Bringing economics back into geoeconomics

Bringing economics back into geoeconomics is the argument, associated with Christopher Clayton, Matteo Maggiori, and Jesse Schreger, that geoeconomics should be grounded in formal economic analysis of how states convert economic structure into power, rather than treated as a branch of geopolitics that merely catalogues economic instruments. The programme supplies micro-foundations for claims that the weaponised-interdependence and statecraft literatures had established descriptively.

The argument

Geoeconomics as popularised by Blackwill and Harris is defined by its ends and means: the use of economic instruments to produce geopolitical results. That framing, Clayton, Maggiori, and Schreger contend, left the economics itself thin; the field was dominated by policy and security-studies writing that described leverage without modelling it. Their alternative builds formal models in which a hegemon's power derives from its position in financial and trade networks: because firms and states depend on the hegemon's currency, funding markets, and technologies, the credible threat of exclusion changes their behaviour, and the hegemon can harvest that dependence as geopolitical leverage. Power over private actors aggregates into power over the states that host them, which formalises the transmission channel the compliance cascade describes institutionally.

Significance

The formalisation matters for practice in three ways. It makes the welfare costs of coercion calculable, disciplining claims about whether a given campaign is worth its price. It identifies where leverage actually sits, in the structure of dependencies rather than in headline trade volumes, aligning with the mapping logic of the Economic Kill Chain. And it predicts endogenous erosion: actors who anticipate coercion invest in alternatives, so leverage is a depletable asset, the formal counterpart of the self-undermining arsenal critique. A further practical dividend is comparative statics: a model of leverage can say how power shifts as network structure changes, which descriptive accounts of fragmentation and decoupling cannot do with precision. That matters for assessment, where the field's chronic weakness is distinguishing what a campaign caused from what the system was doing anyway.

Contestation

The programme is a move in a live boundary dispute. Political scientists counter that formal models understate institutions, domestic politics, and the historically contingent construction of the networks being modelled; the critical literature goes further and questions the neutrality of modelling coercion as an optimisation problem. Economists sympathetic to the project debate how to represent power and security preferences inside welfare analysis at all. The encyclopedia's position is pragmatic: the formal turn and the political-economy tradition are treated as complementary lenses on the same terrain, the first supplying calculable structure and the second supplying the institutional and historical texture the models leave out. Where an entry's claims depend on one lens rather than the other, the dependence is stated, so the reader can weigh the claim by the method that produced it.

See also

Geo-economics (geoeconomic manoeuvre) · Economic statecraft · Weaponised interdependence · Chokepoint effect · Compliance cascade · Markets as the new frontline · Economic Kill Chain (EKC)

Sources

• Christopher Clayton, Matteo Maggiori and Jesse Schreger, "Putting Economics Back Into Geoeconomics", NBER Working Paper 33681 (April 2025; accessed 30 July 2026).
• Christopher Clayton, Matteo Maggiori and Jesse Schreger, "Putting Economics Back into Geoeconomics", NBER Macroeconomics Annual 2025 40, chapter 2 (published May 2026; accessed 30 July 2026).
• Robert D. Blackwill and Jennifer M. Harris, *War by Other Means: Geoeconomics and Statecraft* (Harvard University Press, 2016).
• Henry Farrell and Abraham L. Newman, "Weaponized Interdependence", International Security 44, no. 1 (2019).