The paper is divided up into sections, and so I will divide up my blogging about it - but I will not be discussing them in the same order.
Section 3: Why Stories matter
That "stories matter" is a common trope. Understandably this is a popular view among professional storytellers who (like everyone) like to think their work is important and "matters" in some especial way. This is also a fairly expansive view among the public because they (ok, ok! we) like to hear and read stories and so would like to think such activities are meaningful and more than mere diversion. No doubt it helps that so many skilled story-tellers can make incorporate the trope into their work (to better and worse effect). So much effort on the part of the audience is expended in understanding stories, breaking them down for analysis and criticism, mining them for subtext, and generally also treating them as something that "matters".
But is that a huge waste of time? Is it actually true that stories matter?
The authors argue yes and cite academic literature support them. For the sake of discussion we can just take it as given, but I'd like to mention my gladness at seeing this is actually at least somewhat supported.
And if stories matter, then the Harry Potter series - which have sold more copies than any other text(s) besides the Bible and the Sayings of Chairman Mao (cite)) matters hugely in either shaping how people think about economics (or at the very least laying out a folk theory of economics)
Section 5: the monetary system makes no goddamn sense
The wizards use commodity money with fixed exchange rates [1 gold galleon / 17 silver sickles / 29 copper knuts] with denominations that are prime numbers.
This appears verrrry non-sensical. Denominations in prime numbers is literally the worst possible way to do it. Old fashioned coinages were often in denominations that have many factors, so you could have intuitive divisions of half-pounds, quarter pennies, etc. (like traditional imperial units) or decimalized (like metric units) for easy calculations. Presumably these prime numbers where chosen because they have some kind of numerological significance hidden from muggles.
Wizards and arbitrage
The exchange rate with muggle money is also fixed (at a quite low value). Arbitrage appears not to be happen though. Any wizard could take a weight of galleons, melt them for the gold, sell the gold for cash, buy silver with the cash, have goblins mint the silver into sickles, and exchange the sickles for a greater weight of gold than they started with.
Since the currency appears stable, presumably the goblins prevent this by magic or some other means.
Why are all the prices so round and so stable?
High transaction costs, little competition, and of course writing with round numbers is easier.
The money is made of heavy metal that people can't really cart around (I don't think the wizards have purses of holding (link) although they have similar magic so I wonder why not) and its a huge pain (by design) to make withdrawals from Gringotts so nobody wants to make change or carry more cash than they need.
Historically such a problem would be solved by a private banks issuing banknotes, or merchants issuing letters of credit. Presumably this isn't done for some sort of legal (such things are illegal) or magical (perhaps the goblins can only identify fake currency if its made of metal) reason.
The lack of competition is indicated by the fact that prices can be set by sellers for their own convenience, and is suggested by the great age and small size of so many businesses.
WTF is up with Gringotts?
Gringotts the only bank (at least in wizarding Britain) and it is not by wizards, but by goblins - a minority despised (or at least disliked) because they are selfish, greedy, usurious. I'm sure there's not any subtext there, no-siree.
Gringotts does not make loans. Goblins who work there do - at high interest rates. What Gringotts does is protect money, and control the money supply by minting coins, fighting counterfeiting and acting as a clearinghouse for exchanging wizard money and other valuables (including muggle money). Perhaps this is how they prevent arbitrage.
The wizards appear to view financial services as immoral. If you need cash now you borrow from a friend, who wouldn't be so crass as to charge interest. Or you try your luck gambling. Only the truly low and desperate would borrow money with interest - and only the wicked would lend with it
9. Income inequality and social immobility
The author's section on this topic begins: "The wizards’ society is composed of a large middle class and small elite. The middle class
wizards earn enough to live comfortably but not enough to save. They therefore work almost
their entire lives. Wealthy wizards enjoy a luxurious life style, and own almost all the assets
and capital (Rowling 1999a, p. 19)"
This, however is only true if we think of the wizard's society as consisting only of wizards. But those humans who have no magic (like Hagrid who was deprived of it as a punishment or Argus Filch who was born without it) are distinctly lower class.
And then there are the "magical creatures". Of these goblins are the only ones who might be called middle-class, but are clearly have less social status and political power than humans. Most other intelligent humanoids appeal to live outside of wizarding society and have not clear place in the class structure (although given the contempt wizards have for them I doubt their place is very high).
And then there are the house elves. A whole category of intelligent beings held in bondage and servitude. Hogwarts reputedly owns hundreds, and wealthy families like the Malfoys and Blacks all own at least one (possibly more).
So its clear that while there is tremendous inequality among wizards, when you look at their whole society the picture grows even worse - oppressed classes of people considered sub-human, a middle-class perched precariously on the edge of ruin, and a small clique of ancient, rich elite families who dominate society, the economy and the state.
And how does this elite perpetuate itself?
Endogamy - The big families only marry among themselves, and if a member does marry or even associate with the middle class they are disowned.
Patronage networks - that loan from nice Mr. Malfoy might not have interest, but someday, and this day many never come (spoiler: that day always comes), he will ask you for a favor. But of course if you do something he doesn't like, then all that money will be due at once.
Violence - Note who the Death Eaters are (wealthy families and their clients) and who they target (muggle-born wizards and their allies - i.e. the middle-class and their sympathizers among the elites)
Rent-seeking and the capture of the state - read on:
Section 6 Government
Consider the following: “What would you think of a government that engaged in this list of tyrannical activities: tortured children for lying; designed its prison specifically to suck all life and hope out of the inmates; placed citizens in that prison without a hearing; ordered the death penalty without a trial; allowed the powerful, rich or famous to control policy; selectively prosecuted crimes (the powerful go unpunished and the unpopular face trumped-up charges); conducted criminal trials without defense counsel; used truth serum to force confessions; maintained constant surveillance over all citizens; offered no elections and no democratic law making process; and controlled the press? You might assume that the above list is the work of some despotic central African nation, but it is actually the product of the Ministry of Magic.” Barton (2006, pp. 1523–1524)
The authors say "The Potterian government is corrupt and inefficient." This is true - from a certain point of view. But from another, it misunderstands what the Ministry of Magic is for. It is not an institution for "promoting the general welfare and providing for the common defense" it is, really, "committee for managing the common affairs of the bourgeoisie elite wizarding families"
Thus the government appears corrupt - with protectionist measures being put in place by officials in exchange for bribes, e.g. banning magic carpets to protect British broomstick makers, or preventing the importation of cheaper foreign cauldrons. But while those measures are contrary to the public interest (which is for less groin strain and cheaper magical implements) it would harm the elites. And the point of the Ministry if to serve those elites.
Thus sections 7, 8, 10, 12 of this paper which describe the lack of rule of law (since rule of law might get in the way of the rule of elites), the many monopolies (which are presumably formally or informally maintained by the elite-captured state) in wizarding Britain, and the lack of technological progress for any goods that aren't for the leisure of the elites (innovation would disrupt the elites' monopolies, after all).
The authors claim that the government is the main employer of wizards - that the public sector is large and a main employer. But they don't cite any particular evidence for this. It seems likely that the ministry is the largest employer of wizards we see but see section 13 for a possible reason why that might be selection bias.
But what does the Ministry do? Mainly law enforcement (there are the Aurors, the Office for the Detection and Confiscation of Counterfeit Defensive Spells and
Protective Objects, the Office of the Improper Use of Magic, the Office of the Regulation and Control of Magical Creatures, the Office
of the Magical Law Enforcement, etc.) and cooking up regulations to enforce that benefit magical elites.
Consider the cauldron ban. Given that wizards can travel instantly or near-instantly across the globe (and the Ministry is as a practical matter is unable to prevent this) people buying or smuggling those cheaper foreign cauldrons must be a serious problem for the British cauldron-makers - to be dealt with using the government's pervasive surveillance state.
13. Investment in human capital
Hogwarts is essentially something between a lyceum and a trade-school. A peculiarity given the weakness of the state in wizarding Britain is that this is free universal public education.
Except maybe it isn't! JK said in other contexts that home-schooling is widespread, and given the slow pace of changing knowledge and low-levels of specialized education its quite plausible that wizarding parents could school their children at home at least as well or as safely as Hogwarts. Note that Harry is not ordered to attend Hogwarts, but is accepted and expected to pay for his own (sometimes quite expensive!) equipment. Public education isn't quite "free" and since it isn't compulsory I doubt its actually universal.
My speculation is that Hogwarts does not educate all the children of wizarding Britain. Rather, it mainly educates the muggle-born (like Hermione), since untrained wizards in muggle society are dangerous and could blow the cover of the wizarding world, the children of government employees (like the Weasleys), and members of elite families (like Harry).
Recall that the government of magical Britain is corrupt and inefficient, a "public" school that mainly educates the children of rent-seeking elites and rent-seeking government employees seems like exactly the sort of thing they'd do. This would have the added effect maintaining ties within the elite networks that control the government apparatus.
The fact that nobody has needed new textbooks in generations indicates that knowledge advances slowly or not at all (and given the lack of mathematics classes, there's hardly a store of sure universal truth), or, more cynically, that teaching children new things is not the actual point of Hogwarts.
11. War (economics)
At the climax of the series, when the second wizarding war breaks out, the Ministry is caught totally unprepared to fight, and scrambles for materiel (no doubt obtained by a combination of straightforward appropriation, given the non-existent rule of law, and self-dealing war-profiteers).
Nevertheless the Ministry is too weak to prosecute the war against the Death Eaters - since a government capable of fighting the Death Eaters (a clique of elite wizards and their clients) would be powerful enough to compel the elites to do things they don't want to if the middle-classes should ever get a hold of it.
Thus the second wizarding war is essentially a factional struggle between two cliques of elites and their clients. Doubtless Harry doesn't think of his comrades in the Order as clients, but a patron-client doesn't preclude, and indeed often coincides with, friendship. Fred and George need that loan for their joke shop, and Harry obliged, and now they owe him a favor (or many favors) in exchange.
14. Conclusion
Throughout this paper the authors draw parallels between the Marxian and Potterian views when analyzing the economy. But I think they are off in their read here. The economic views of/in Harry Potter are in fact, medieval more than Marxian. The Jews goblins are considered wicked by ordinary peasants wizards because they operate outside of the economy of patronage and gift-exchange, where questions of status and group-membership, are supreme over market considerations. The state is run by and for elites, who are more than anything else stationary bandits aiming to maintain themselves as a leisure class rather than a commercially-oriented bourgeoise. Economic and social status is largely hereditary, with a small elite lording it over everyone else. The (hypothetical) non-elite children are schooled at home by their parents. The only people you can count on to protect your life and property are your kin and your patron. The unfree house-elves are happy with their unfreedom, and not really suited to liberty, and certainly not equality. Real money goes *clink* when you drop it on the ground.
Now this is weird because that's not a completely off-the-wall descriptions of the pre-modern economy worked and how the people in that economy thought of things.
But fiction is a mirror and so presumably this is meant to reflect some folk understanding of how modern economies work (roughly speaking, in developed countries). And they don't work like that! Real money doesn't have to go *clink* when you drop it on the ground! Slavery is bad! The state is probably more reliable than your cousins when it comes to keeping you safe and your stuff from being stolen! There's a non-zero amount of upward social mobility! Economic elites (at least pretend to) actually work for their fortunes! The state is more than a stationary bandit that robs people - it also works for social welfare (I mean we actually have a universal education system)! That state does actually care at least a bit about what non-elite people think! The economy is based on market transactions not subsistence and social relationships!
If I'm allowed to speculate (and since this is my blog I am) my guess is that this folk-understanding of the economy evolved over the millennia of the pre-modern period and then stuck around as we entered economic modernity, even as it became less accurate.