established hierarchies appear not as impositions but as the efficient organization of global production.

In “The Concept of Power” (1959) Dahl translated Weber’s probability into observable behavior: A has power over B when A can get B to do what B would not otherwise do. This deterministic formulation, focused on observable outcomes rather than latent capacity, made power measurable but only through visible confrontation. Yet as Lukes demonstrated with “Power: A Radical View” (1974), focusing on manifest conflict missed how power shapes action before conflict ever arises.

Lukes identified three dimensions, each deeper than the last. The first encompasses visible coercion: sanctions, threats, retaliation. Most economic models, when they acknowledge power at all, restrict themselves to this dimension, modeling it as constraint while avoiding the term itself. The second dimension controls agendas rather than outcomes, not through explicit veto but by determining what counts as viable policy, which alternatives merit consideration, which dependencies appear reversible. When certain economic arrangements never reach negotiation, when alternative architectures remain unimaginable, power has already won.

The third dimension resonates with what Gramsci, writing from Mussolini’s prisons, called hegemony. Here dominant powers shape not just choices but the preferences that guide them. When subordinate nations genuinely believe that asymmetric arrangements serve their interests, when they internalize the logic of the dominant order as economic rationality itself, domination no longer requires force. Gramsci understood that capitalism’s deepest power lay in making historically specific arrangements appear as natural law.

The discipline’s dominant frameworks engage only the first dimension, and reluctantly at that. Economics possesses no apparatus for analyzing how global structures predetermine which policies governments consider, much less how decades of integration shape what prosperity itself means to different societies. These analytical gaps are not oversights. The second and third dimensions resist the clean formalization that economists prefer. Yet for geoeconomics, where power flows through the architecture of interdependence itself, these invisible dimensions matter most.

Hirschman’s analysis: the political economy of asymmetric dependence

Albert Hirschman’s “National Power and the Structure of Foreign Trade” placed the problem of economic coercion in intellectual history. Writing in the shadow of Nazi Germany’s economic subjugation of Central Europe, Hirschman traced a tension back to the origins of modern commerce: mercantilists viewed trade as zero-sum competition for state power, while liberals from Smith onward promised that commerce would pacify nations through mutual benefit.

Hirschman found both positions inadequate to explain what he had witnessed. The mercantilists were wrong in their prescription. Germany had not pursued autarky but had instead intensified trade relationships with its smaller neighbors. The liberals proved wrong in their prediction. Commerce had not softened nations or prevented aggression. Germany discovered something neither school anticipated: the very networks of mutual benefit that Smith celebrated could be transformed into instruments of domination. Trade that began by enriching both partners had evolved into relationships where exit costs had grown so asymmetric that the weaker party could no longer afford to leave.

This insight from 1945 has acquired renewed urgency. Today’s great powers are discovering what Nazi Germany demonstrated: interdependence itself can be weaponized without abandoning trade. We are not witnessing mercantilism’s return but something Hirschman would recognize immediately. States are learning to exploit the asymmetric vulnerabilities that deep economic integration creates. Trade continues and even intensifies, but, from the west’s perspective, its political meaning shifts from pacification to coercion.

Hirschman’s analysis is elegantly simple: power in economic relationships flows from asymmetric costs of exit. The actor who can terminate the relationship more easily dominates the partner who cannot, regardless of who captures greater gains while the relationship continues. This is not about bargaining within relationships but about the structural conditions that make exit feasible for some and catastrophic for others.

Three features create these asymmetries. Size generates the most obvious: when trade represents sixty percent of one economy but two percent of another, termination means disaster for the smaller partner and inconvenience for the larger. Specialization compounds vulnerability. When economies restructure production around particular export markets, when they accumulate sector-specific capital and expertise, when entire regions depend on foreign demand, the investments cannot be redeployed if markets close. Substitutability determines whether alternatives exist not in abstract theory but in costly practice. Technical specifications, regulatory harmonization, quality standards all impose switching costs that can make nominal alternatives prohibitively expensive.

Dollar hegemony as test case

Dollar hegemony exemplifies all three dimensions of power, ascending from visible coercion through structural control to hegemonic naturalization.

The first dimension appears when the architecture becomes weapon or lifeline. American exclusion of Iran or Russia from dollar clearing devastates their economies. Conversely, the recent US intervention buying Argentine pesos against dollars stabilized a collapsing currency. Both are Lukes’ first dimension in action: observable power through direct material effect, whether harm or rescue.

Yet this coercive capacity depends entirely on the second dimension: agenda control through infrastructure. Why does Argentina need dollars at all? Not because America demands it, but because decades of financial architecture leave no alternative. Argentina’s sovereign debt is dollar-denominated. Its trade partners expect payment in dollars. When the peso collapses, Argentines convert savings to dollars because that’s where liquidity exists. The central bank needs dollar reserves because that’s what markets accept. Abandoning this dependence would require coordinating with trading partners to accept pesos, restructuring all dollar debt, creating peso liquidity that international markets trust, building clearing systems that bypass dollar infrastructure. These barriers weren’t erected by American threats. They accumulated through decades of rational decisions that made dollars the path of least resistance. Now alternatives never reach serious consideration because the existing architecture makes them appear prohibitively expensive. Power works by determining what counts as feasible policy. Argentina’s government cannot simply decide to “not use dollars.” The option has been structured out of existence.

The third dimension, what Gramsci called hegemony, lies deepest. This is power’s most complete form. It moves beyond the second dimension, where Argentina cannot feasibly exit the system even if it wants to, to a realm where a German exporter or a Saudi oil minister does not even want to exit. They have internalized the dollar’s utility as the natural and most rational state of affairs. With fifty-eight percent of global reserves and eighty-eight percent of foreign exchange transactions, the dollar’s dominance reflects no coercion at all. Countries choose dollars because dollar markets are deepest. They price commodities in dollars because everyone accepts dollars. They clear through dollar systems because the infrastructure already exists. Each rational decision reinforces the architecture that makes alternatives progressively more difficult to imagine. Weber’s Herrschaft could hardly be more complete: authority so naturalized it requires no threats. Dollar dominance appears not as American imposition but as economic rationality itself. This is Gramsci’s insight about how particular interests become universal common sense.

What remains to be done

The transformation before us is neither deglobalization nor mercantilism’s return. States are learning to conduct strategy through economic structures originally built for efficiency. Networks of interdependence persist but their political meaning shifts from cooperation to competition.

Understanding this requires confronting a double blindness that has put geoeconomics in the background. Realist IR theory understood power but treated economics as “low politics” secondary to military force. Even when critics like Zürn (1994) recognized this gap, their insights remained confined to IR circles. Mainstream economics commits the mirror error: mastering efficiency while remaining unable to theorize power itself. Where realists see power but miss economic complexity, economists optimize within structures but cannot analyze the power to create those structures. This disciplinary separation was tolerable under hegemonic stability. It becomes catastrophic when interdependence itself is weaponized. Geoeconomics emerges as necessary synthesis: power through markets, not against them.

Mohr and Trebesch (2025) reveal a discipline unprepared for the questions that now matter. How do we optimize when interdependence creates both gains and vulnerabilities? Why can some states impose sanctions effectively while others cannot? How do export controls, investment restrictions, and other coercive tools interact? We lack systematic measurement of geoeconomic rents and their extraction, better conceptualization of alliances and spheres of influence, and formal theory on how states weaponize economic architecture. The geopolitics of international finance remains particularly understudied. Most research focuses on trade while work on capital markets, currency dominance, and state-directed capital flows lags far behind. Even historical precedents offering natural experiments, the Cold War’s fragmented economy, the catastrophic inter-war decades, remain underexploited by economists.

Hirschman understood this watching Nazi Germany transform trade into domination. Gramsci grasped it from prison, theorizing how particular interests become universal common sense. Weber distinguished forcing compliance from making compliance optimal. Their insights, long excluded from economic analysis, now define the research frontier as the invisible power structures of the postwar order become visible through fragmentation and challenge.

Picture: Hans Holbein the Younger’s “The Ambassadors” (1533)