Economics for the Curious

Who Really Runs the Economy?

Wealth, market power, and who makes the rules

Figures current as of November 6, 2026

14 min read

Start Here: One Question, Three Claims

A student once asked: “Do a handful of billionaires control everything? How can we call it a free market if a few people run it?”

It’s a fair question, and it’s easy to see why it feels true. Headlines report record fortunes. A few famous companies seem to be everywhere. A plant closing that changes a whole town can be decided in an office hundreds of miles away. This reading takes the question seriously by pulling it apart.

Define It: Wealth, Power, and Freedom

1 Wealth is not the same as power

Having a lot of money is not the same as controlling what other people do. Economists separate two kinds of power. Market power is the ability to raise prices (or hold down wages) without losing your customers (or your workers). A firm with market power can charge more than it could if rivals were close by. Political power is the ability to shape the rules everyone else must follow. A billionaire may have a great deal of one, both, or surprisingly little of either.

2 What “free” means in a free market

“Free” in “free market” means free to enter, free to exchange, and free to walk away. It does not mean free of rich people or free of big firms. A market is free when buyers can choose among sellers, sellers can choose among buyers, and newcomers can try to do better. The readings “Where Do Prices Come From?” and “Who Should Decide?” explain why those freedoms matter for prices and for decisions.

3 From competition to monopoly

Textbooks often sort industries into four boxes: perfect competition, monopolistic competition, oligopoly, and monopoly. Page One Economics, from the St. Louis Fed, suggests a better picture: “market structures could be thought of as a continuum from pure monopoly to perfect competition.” Its example is the airline industry. Between 2005 and 2015, mergers cut the number of major U.S. airlines from nine to four, and those four controlled 80 percent of the market. Yet the growth of low-cost flights, the article argues, “has pushed the airline industry, which was arguably an oligopoly, toward monopolistic competition.”

The lesson: a market with only a few big firms is concentrated, but concentration is not the same as market power. What matters is whether customers have real choices and whether rivals can get in.

Measure It: Who Is on Top, and for How Long?

4 Wealth concentration: the true part

The richest 0.1 percent of U.S. households held 15.0 percent of all household net worth in the second quarter of 2026, according to the Federal Reserve’s Distributional Financial Accounts. In 1989, when the series begins, they held 8.6 percent. Wealth at the very top is more concentrated than it was a generation ago. The reading “How Unequal Is America?” looks at income, wealth, and mobility in more detail.

5 Do the same people stay on top?

A snapshot of who is rich today doesn’t show whether the same families stay rich. For that, researchers follow the Forbes 400 list of the richest Americans over time.

Measure It: Who Is on Top, and for How Long?: Forbes 400 members who…
Forbes 400 members who…19822011
Were the first in their family to run their business40%69%
Grew up wealthy60%32%

Steven Kaplan and Joshua Rauh, writing in the Journal of Economic Perspectives, found that the top of the list shifted from inherited fortunes toward people who built their own businesses. Robert Arnott, William Bernstein, and Lillian Wu, writing in the Cato Journal, push the argument further: “only 34 names on the inaugural 1982 list remain on the 2014 list,” and by their count 61 percent of the wealth on the 2014 list was “new wealth.”

Philipp Korom, Mark Lutter, and Jens Beckert of the Max Planck Institute for the Study of Societies agree that self-made entrepreneurs became more common at the top. But they add an important twist. Heirs of great fortunes “are more likely to remain listed in the Forbes 400 roster than self-made entrepreneurs.” Family fortunes last, they argue, because rich families keep control of companies and can pay for sophisticated financial advice. New fortunes are easier to make than they used to be, and old fortunes are hard to lose.

6 Do the same firms stay on top?

Companies turn over too. Mark Perry of the American Enterprise Institute compared the first Fortune 500 list of the largest U.S. companies, from 1955, with the 2019 list. He counted “only 52 companies that appear in both lists.” Most of the giants of 1955 merged, shrank, or disappeared. Economists call this creative destruction: new products and firms replace old ones. Kodak and Polaroid once dominated photography. Then digital cameras and phones made film obsolete, and customers moved on.

WATCH Creative Destruction: Technology and Trade (Marginal Revolution University)

7 Markups: the debated part

A markup is how far a firm’s price sits above the cost of producing one more unit. If markups are rising across the economy, firms may be gaining market power. Economists disagree about whether that is happening.

  • The rising-power view. Jan De Loecker, Jan Eeckhout, and Gabriel Unger estimate that average markups rose from 21 percent above cost in 1980 to 61 percent. They note that the rise comes mainly from firms at the top. “Quite strikingly, the median is unchanged.” Thomas Philippon of New York University argues in The Great Reversal that U.S. markets have become less competitive. “By lobbying against competition,” he writes, “the biggest firms drive profits higher while depressing wages and limiting opportunities for investment, innovation, and growth.”
  • The skeptical view. Nicholas Trachter and Lindsay Li of the Richmond Fed describe “a paradoxical finding”: national concentration is rising while local concentration is falling. When a big chain opens in a new town, local concentration falls and stays lower for at least seven years. That may be “infusing more competition, not less,” into local markets. Lanier Benkard, Nathan Miller, and Ali Yurukoglu reexamined the markup data and found an increase only half as large as the original estimate. Christopher Conlon and coauthors found “little to no relationship” between rising markups and rising prices. Federal Reserve economists Brian Albrecht and Ryan Decker conclude that rising markups “are not a major explanatory factor” behind the slowdown in new business activity.

Both sides agree on some things. The economy as a whole is not run by a few firms, and some particular industries deserve a closer look. Disagreement centers on how widespread the problem is and what causes it.

8 Can newcomers still get in?

Most firms are small. The Small Business Administration’s Office of Advocacy counts 36.2 million small businesses. They make up 99.9 percent of all firms, employ 45.9 percent of private-sector workers, and accounted for 61 percent of net new jobs from 1995 to 2024. Americans keep starting businesses. In September 2026, they filed 534,947 applications to start new businesses, according to the Census Bureau.

There is an honest caveat. The share of employer firms that are brand new, called the startup rate, fell from 13.7 percent in 1978 to 8.4 percent in 2020, according to the Richmond Fed. The share of firms that grow fast also fell, from 18 percent in 1985 to 12 percent in 2015, Federal Reserve and Census researchers found. Part of the decline may simply reflect demographics. Fatih Karahan, Benjamin Pugsley, and Ayşegül Şahin find that slower growth in the labor force explains “roughly two-thirds of the decline” in the startup rate. Fewer new workers means fewer new firms.

Do we need more founders? The science writer Matt Ridley argues that we do. Founders with “skin in the game,” he writes, “drive change, disrupt monopoly, challenge stagnation and make the future happen,” and most “get rich by improving the lives of their customers.” He believes an economy that rewards founders over hired managers would grow faster and solve more problems. He also points out that the line between “employers” and “working people” is blurry, because many owners began as employees.

The evidence adds a qualification: it matters which founders, not just how many. John Haltiwanger, Ron Jarmin, and Javier Miranda found that “once we control for firm age there is no systematic relationship between firm size and growth.” Young firms drive job creation, with an “up or out” pattern: most fail or stay small, and a few grow fast. Erik Hurst and Benjamin Pugsley found that “most small businesses have little desire to grow big or to innovate.” Many owners value being their own boss more than growing big. And if two-thirds of the startup decline is demographic, stronger rewards for founders may not reverse it on their own.

Explain It: What Limits Power, and What Protects It

9 Why markets limit power

In a market, high profits are a signal. They tell rivals that customers want more of something, and rivals move in to compete. Losses tell firms that customers have moved on. The reading “Why Do Profits and Losses Matter?” explains how this works. A firm that gets big by serving customers well stays big only as long as it keeps serving them. When it stops, customers can leave and rivals can enter. That is why the giants of 1955 are mostly gone.

WATCH The Balance of Industries and Creative Destruction (Marginal Revolution University)

10 Where power lasts: through the rules

Market power is hardest to compete away when the law blocks rivals. Federal Reserve Education lists three common sources of monopoly. The first is the government itself, when it grants a patent, copyright, or license that blocks other businesses from entering a market. Some barriers protect inventors or public safety. Others mainly protect firms already in the market.

Adam Smith saw this in 1776:

Smith worried less about businesspeople meeting than about the law helping them shut out competitors. Today, much of that effort happens through lobbying. Spending on federal lobbying reached $5.08 billion in 2025, according to OpenSecrets.

Smith saw the same tilt in the market for labor. Employers, he wrote, “being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen.” The advantage he described came from numbers, the law, and savings that let employers wait out a dispute, not from greater talent. In the long run, he wrote, “the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate.” The reading “Why Do Some Jobs Pay More Than Others?” looks at bargaining power today.

Economists from different starting points reach similar conclusions here. Public choice economists study politicians and officials as people who respond to incentives, just like buyers and sellers. Mike Munger calls this “politics without romance.” Small groups with a lot at stake, such as firms already in an industry, have strong reasons to organize and lobby. The large groups who pay the cost, such as customers and would-be rivals, often don’t. From the center-left, Philippon blames lobbying and weak enforcement for less competition. The political theorist Glory Liu reads Smith himself as a thinker who worried about organized wealth bending the rules.

Those small groups are not always big corporations. Economists Owen Zidar and Eric Zwick find that owners of ordinary private businesses, such as doctors, dentists, car dealers, and beer distributors, carry outsized political weight. They live in nearly every congressional district, are far more likely than most Americans to hold office, and are especially active in statehouses and city halls, where many of the rules that govern their businesses are written.

11 Distant decisions

The same feeling drives much of the backlash against globalization: choices that reshape a town are made far away. The losses were real and concentrated in particular places. David Autor, David Dorn, and Gordon Hanson found that the harm from rising Chinese imports lasted. In the places most exposed to import competition, factory employment and overall employment stayed lower through 2019, and many people who lost work left the labor force rather than moving away.

But no single person made that decision. Millions of buyers chose cheaper goods, and millions of businesses responded. The research itself is now being debated. The economic historian Joseph Francis argues in Econ Journal Watch that once a 2022 correction to the research design is fully applied, the estimated job losses fall by about half and the findings on wages and living standards disappear. He discussed the critique on EconTalk in November 2026, and the original authors have been invited to reply. Treat this as a live dispute, not a settled verdict. The readings “Why Do We Trade?”, “Should We Bring Manufacturing Home?”, and “Who Pays for Tariffs?” cover trade in more detail.

Fair Challenges

Decide what you think of each challenge first, then open the response.

“A handful of billionaires control everything.”
Wealth at the top is concentrated, and more so than in 1989. But fortunes and firms turn over, most firms are small, and customers decide which firms grow. Where power does last, look at the rules: licenses, patents, and regulations that keep rivals out.
“Big chains kill Main Street.”
Some local stores do close when a big chain arrives. Richmond Fed research also finds that a chain’s arrival lowers local concentration for at least seven years, giving shoppers more choices. Both can be true at the same time.
“Big corporations shipped our jobs overseas.”
Trade losses were real and concentrated in particular places. How large they were is now disputed. And the shift came from millions of buyers choosing cheaper goods, not from one decision-maker.
“If you don’t like it, just start your own business.”
Entry is open in many industries, and Americans filed about half a million new business applications in September 2026 alone. But the startup rate has fallen since the 1970s, and some barriers, such as licensing and regulation, are real.

Economists also disagree among themselves. Three live debates:

  • Is U.S. competition declining? De Loecker, Eeckhout, and Unger find markups rising sharply, and Philippon argues that competition has weakened. Trachter and Li find local competition increasing, Benkard, Miller, and Yurukoglu find a markup rise about half as large, and Conlon and coauthors find little link between markups and prices.
  • Do great fortunes last? Kaplan and Rauh find the Forbes 400 increasingly self-made, and Arnott, Bernstein, and Wu argue that most top wealth is new. Korom, Lutter, and Beckert find that inherited fortunes are more likely than self-made ones to stay on the list.
  • How big was the China shock? Autor, Dorn, and Hanson find large, lasting losses in exposed places. Francis argues that corrected methods cut the job-loss estimate in half and erase the wage findings.

Notice what evidence can settle and what it can’t. How concentrated wealth is, whether markups are rising, and how long fortunes last are questions that data can address, even when studies disagree. How much concentration is acceptable, and whether great wealth is a reward for serving others or a threat to equal citizenship, are questions of values.

What Economics Adds

LISTEN Public Choice and Politics Without Romance (with Mike Munger) on EconTalk, hosted by Russ Roberts; and Is Everyone Getting Adam Smith Wrong? ft. Glory Liu on Capitalisn’t, hosted by Bethany McLean and Luigi Zingales

The Normative Question

Is bigness itself a problem, or only bad conduct? One view, voiced by Luigi Zingales and others, holds that size alone can threaten competition and democracy, because economic power can turn into political power. Another holds that size earned by serving customers is fine, and that the real problem is rules that protect firms already on top. Evidence can tell us about prices, wages, entry, and turnover. Deciding how much concentration a free society should accept is a judgment about values, and reasonable people weigh it differently.

Key Terms in Plain Words

Market power
The ability to raise prices (or hold down wages) without losing customers (or workers).
Political power
The ability to shape the rules that everyone else must follow.
Markup
How far a price sits above the cost of producing one more unit.
Market concentration
How much of a market’s sales go to its largest few firms.
Creative destruction
New products and firms replacing old ones.
Barrier to entry
Anything that makes it hard for new rivals to enter a market.
Government-granted monopoly
A monopoly created by a patent, copyright, or license.
Oligopoly
A market dominated by a few large sellers.
Startup rate
The share of employer firms in a given year that are brand new.
Lobbying
Spending to influence what lawmakers and regulators decide.
Public choice
The study of politics using the same tools economists use to study markets.
Net worth
What a household owns minus what it owes.

Sources