Sunday, 22 November 2015

The Economics of Hunger Games

It's Hunger Games time! November has been the highlight of the year for us Hunger Games fans - now for the last time. Straight after my exam thursday, I went to my friend's place and we had an incredibly nice marathon of the first three movies (complete with chocolate, biscuits, cake and take-away thai food!), after which we rushed to the cinema to see the last movie. And it was good - as good as a cinema portrayal of splendid novels you can imagine. Yes, I love the story, but I'm Team Gale so I'm obviously less-than-thrilled about how Collins make Katniss like/love Peeta throughout the story. 

Now, this is Life of an Econ Student and so economic analysis is required. A quick googling shows that quite a few people have written on the economics of Panem: Matthew Yglesias @ Slate, Erik Kain at Forbes, Jeffrey Tucker, Sara Skwire at FEE.org. Me? Never had much thoughts about the economics of Panem - until thursday that it. So here's a quick overview of what struck me as somewhat weird.

The absence of transactions
A whole lot of economic activity is depicted throughout the series,  such as black-market trade in district 12, Peeta's family's bakery, commodity-production in various districts, betting on tributes in the Capitol, but we are hardly ever shown the actual transactions or the money used in those transactions. In one particular scene where Katniss is trading her bounty from the forest with Greasy Sae, the importance is the Mockingjay Pin as a gift rather than the barter going on.

Hang on. Barter. The only transaction we see is one of barter. But any and every economic textbook would give you the four uses of money (medium of exchange, unit of account, store of value, standard of deferred payment) and economic theory tells us that money naturally emerges from barter in any economy. Why? Barter economies are limited by the double coincidence of wants; it only works if I want exactly what you have, and you want exactly what I have - in those quantities, and divisible accordingly. And so a barter economy would be very limited and poor, since transaction costs and searching for a trade-partner would be costly. But in Panem we have a highly-advanced and wealthy Capitol (where no use of money is ever seen) and terribly poor outer districts (where again no use of money is ever seen). That's weird.

High-tech and Innovation in a command economy?
And all the high-tech equipment that exists and keep being produced throughout the story requires innovation - but tightly-controlled authoritarian command economies like Panem discourage rather than encourage innovation. So we'd expect to see a technologically-deteriorating society, especially after 70+ years of Capitol rule. After all, there are no transactions (and so very limited use of prices) which would create the famous Calculation Problem.

Division of labour gone astray
Moreover, the District-specific division of labour is awkward; at the heart of Economics lies division of labour and comparative advantage, the idea that if two people specialize in producing one good each and then trade with one another, they could produce more than if both had to produce their own two commodities. The idea is easily expressed in non-economicsy terms: even if Lionel Messi is way better than me at both football and mowing the lawn, it makes sense for him to play football and me to mow, since he's so much better a football player than me. But in Panem, more or less everyone in a particular district has to chop trees or mine coal, regardless of their actual skills and abilities. That is, Panem (and the Capitol) could have been better off, if people were allowed to produce in accordance with their comparative advantage. So even if the Capitol and President Snow is motivated by making life miserable for anyone but the people in the Capitol (or district 1-2), he could do so in ways that would produce even more wealth for himself and the Capitol by using comparative advantage more adequately.

Ultimately, though, Hunger Games is not about economics, and there isn't much economic interpretation to be made. It is mainly about dreams, valor, sacrifice, love, trust, friendship and sanity in face of horrible conditions. And there's a whole bunch of political inferences to be made.

The month of November will never be the same again as we say farewell to our beloved Hunger Games.

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