Economics of the Wizarding World
- Simran Singh
- Aug 25, 2020
- 4 min read
Updated: Oct 15, 2020
It will be presumptuous on my part to deem all my readers as fantasy fanatics. However, being a fellow Potterhead - I ask of an observation battle with a bow as gracious as Buckbeak. Sure enough, once in a while we might have fantasized about living in the world of Harry Potter. It definitely has an opportunity cost we all have disregarded, assuming that the world is as real as Ron's rat. But a problem that exists despite the sheer contrast of the two worlds is scarcity. Owing to scarcity, the magic world adheres to the economic principles that may prevail. The question arises, how can scarcity exist in a world of magic?
It’s fairly simple, the use of certain spells is restricted and thus you can't get everything you want with the help of magic.[1] Even in the wizarding world, you need money to buy goods and services, even food is something that you can’t just summon out of thin air. The irony is that even magic won’t help you if you are poor. Everyone faces trade-offs. An instance of this can be seen when Harry realizes that he’s a Horcrux and sacrifices himself for the greater good; he measures the opportunity cost of killing himself which turns out to be less than the opportunity cost of killing Voldemort and hence did what he had to. JK Rowling offers various such incidents backed by basic economic principles throughout the series.[2]
The wizarding world of Harry Potter follows a socialist pattern of governance quite different from the capitalist society we live in today. Most of the jobs in magical Britain are governmental jobs offered by the ministry of magic. The ministry of magic is the monopoly provider in all of the major sectors including education, healthcare, transport (knight bus and Hogwarts express), etc.[3] The ministry has enormous power and acts as the legislator, executive and judiciary. It is also known to control the press by printing slanted content to publicize its political agenda. Hogwarts is the only school in the UK which is owned by the government. Although there’s no tuition and education is free for all, there seems to be a lack of incentive to provide quality education.
The existence of such large public sector monopolies and various other regulations have a crowding-out effect driving out private investors as a result of which privatization is almost non-existent in the magic world which is evident by the fact that there are only a few privately owned small businesses. An example of a privately owned business is Ollivanders', the famous and only wand shop, which was opened in 382 BC. There seems to be little innovation and no technological advancement. In the absence of technological advancement and innovation, the wizarding economy is facing the trap of stagnation.[4] In some sense, it can also be said that technology in the real world is a substitute for magic. They might have moving stairs but don’t we have escalators?
The monetary system is controlled by Gringotts, which is the only bank in magical Britain. The wizarding world uses commodity money which is printed by the goblins of Gringotts.[5] Thus, Gringotts performs functions of an independent central bank. However, it functions much differently from the banks we have. The bank does not pay any interest on savings, nor does it offer various deposit options. It is unclear whether the bank lends money at all. It is more like a locker facility wherein wizards can keep their savings. However, under this banking system, the money multiplier effect breaks down. Although the savings are leakages from the GDP, there is no simultaneous lending to offset the effect of such leakages, and thus the GDP does not rise as much as it should’ve as a result of which the economy grows at a much lower rate than its potential rate. This is yet another reason why there are so few privately owned businesses.
Even the non-existence of capitalism in the wizarding world didn't stop it from creating income inequalities dividing the magic population into three groups- the Potters and Malfoys belonging to the rich category, Weasleys being in the middle-income group and the house-elves being the poorest. Slavery is something which is very common and although inhumane, reaps benefits for the economy as slaves provide the labour at very low costs which nobody else is willing to do. The rich get richer just like in the real world at the expense of others who are weaker. Such an example is that of a Slytherin family of Malfoys. Although evil, they are never caught and have all the power and money in the world. While their house-elf Dobby is so poor and ill-treated, it's disheartening.
In a realm filled with magic, one might expect the economic problems that we Muggles face to disappear in a puff of smoke. But even the Boy Who Lived has to come to grips with fiscal reality. Instead of taking the potions class, Harry should have clearly taken up a course in economics if only Hogwarts had a diverse range of subjects to choose from!
References:
[1] Beyond Hogwarts, David Haber “The Five Principal Exceptions to Gamp's Law of Elemental Transfiguration” Published April 30, 2008
https://www.beyondhogwarts.com/harry-potter/articles/the-five-principal-exceptions-to-gamps-law.html
[2] Marta Podemska and Darwyyn Deyo “It's Just Like Magic: The Economics of Harry Potter.” 31 May 2013, Last revised: 23 Jan 2018
[3] Harry Potter wiki “British Ministry Of Magic”
[4] Jethro Elsden “Harry Potter and the economics of the wizarding world” 2 January 2019
[5] Harry Potter Wiki “Gringotts Wizarding Bank”
Cover image credits: hp-lexicon.org
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