Core Principle: Your Fantasy Economy is Bullshit
Posted: Wed Jun 16, 2010 7:19 pm
In virtually every case, the economy of a fantasy world is ten pounds of shit in a five pound bag. Few make sense on even the most casual inspection. Fewer still make any sense on any kind of deep inspection. So let's talk about why that is.
Economies: What Are They?
I will give you five pieces of silver for the exclusive rights to charge people money for being allowed to jump off that cliff.
If you read a modern introduction to economics, they will tell you something about goods and services "made for the market" as if the market was some giant tiki god that demands sacrifices of cottage cheese and back rubs. But the truth is that is only the monetized economy. And most fantasy settings do not have money, so we're going to use a slightly larger definition of economy. An economy is the sum total of all goods produced, all labors undertaken, and all resources that are available by or to anyone in society. The economic system is the method by which all of this is distributed to people within society and the expectations that are placed upon the individual's actions or contributions in order to be afforded their share.
Wait, did I just say that most fantasy economies don't have money? Yes. A gold piece is not money. It's a chunk of precious metal. It's actually one of those available resources I was just talking about. You could make a ring out of it or face a metal object with it to keep it from rusting. At a higher technology level, you could make a bunch of microwires out of it. But in any case, money is the guaranty that society at large views the bearer as being entitled to some share of finished goods, services, or resources. That's not what a gold piece is. A gold piece is an actual resource that you are bartering for whatever it is that you are trying to get. People in short, do not actually "buy" or "sell" in most fantasy economies. They simply trade. That's wildly inefficient, and not just because a D&D Copper Piece is only 50 to the pound.
Specialization and the Wealth of Society
Potash makers? We have potash makers now? This fortress is going o shit.
It's actually possible to survive using just your own labors. At least, if you happen to live in a relatively fertile area that doesn't have severe cold or heat. However, the fact is that you can achieve a very much higher standard of living by relying upon others and allowing others to rely upon you in return. This is because the most efficient ways to produce things require capital. Which is actually rather axiomatic, because capital is really anything that makes production easier. A blacksmith's tools? That's capital. A blacksmith's workshop? That's capital too. Even the skills of a blacksmith are a form of capital - human capital.
And that's where capitalism comes in. It's where communism, fascism, sustainability economics, and honestly every single other economic thought that anyone has had since 1850 has come in. Even in the absence of available investments like factories and tools, the fact is that practice does make perfect and having people do less different economic activities allows them to practice the ones they actually do more, which increases their productivity. And that means that if you trade the production around there will be extras of everything and someone (maybe everyone) can be a lot richer than if everyone was hunting their own deer.
How much more productivity are we talking about? Well, a lot. In fact, it's enough of a net productivity increase that even the labor you spend moving finished goods around and trading things back and forth still leaves you in the black. And yes, even that labor is a thing that can be specialized. That's the job called "merchant" and having them around does create wealth therefore. While ancient philosophers like Confucius thought that merchants just extracted wealth from society, the fact is that distributing oranges from the orange orchard to the rice farmers and rice from the rice paddies to the orange farmers is another form of labor. It's the thing that allows you to specialize and get those high yields in the first place. And having someone specialize in that frees up yet more time for the rice farmers to grow more rice.
As the economy becomes more filled with specialists, the overall production increases, and quality of life increases. And yet in order to specialize beyond a certain rather limited amount, there has to be an increase in abstraction of the economy. It's all very well and good for one guy to go pick berries while another goes to pick nuts and then have them meet up at the end of the day and split the proceeds - thereby having both get more berries and nuts than if they both tried to pick their own baskets of both. But in more advanced economies you can produce larger things - like building houses or painting the yaks. And that requires more than a single day's production from most people to pay for. To get these big ticket items done, people have to have some way to save wealth up over time. And honestly, most contractors would like to end up turning their labor into fresh items and not get paid exclusively in salted pork and vegetable oil. That's where tradeable wealth comes in. Precious metals are a pretty early version of that sort of thing (being small and portable), with more advanced versions being paper that guarantees access to metals or cheese or something, and even more advanced versions being actual fucking money that we talk about today. But in a fantasy world, chances are pretty good that people are doing the basic shitty thing where they just leave actual piles of metal around and move them back and forth in order to justify doing services for each other.
Note that the gold being used as a trade good reduces the amount of wealth of society by the "value" of that gold. However, the net result is likely still positive. This is because the more gold is around the more specialization is possible because more people can be paid to do things. More people being paid to do things means more people will be doing things, and the more goods and services will be provided. If the gold is merely saved somewhere however, the overall effect of the gold is zero, since it isn't doing anything while in reserve. This means that minting coins and then hiding them in a vault or a dragon's hoard is a net loss to the economy.
Welcome to Zero Percent Growth
"The idea that failure to increase in GDP per capita was a failure is a product of the industrial revolution."
The assumption of modern economics is that the economy will grow every year. Our modern "recessions" are usually placed in years where the economy simply grew slower than we hoped that year. That's plenty devastating, because our expectations are that the economy will be growing. We can even have people starve during periods of flat growth because essentially we assigned some people food out of the projected growth budgets. It's both tragic and stupid.
But the whole idea of constant growth is not a bad one. It allows us to have the internet and drink Mountain Dew. And it happens because the more we specialize our economy, the more we can continue to do so. And that requires a more and more complex and abstract economic system to make sure that people get some share of the proceeds of our economy while interacting with it. The one we have now is pretty damn abstract, with web cartoonists able to pay rent and eat even though the landlord may never read their comic and the farmers who grow their food may not even know they exist. And hey, we get to have web comics out of the deal. Which improves my quality of life.
But here's he thing: in most fantasy worlds, the economy isn't getting more abstract, and specialization is not increasing. People were locked in direct 1:1 barter negotiations a millennium ago and they'll be doing the same bullshit 1:1 barter negotiation a century from now. Technology is not apparently advancing, and farming yields are apparently approximately now what they were shortly after the old generic magic empire fell.
Which means that the level of poverty in any fantasy world is off the hook. Pretty much the only way production increases is through population growth. Which since the new people are being born without necessarily getting homes, farmland, or blacksmith shops to inherit means that unless new resources are found - and quick - that the wealth per person will seriously fall generation to generation. No wonder people are willing to send their kids off to die in orc wars and mine gold in caverns full of dragons!
Adventurers Drain the Economy
"I'll tell you what... we'll take all your food and iron, in exchange for which we will hide some gold under your bed. Deal?"
So here's what happens when "adventurers" go loot a dragon's cave or a wizard's tower: First they take the hardiest and most apparently skilled members of society and leave. They go fight a foreign war, and maybe they don't come back. In the meantime, any equipment they take with them is possibly not coming back. And it's generally swords and leather backpacks and armor - not exactly cheaply produced stuff for a simple economy. And if they win, they come back with gold. Maybe a lot of gold. And some of it they will spend in your society again. And you know what happens after that? They leave again. And they repeat doing this until eventually they fight a bigger demon lord and outright lose, or just settle down somewhere else and never come back.
And what do they leave behind? Well, they leave gold. In exchange for the gold, they get the best healing potions the village alchemist can cook up, the best food, nights with women they will never see again, and the labors of the blacksmith. In short, they take everything the village has, and they leave gold behind. Unfortunately, as previously noted, that gold doesn't actually do anything except act as a trade good. It doesn't appreciate in value or generate any benefit while it is there. So when it comes to trying to get any benefit from actually owning that gold, all anyone will be able to do is try to trade it to some other sucker - for the same value of goods or services that they traded for the gold in the first place.
Now there is potential benefits to the village in addition to the obvious immediate deficit of the adventurers walking away with their food and mules and leaving behind nothing of any utility. If the village had underemployment (which this being a barter economy, I think that's a pretty good bet), the gold being in town can encourage people to do stuff. But not really any more so than having powerful warriors point spears at the underemployed people and order them to get to work on some imperial project or another.
-Username17
Economies: What Are They?
I will give you five pieces of silver for the exclusive rights to charge people money for being allowed to jump off that cliff.
If you read a modern introduction to economics, they will tell you something about goods and services "made for the market" as if the market was some giant tiki god that demands sacrifices of cottage cheese and back rubs. But the truth is that is only the monetized economy. And most fantasy settings do not have money, so we're going to use a slightly larger definition of economy. An economy is the sum total of all goods produced, all labors undertaken, and all resources that are available by or to anyone in society. The economic system is the method by which all of this is distributed to people within society and the expectations that are placed upon the individual's actions or contributions in order to be afforded their share.
Wait, did I just say that most fantasy economies don't have money? Yes. A gold piece is not money. It's a chunk of precious metal. It's actually one of those available resources I was just talking about. You could make a ring out of it or face a metal object with it to keep it from rusting. At a higher technology level, you could make a bunch of microwires out of it. But in any case, money is the guaranty that society at large views the bearer as being entitled to some share of finished goods, services, or resources. That's not what a gold piece is. A gold piece is an actual resource that you are bartering for whatever it is that you are trying to get. People in short, do not actually "buy" or "sell" in most fantasy economies. They simply trade. That's wildly inefficient, and not just because a D&D Copper Piece is only 50 to the pound.
Specialization and the Wealth of Society
Potash makers? We have potash makers now? This fortress is going o shit.
It's actually possible to survive using just your own labors. At least, if you happen to live in a relatively fertile area that doesn't have severe cold or heat. However, the fact is that you can achieve a very much higher standard of living by relying upon others and allowing others to rely upon you in return. This is because the most efficient ways to produce things require capital. Which is actually rather axiomatic, because capital is really anything that makes production easier. A blacksmith's tools? That's capital. A blacksmith's workshop? That's capital too. Even the skills of a blacksmith are a form of capital - human capital.
And that's where capitalism comes in. It's where communism, fascism, sustainability economics, and honestly every single other economic thought that anyone has had since 1850 has come in. Even in the absence of available investments like factories and tools, the fact is that practice does make perfect and having people do less different economic activities allows them to practice the ones they actually do more, which increases their productivity. And that means that if you trade the production around there will be extras of everything and someone (maybe everyone) can be a lot richer than if everyone was hunting their own deer.
How much more productivity are we talking about? Well, a lot. In fact, it's enough of a net productivity increase that even the labor you spend moving finished goods around and trading things back and forth still leaves you in the black. And yes, even that labor is a thing that can be specialized. That's the job called "merchant" and having them around does create wealth therefore. While ancient philosophers like Confucius thought that merchants just extracted wealth from society, the fact is that distributing oranges from the orange orchard to the rice farmers and rice from the rice paddies to the orange farmers is another form of labor. It's the thing that allows you to specialize and get those high yields in the first place. And having someone specialize in that frees up yet more time for the rice farmers to grow more rice.
As the economy becomes more filled with specialists, the overall production increases, and quality of life increases. And yet in order to specialize beyond a certain rather limited amount, there has to be an increase in abstraction of the economy. It's all very well and good for one guy to go pick berries while another goes to pick nuts and then have them meet up at the end of the day and split the proceeds - thereby having both get more berries and nuts than if they both tried to pick their own baskets of both. But in more advanced economies you can produce larger things - like building houses or painting the yaks. And that requires more than a single day's production from most people to pay for. To get these big ticket items done, people have to have some way to save wealth up over time. And honestly, most contractors would like to end up turning their labor into fresh items and not get paid exclusively in salted pork and vegetable oil. That's where tradeable wealth comes in. Precious metals are a pretty early version of that sort of thing (being small and portable), with more advanced versions being paper that guarantees access to metals or cheese or something, and even more advanced versions being actual fucking money that we talk about today. But in a fantasy world, chances are pretty good that people are doing the basic shitty thing where they just leave actual piles of metal around and move them back and forth in order to justify doing services for each other.
Note that the gold being used as a trade good reduces the amount of wealth of society by the "value" of that gold. However, the net result is likely still positive. This is because the more gold is around the more specialization is possible because more people can be paid to do things. More people being paid to do things means more people will be doing things, and the more goods and services will be provided. If the gold is merely saved somewhere however, the overall effect of the gold is zero, since it isn't doing anything while in reserve. This means that minting coins and then hiding them in a vault or a dragon's hoard is a net loss to the economy.
Welcome to Zero Percent Growth
"The idea that failure to increase in GDP per capita was a failure is a product of the industrial revolution."
The assumption of modern economics is that the economy will grow every year. Our modern "recessions" are usually placed in years where the economy simply grew slower than we hoped that year. That's plenty devastating, because our expectations are that the economy will be growing. We can even have people starve during periods of flat growth because essentially we assigned some people food out of the projected growth budgets. It's both tragic and stupid.
But the whole idea of constant growth is not a bad one. It allows us to have the internet and drink Mountain Dew. And it happens because the more we specialize our economy, the more we can continue to do so. And that requires a more and more complex and abstract economic system to make sure that people get some share of the proceeds of our economy while interacting with it. The one we have now is pretty damn abstract, with web cartoonists able to pay rent and eat even though the landlord may never read their comic and the farmers who grow their food may not even know they exist. And hey, we get to have web comics out of the deal. Which improves my quality of life.
But here's he thing: in most fantasy worlds, the economy isn't getting more abstract, and specialization is not increasing. People were locked in direct 1:1 barter negotiations a millennium ago and they'll be doing the same bullshit 1:1 barter negotiation a century from now. Technology is not apparently advancing, and farming yields are apparently approximately now what they were shortly after the old generic magic empire fell.
Which means that the level of poverty in any fantasy world is off the hook. Pretty much the only way production increases is through population growth. Which since the new people are being born without necessarily getting homes, farmland, or blacksmith shops to inherit means that unless new resources are found - and quick - that the wealth per person will seriously fall generation to generation. No wonder people are willing to send their kids off to die in orc wars and mine gold in caverns full of dragons!
Adventurers Drain the Economy
"I'll tell you what... we'll take all your food and iron, in exchange for which we will hide some gold under your bed. Deal?"
So here's what happens when "adventurers" go loot a dragon's cave or a wizard's tower: First they take the hardiest and most apparently skilled members of society and leave. They go fight a foreign war, and maybe they don't come back. In the meantime, any equipment they take with them is possibly not coming back. And it's generally swords and leather backpacks and armor - not exactly cheaply produced stuff for a simple economy. And if they win, they come back with gold. Maybe a lot of gold. And some of it they will spend in your society again. And you know what happens after that? They leave again. And they repeat doing this until eventually they fight a bigger demon lord and outright lose, or just settle down somewhere else and never come back.
And what do they leave behind? Well, they leave gold. In exchange for the gold, they get the best healing potions the village alchemist can cook up, the best food, nights with women they will never see again, and the labors of the blacksmith. In short, they take everything the village has, and they leave gold behind. Unfortunately, as previously noted, that gold doesn't actually do anything except act as a trade good. It doesn't appreciate in value or generate any benefit while it is there. So when it comes to trying to get any benefit from actually owning that gold, all anyone will be able to do is try to trade it to some other sucker - for the same value of goods or services that they traded for the gold in the first place.
Now there is potential benefits to the village in addition to the obvious immediate deficit of the adventurers walking away with their food and mules and leaving behind nothing of any utility. If the village had underemployment (which this being a barter economy, I think that's a pretty good bet), the gold being in town can encourage people to do stuff. But not really any more so than having powerful warriors point spears at the underemployed people and order them to get to work on some imperial project or another.
-Username17