Friday, April 22, 2016

Economics of Imaginary Worlds

One of my favorite podcasts is talking this week about the economics of imaginary worlds.

As a long time fan (since day 1 of the podcast) and as an economist, I have thought a lot about these questions. I've always planned to teach a class on the economics of science fiction/fantasy. I wrote about Issac Asimov's 2nd foundation as my inspiration for the study of economics in my grad school essays (apparently Krugman did the same) since Asimov's psychohistory was simply the application of math to predict human behavior, which is exactly what economics does. Krugman is also famous within the economics community for working out in grad school the economics of interstellar trade when sub-light speed travel is going to screw up all of your interest rate payments since time is moving at different speeds.

I love all the shows mentioned (BSG, Firefly, and Game of Thrones are among my favorites of all time) and was impressed by how much insight we derived simply the law of scarcity. The idea that scarcity would simply shift from material goods to status or experiential goods once we have replicators is something most people under appreciate. Even my favorite economics podcast planet money got it wrong. But its a natural shift. Even today material goods are a small part of the US economy (see my column in US News) and Adam Smith first wrote about this in the 1750s.

However, there is so much more to economics than simple scarcity. For example, for Lannister's motto (a Lannister always pays his debts) there is a theory called "tying the kings hand" by Nobel Prize winner Douglas North that the reason England eventually became the dominant power in Europe is because England always pays its debts. Most kings have a habit of just deciding not to pay when times get tough. In England, the Magna Carta empowered parliament to "tie the kings hands" and force the king to pay, which made lenders much more eager to lend to the king of England, which gave England more resources than other kingdoms, and therefore the advantage needed to build the British empire.

Other interesting debates exist about the feasibility of a money-less economy as envisioned by Roddenbury. (Mostly dumb) Neal Stephenson (my favorite novelist) does an excellent job unpacking many economic issues, like the invention of monetary policy by Issac Newton, to what happens after the disintegration of the nation state in Snowcrash.

Anyway is a fun exercise to think about how the economies of worlds work in fantasy or scifi worlds where the boundaries of physics as we know it have changed. Perhaps I will get to teach that class someday.

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