The Economics of Elfland

Not fairies, but ducks:

http://208.109.58.171/display.php?id=1220

There’s the goose that laid the golden eggs, of course. And I remember a story about a bowl that produced gold every day, but if you ever spent any, it would stop. So the owner dies in poverty, in a tiny cottage filled with gold. That does definitely get at the essential weirdness of money: that it’s useless until you get rid of it.

Also, I remember reading an old Jewish folktale about a king-in-disguise visiting a poor water-carrier; the king is amazed that someone can live in such poverty (specifically because the water-carrier has no savings against an emergency), but the water-carrier is confident that God will provide for him. So the king, to test this theory, outlaws water-carrying, then comes back the next day to see how the man is doing. He has quit water-carrying and become a woodcutter, and again made enough to feed him for the day. So the king orders all woodcutters drafted into the army, then visits again. The poor man couldn’t work, since he had to train with the army, so he sold his sword-blade for money, and replaced it with a blade made of wood. So the next day, the king has this particular soldier called on to behead a condemned man. This looks bad; but the man loudly prays, “God, I am no murderer: if this man is really guilty, let me kill him, but if he is innocent, let my sword’s blade be turned to wood!” And, of course, the miracle occurs, and the king finally gives up and rewards the poor man and they all live happily ever after.

There have to be some economics lessons in that one, right? Something about laborers reacting to new regulations, or public- versus private-sector jobs, or just that the people who want to learn about economics are heartless bastards trying to screw over the poor?

There’s Rumpelstiltskin spinning straw into gold, and there’s “Why the Sea Is Salt”.

That is Yankee Dood It.

And there is also The Mother Hive by Kipling – quite possibly the most repulsive thing he ever wrote (and there is so much to choose from):

This is one of Kipling’s political fables, in which he preaches the need for steadfast disciplined defence against false ‘progressive’ ideas which endanger the very existence of the realm.

A beehive is humming with purposeful activity, with all the bees doing their duty. The myriad workers are gathering honey outside the hive, making wax, building the combs in careful hexagons, looking after the young grubs, and feeding the Queen. At the gate there are guards against interlopers. But, through a moment’s inattention, a Wax Moth slips into the hive, befriends the young bees with sweet insincere pledges of affection, persuades them that all this activity is unnecessary, and covertly lays her eggs.

Before long the new grubs are growing into ‘oddities’ rather than proper worker bees, and there are burrows through the combs, ruining the vital honey and killing the young grubs. The hive is wrecked, and before long the beekeepers themselves destroy the rotten combs in a fearsome ‘Day of Judgement’.

Fortunately a small group of loyal bees have secretly raised a new Queen, and swarm away with her to build anew, so all is not lost.

A question often raised by readers of the Harry Potter books used to be: why are there poor wizards? All wizards learn how to transfigure objects; why don’t the poor ones just transfigure some chocolate coins into gold? Eventually it turned out that certain kinds of matter can’t be transfigured, and gold is one of them. (Food is another, which is probably just as important economically — if any wizard could transfigure stones into bread, there’d be much less need to work.)

Examples of fairytale econ. Rumpelstiltskin, weaving straw into gold a metaphor for wealth deriving from effort?
Jack and the Beanstalk magic beans ≠ gold. A lesson in short sighted economics. That gold isn’t going to just trickle down the beanstalk – you have to go and get it! Risk! Danger. It’s like Wall Street!
Up there on top of the stalk you have the Goose laying Golden Eggs – if that isn’t the concept of Wall Street as seen today…
There are more, but that’s probably ample.
Those ice coins are probably a metaphor for a currency economy – we trade pieces of paper with no real value, like ice.

There’s a Terry Jones fairy tale about a wizard that gives a guy three potions. One drop of each will give him enough gold, silver, and wood to be considered fabulously wealthy, while the entire potions will give him all of the gold, silver, and wood in the world. He starts with a drop of each but can’t resist using up all of each of them. You get things like the merchants stopping by complaining once he has used all the silver that they can’t do any trading and so on. Once he has all the wood basically everyone comes by and takes everything back from him by force.

This is all about recent fantasy works (rather than fairytales), but after reading some of Naomi Novik’s Temeraire books (it’s the Napoleonic war… with dragons!), I had a related thought, which I am cutting-and-pasting here:

Following the unionizing of spirits in Mieville’s Perdido Street Station and the bureaucratization of magic in Harry Potter and the Triplicate Form, the reduction of dragons to their instrumental value seems to point towards the steady creep of capitalism into fantasy. Which I suppose makes sense on some level: what’s more magical than money?

Now, if we’re talking old-country fairytales, we’d probably have to start with the recognition that a lot of them are motivated by poverty (e.g., kids get kicked out or abandoned because they can’t be fed) and the happy ending of many (i.e., he marries the princess, she marries the prince) is not really economic in any sense.

“Those ice coins are probably a metaphor for a currency economy – we trade pieces of paper with no real value, like ice.”

Gold doesn’t have any real value either. It’s only valuable because we value it.

Private Eye occasionally runs a news item from the ‘Nursery Times’ – rarely belly-laugh material, but often enough raises a kind of internal nod of appreciation at a nice, neat, preferably multi-facetious allusion.

This fortnight, a story taken from the Irish edition: Leprechauns Discover ‘Crock of Shit at End of Rainbow’.

The best currency policy I have come across is “http://www.funnyhumor.com/jokes/16.php”.

“When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean – neither more nor less.”

Just an example of the Larry Niven concept…

One of the wizards has figured out the concept. He has to fight a duel with another wizard. He creates a device that rotates faster and faster by magic. As the duel starts, he sets off his device, which by positive feedback exhausts all the magic in the area.

Both wizards are several hundred years old, sustained by magic, so when the magic in the area gets used up, they become incredibly old. But the good wizard has a girlfriend who is genuinely young, so she can drag him out of the combat zone into an area where there is fresh magic that makes him young again. Meanwhile the rival dies of old age.

It was quoted in my A-level econ textbook, but I didn’t get to read the paper itself for some years later (yay! internets). IIRC it was more complicated, and interesting, than that. When the Red Cross ciggies arrived, there was a massive monetary expansion and a surge of economic activity, which waned as people began to smoke them. After a certain point, there was a nonlinear drop in the pool of circulating cigarettes because smokers would withdraw their cigs from circulation – i.e. their liquidity-preference shifted up vice risk tolerance shifting down – and essentially a recession. As the interval between helidrops of cigarettes wore on, though, eventually the deflation rendered the remaining pool of cigarettes valuable enough in terms of the remaining pool of other goods and services that people began to spend them again.

However, this was very much dependent on expectations of when the next lot of cigs would arrive. Obviously if you were confident that the next delivery would be on time, you’d be more willing to trade cigarettes for anything else. If you suspected it would be delayed, you’d stick to them. There was a further interesting twist in that you would also be more likely to consume them if you expected timely resupply. This can of course be modelled on the basis that the decision to smoke a cigarette involves trading the enjoyment of it against its potential value as currency and hence an implicit interest rate.

So, you can get a Keynesian interpretation out of this – decisions to inject or withdraw from the circular flow, and therefore both economic activity and the price level, are driven by animal spirits, our fundamentally fallible intuitions about the future. You can get a monetarist interpretation – changes in the monetary base result in fluctuating price levels along a fundamentally fixed aggregate supply curve, with the key intermediary being the interest rate. You can get a Marxist interpretation – note the difference between the use-value and exchange-value of the cigarette. You can get a Minskyian interpretation – the key factor is risk-tolerance and it’s driven by the availability of AAA-grade liquidity, so that activity booms to the point where confidence in the ability to get out falters and there is a run on cigarettes and a crash. You can get a behavioural finance interpretation – once the cigarettes show up, optimism bias and the just world hypothesis lead people to trade, until the gradually shrinking supply of cigarettes (due to addiction) becomes obvious, at which point the fallacy of composition kicks in and everyone flips to a bank-run psychology.

You can get a deep ecology/doomhead interpretation – everyone smokes all the cigarettes, heading over to ecological overshoot, and then dies off by going cold turkey. Actually you couldn’t, because one feature of the prison camp economy was that it usually did manage to stretch the cigarette supply to the next shipment.

I’ve been wondering who arranges the distribution of goods to be achieved by Thomas and his fellow engines. Sir Topham Hat tells them what has to be moved where, there are occasional farmers and manual workers, and of course the engineers and firemen and people responsible for maintaining the trains, and that seems to be about it. Off topic, though of course the engines have no need for money, just amour-propre and the nascent desire to be really useful.

For some reason, this description, especially the last sentence, makes me think that the world of Thomas the Tank Engine is basically the same as the Culture. No visible economics and artificially-intelligent vehicles pottering around the place having adventures. Sir Topham Hatt is clearly a Culture Mind.

Alex, as my dad told it there were two economic patterns. The first as you have described, the other where on the arrival of the Red Cross parcels, the non-smokers (a minority to which my dad belonged) traded all their cigarettes as quickly as possible for chocolate on the grounds that it was a. non-perishable and b. a good iron ration. This trade had to be done quickly, as there wasn’t all that much chocolate and it tended to get eaten if you hung around, but the rate at times went up to a full chocolate ration for a couple of fags – often depending, as you point out, on expectations for the next consignment. The non-smokers’ fags then went into the general trading economy you’ve outlined.

The role of the chocolate in this, as a good which carries a very high value for the non-smokers and a very low value (or low enough to be negligible compared to tobacco) for the smokers, seems to introduce an analogy with international trade in the early modern period, where isolated economic areas exchanged goods which carried high use or status value for the purchaser but were trivially cheap for seller to produce and distribute. It’s possible to see the non-smokers as imperialists monopolising the chocolate market to the clear detriment of the smokers whose available calories they were diminishing.

How about the Billy Goats Gruff as a fable for monopoly busting? By getting rid of the “troll,” i.e. rent seeking monopolists, consumers, the goats, get fat off of their consumer surplus.
http://en.wikipedia.org/wiki/Billy_goats_gruff

Faust?

I suspect that a lot of the fairy stories about money have the same message as many other fairy stories, which is “be satisfied with what you are, don’t get ambitious, don’t be uppity, don’t rock the boat”. In this case it would be “don’t lust after money, being rich will only make you unhappier than you are at the moment”.

zamfir,

Faust is dissatisfied, disgusted even, with knowledge. This prompts him to sell his soul for youth, power, and money. Pursuit of those things gets him in trouble — interesting, eventually salvational, trouble per Goethe, but just damning trouble per the folk tale.

I don’t see the story as at all cautionary about systems of thought, except maybe that they are so pointless and powerless that acquiring such “knowledge” is likely to lead one to give up in disgust at some point, and make a fool of oneself pursuing the department secretary or some other person 40 years one’s junior. I’m sure I’m dating myself with such an example, since academic departments probably can’t afford secretaries anymore.

Tim Wilkinson,

I don’t think that by “knowledge of Good and Evil” (I assume you’re referring to that story as a counter-example to my idea that there aren’t folk tales warning about the dangers of literacy), we are meant to understand some technical system of ethics that God was trying to keep from man, lest he grow too powerful or some such. I do have to concede that the reason they bite, so to speak, does seem to involve some false idea that this “knowledge” is going to be somehow empowering, make them like their Creator. But it turns out not to be like that at all. The difficulty it creates for them isn’t that it gets out of control, has a mind of its own, makes them too powerful in ways they don’t have the wisdom to control (all the things that “perils of money” fables dwell on).

The problem for these first humans from this “knowldege” is that it enfeebles, rather than empowers. The word probably should have been translated as “awareness” or “self-consciousness” about good and evil. Essentially, this is the first awakening of a sense of shame or guilt being described as the result of eating the fruit of the forbidden tree, not the awakening of some powerful tool at man’s disposal. Mankind doesn’t run into trouble as a result of this “knowledge” because the knowledge runs amok with autonomous and uncontrolled power. The “knowledge” isn’t systematic or alienated from the individual thinker, as happens after literacy and systems of thought are invented, it is rather the intensely personal consciousness that individual acts have the potential to be right or wrong.

If you’re going to find any scrap of a reference to systems of thought in this story, and it’s a stretch, it would be by seeing clothing, which Adam and Eve adopt only after acquiring this shame and guilt, as a metaphor for the systems of ethics that people, now that we know right from wrong, invent to systematically justify ourselves, to get rid of this new shame by means of a surface technology that doesn’t really change the underlying reality. But that’s a stretch, I would think.