What Harry Potter is Right – and Wrong – About Economics


By Aarthi Swaminathan

A new study from Oxford Open Economics examines what JK Rowling’s series teaches the public about economics.

The best Harry Potter wizard inhabited a fascinating world that ran on galleons and Gringotts.

Given the series’ influence on readers around the world, economics professors Daniel Levy and Avichai Snir examine how author JK Rowling created the economic underpinnings of Potter’s world in a new study.

More than 7.3% of the world’s population has read the Harry Potter books, the authors estimate, and millions more have seen the films, underscoring “the importance of the messages” conveyed by the series. they stated.

These messages have spread over decades, and an entire generation has come of age with Rowling’s wizarding world by its side. The first of seven books was published in 1997; the first of the eight films was released in 2001 and a spin-off series, “Fantastic Beasts”, was launched that year.

But in a study published in the Oxford Open Economics, Levy and Snir found that while the series imparts knowledge to readers about what they call “popular economics,” when it comes to many “aspects Deeper” into how the economy works in real life, the books give readers a distorted view. This could cause young readers encountering the books to come away with an inaccurate understanding of economics, the researchers said. (Popular economics refers to “intuitive notions of naïve individuals who see market transactions as a zero-sum game,” the authors said.)

Yet Potter’s world is “rich with economic institutions and ideas, including monopolies, inefficient government, limited social mobility, trade restrictions and other regulations, insufficient social capital, currency- commodity, prices, banks,” and more, they wrote.

Here are four lessons the Wizarding World of Potter – which made Rowling a billionaire – teaches us about economics:

How banks work

Young readers of Harry Potter will be exposed to how the banking system works, following it to Gringotts, the only bank serving wizards. Gringotts mints money, prevents counterfeiting, provides safe deposit boxes and currency exchange services, the authors explained.

The books paint a vivid picture of how goblins run the banking system and how Potter stores his gold in vaults. It even describes high protection for some accounts, including dragons guarding chests.

But unlike modern banks, Gringotts doesn’t lend much – wizards with an entrepreneurial spirit must turn to private sources, as when Fred and George Weasley, two of Harry’s classmates at the School of Witchcraft and Wizardry Hogwarts sorcery, borrow funds from Potter. to open their joke shop, ‘Weasleys’ Wizard Wheezes.’

How a planned economy works

Readers of the Harry Potter books will get an idea of ​​how a planned economy works, with a government controlling many aspects.

The authors describe the Ministry of Magic as an entity that controls and regulates “the production of all major goods and services” made in the world of Potter. The government also decides what will be imported and what will not. All of this points to an economy along the lines of a “Marxian model”, the authors noted.

One of the drawbacks of such a model is the resulting corruption. The government described by Rowling is also “large, corrupt and inefficient”, the authors explained. This includes instances of nepotism (Arthur Weasley getting his two sons, Percy and Ron, jobs at the Ministry of Magic) and possible bribes (Lucius Malfoy, father of Harry’s nemesis Draco Malfoy, asking for favors from the ministry).

What Monopolies and Oligopolies Look Like

Fans will know that there are few options for wizard-related purchases in the world of Potter. This gives them an understanding of how oligopolies and monopolies work, the authors said.

Due to the way government regulations are structured, only two options exist for buyers in the world of Potter: Hogsmeade and Diagon Alley. New businesses can’t get started because “public officials block competition,” the authors said, resulting in limited choices for consumers.

The authors describe how in ‘Harry Potter and the Goblet of Fire’ an entrepreneur, Ali Bashir, was stopped from trying to import flying carpets into the UK that would replace flying broomsticks, even though he had the support of a senior official, Barty. Squat. Bashir’s effort was halted because the Ministry defined the rugs as a Muggle (non-wizarding) artifact.

How Social Classes Work

From the books, fans know that there are three social classes among wizards: lower class, middle class, and a small elite.

But the books also cover the idea of ​​social mobility, the authors said, noting examples such as Voldemort’s rise from the bottom up and Hermione Granger’s journey from a “mudblood” wizard to the Minister of Magic.

Interestingly, the way society is structured leads to a struggle between middle and upper class wizards, the authors said.

Nevertheless, for all its magic, poterian economics gives the public a “distorted view of economics”, according to the study.

For example, taxes don’t exist in the world of Potter, even though key institutions like Hogwarts are “free” and therefore likely to be funded by the state.

Ultimately, the books still provide an understanding of “popular economics,” the authors said, “which, while perhaps problematic for human flourishing in the Smithian sense, captures and reflects people’s views on many economic and social issues.

Write to MarketWatch reporter Aarthi Swaminathan at [email protected]

-Aarthi Swaminathan

 

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07-21-22 0007ET

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