The Wonderful World of Potternomics

'Welcome' said Hagrid, 'to Diagon Alley.'

Economic systems are fascinating. They come in all shapes and sizes, from classic liberal democracy to more notorious historical ne'er-do-wells such as communism, empire (mercantilism) and autarky. The world of fiction is also replete with them; think Star Wars, The Lord of the Rings, Prachett's Discworld or even simpler constructs such as The Borrowers. In numerous ways, depending on the preferences of the author, they can offer up a whole range of similarities or differences to our own economic experiences. In turn, these fictional 'case studies' offer a unique opportunity for us to explore the world of economics in new and interesting ways.

And what better place to compare and contrast fictional economic concepts than the wizarding world depicted in J.K Rowling’s Harry Potter series? Not only is it a modern childhood classic, but part of its charm as a story is that many aspects of both the protagonists’ personal lives and the realm they inhabit are directly comparable to our own, with enough unique differences to complete the fantasy effect in our imaginations.

Potternomics - The Basics 

I’m assuming anyone reading up to this point probably has a passing interest in the Harry Potter franchise, and a grasp of the at times convoluted but essentially simple plot. From this point on, then, we’ll start looking at the various different actors and institutions that populate the ‘Potterverse’ (a bit of fan-vocab, but useful), and hopefully uncover some interesting economics that we can compare to our own societies.

So what sort of things in the wizarding world could interest economists? Well, from pretty much the moment Harry walks through the wall (a magic wall, naturally) at the Leaky Cauldron, we are presented with a wonderful array of economic participants in Diagon Alley and beyond.

At the firm level, we have commercial enterprises (Ollivander’s wand shop, Flourish and Blotts’ bookshop), financial institutions (Gringotts), a central government (the Ministry of Magic) and an established education system (no need to reference here!). At the individual level, we have wizards, goblins and elves as the three main economic participants. The latter two are distinctly subordinate in status to wizards, with goblins fulfilling the ‘negative’ role of moneylenders at Gringotts, and elves as a type of servant underclass. Whilst it is clear that Rowling uses these social strata to discuss moral and ethical dimensions, and to encourage her readers to contemplate these subjects, the economic aspects of such stratification are also of interest. Why, for example, do the wizards feel the need to maintain such an economically discriminatory system?

In addition to economic participants and institutions, we also have a fascinating collection of economic items; commodity money in the form of gold Galleons (and their sub-units, the Sickle and Knut); magic itself as a productivity-enhancer akin to technology; a developed legal structure that has frightening inconsistencies, and much more. This is an intellectual dream for economists of all stripes, encompassing microeconomic theories of individual preferences to macro level institutional policies.

Diagon Alley and beyond...

Over the next four posts, I’ll be looking at a number of areas in the Potterverse that I think are of particular interest to economists in the real world today. We’ll assess the role of Gringotts as a financial institution, and the wizarding preference for commodity money over a paper equivalent. We’ll look at social stratification in the wizarding world, and assess why wealth differences still persist despite the universal provision of standardized education. Then we’ll turn to the role of institutions, and ponder their effectiveness in serving the wizarding population. Finally, we’ll conclude with a magical case study; ‘Voldemort – from orphanage to oligarch’. How did he make it, how did he gain support, how did he game the system and what lessons might there be in this tale for economic management in the real world today.

Who knows, if we learn a thing or two about our own societies in the process…well that may be what JK intended all along! So get your broomstick, and see you outside Gringotts!