Potterian Economics

Abstract

Recent studies in psychology and neuroscience offer systematic evidence that fictional works exert a surprisingly strong influence on readers and have the power to shape their opinions and worldviews. Building on these findings, we study what we term Potterian economics, the economic ideas, insights, and structure, found in Harry Potter books, to assess how the books might affect economic literacy. A conservative estimate suggests that more than 7.3 percent of the world population has read the Harry Potter books, and millions more have seen their movie adaptations. These extraordinary figures underscore the importance of the messages the books convey. We explore the Potterian economic model and compare it to professional economic models to assess the consistency of the Potterian economic principles with the existing economic models. We find that some of the principles of Potterian economics are consistent with economists models. Many other principles, however, are distorted and contain numerous inaccuracies, contradicting professional economists views and insights. We conclude that Potterian economics can teach us about the formation and dissemination of folk economics, the intuitive notions of naive individuals who see market transactions as a zero-sum game, who care about distribution but fail to understand incentives and efficiency, and who think of prices as allocating wealth but not resources or their efficient use.

Full text

Oxford Open Economics
, 2022,
1
, 1–32
https://do i.org/10.1093/ooec/odac004
Advance access publ ication date 19 July 2022
Research Article
Potterian
economics
Daniel Levy
1 ,2 ,3 ,4 ,
* and Avich ai Snir
5
1
Departm ent of Economics, Bar-I lan University, Ramat Gan 5290002, Israel
2
Department of Eco nomics, Emory Univ ersity, Atl anta, GA 30322, USA
3
International School of Economics at Tbilisi State University, 0108 Tbilisi, Georgia
4
ICEAand RCEA
5
Departm ent of Banking and Financ e, Netan ya Acad emic Coll ege, Netan ya 42365, Israel
*Correspondence address. Department of Economics, Bar-Ilan University, Ramat Gan 5290002, Israel. E- mail: Daniel.Levy@biu .ac.il
Abstract
Recent studies in psychology and neuroscience offer systematic evidence that fictional works exert a surprisingly strong influence
on readers and have the power to shape their opinions and worldviews. Building on these findings, we study ‘Potterian economics’,
the economic ideas, insights and structure, found in Harry Potter books, to assess how the books might affect economic literacy. A
conservative estimate suggests that more than 7.3% of the world’s population has read the Harry Potter books, and millions more
have seen their movie adaptations. These extraordinary figures underscore the importance of the messages the books convey. We
explore the Potterian economic model and compare it to professional economic models to assess the consistency of the Potterian
economic principles with the existing economic models. We find that some of the principles of Potterian economics are consistent with
economists’ models. Many other principles, however, are distorted and contain numerous inaccuracies, contradicting professional
economists’ views and insights. We conclude that Potterian economics can teach us about the formation and dissemination of folk
economics—the intuitive notions of naïve individuals who see market transactions as a zero-sum game, who care about distribution
but fail to understand incentives and efficiency and who think of prices as allocating wealth but not resources or their efficient use.
‘I think the writers [of popular literature] are not particularly sympathetic to or don’t understand how a market works. It’s not easy
to convey that to a child. It’s not always easy to convey it to grown-ups.’
Gary Becker
(
New York Times
, August 21, 2011, p. SR5).
‘With all due respect to Richard Posner, Cass Sunstein, or Peter Schuck [reference to the books these scholars published in 2005], no
book released in 2005 will have more influence on what kids and adults around the world think about government than [Rowling’s]
The Half-Blood Prince
.’
Benjamin Barton
(
Michigan Law Review
, 2006, p. 1525).
‘As economic theorists, we organize our thoughts using what we call models. The word “model” sounds more scientific than “fable” or
“fairy tale” although I do not see much difference between them. The author of a fable draws a parallel to a situation in real life. He has
some moral he wishes to impart to the reader. The fable is an imaginary situation that is somewhere between fantasy and reality. Any
fable can be dismissed as being unrealistic or simplistic, but this is also the fable’s advantage. Being something between fantasy and
reality, a fable is free of extraneous details and annoying diversions. In this unencumbered state, we can clearly discern what cannot
always be seen in the real world. On our return to reality, we are in possession of some sound advice or a relevant argument that can
be used in the real world.”
Ariel Rubinstein
(
Econometrica
, 2006, p. 881).
‘An investigation of novels and [economic] models
...
may help us better understand how the public thinks about economic issues.’
Tyler Cowen
(
The Street Porter and the Philosopher: Conversations on Analytical Egalitarianism
, 2008, p. 321).
Keywords:
popular opinion, Potterian economy, Harry Potter, economic and financial literacy, folk economics, social organization of
economic activity
INTRODUCTION
According to Caplan (2007), ‘
...
modern economic
theories
...
begin by assuming that the typical citizen
understands economics and votes accordingly.’ Empirical
evidence, however, suggests that the economic literacy
of the public is low. For example, OECD (2014, p.
1) reports that only ‘
...
10 percent of students can
analyze complex financial products
...
while 15 per-
cent can, at best, make simple decisions about every-
day spending.’ Similarly, to assess financial literacy,
Tang et al. (2015) surveyed American young adults,
asking them three simple intuitive questions, and
find that the participants answered correctly only 1.8
questions, on average.
Received:
April 25, 2022.
Revised:
April 25, 2022 .
Accepted:
June 2, 2022
© The Author(s) 2022. Publish ed by Oxford University Press.
This is an Open Access article distributed under the terms of the Creative Commons Att ribution Lic ense (https://creativecommons.org/licenses/by/4.0/), which
permits unrestricted reuse, distribution, and rep roduction in any medium, provided the or iginal work is properly cit ed.
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Similar findings were reported in 2014 in Israel:
82.2% of the Israeli adults could not identify the interest
rate that the Bank of Israel sets monthly. This is despite
the attention the media has paid to it with the rate cut
to 0.25%, the lowest level ever (Source: www.ynet.co.il/
articles/0,7340,L-4568826,00.html (in Hebrew), accessed
June 6, 2022.). Consistent with these findings, Nelson
and Sheffrin (1991, p. 157) state that ‘The level of
economic knowledge among most high school students
is shocking.’
There is evidence that better economic literacy
improves economic decision-making, and therefore, the
low level of economic literacy is worrisome as it may
lead to poor financial planning (Note: See Bernheim et
al. (2001), Boisclair et al. (2014), Gerardi et al. (2013),
Brown et al. (2014), Grohmann et al. (2015), Lusardi
& Mitchell (2014), Wiedrich et al. (2014) and Rubin
(2018).). It may also lessen the effectiveness of economic
policy (Bernanke, 2006). There is also evidence that the
general public has biases and misconceptions about the
economy, which influence and shape its views about the
role of public policy (Rubin, 2003; Caplan, 2007; Hillman,
2010). These observations raise questions about how
people acquire their knowledge about the economy.
It is widely accepted that literature, even fictional, is
a mirror of culture and society (Albrecht, 1954). Recent
studies in psychology and neuroscience, however, find
that causality goes the other way as well, offering
systematic evidence of fictional stories’ effects on the
human mind (Hakemulder, 2000; Mar, 2004; Appel, 2008).
We focus on the potential influence of literature on
people’s views and opinions about the economy and its
functioning, by studying the economic principles that
Harry Potter books convey. We chose Harry Potter books
because studies that focus specifically on these books
find that they not only relate to and reflect the readers’
views but also have a powerful influence on them.
Although Harry Potter books belong to the fantasy
genre, Harry Potter lives not only in a social world but
also in an economic one. Indeed, the Potterian world
is rich with economic institutions and ideas, including
monopolies, inefficient government, limited social mobil-
ity, trade restrictions and other regulations, insufficient
social capital, commodity money, prices, banking, etc.
Not surprisingly, these economic ideas are unnoticed by
most readers. But perhaps surprisingly, they are often
unnoticed also by professional economists. Indeed, when
we offered a colleague a list of the economic ideas we
identified in the books, his response was, ‘Well, you are
right, I completely missed that.’
Studying what we term ‘Potterian economics’ is inter-
esting for several reasons. First, as Lucas Jr. et al. (2002),
Blinder & Krueger (2004), Giovannini & Malgarini (2012),
and Cruijsen et al. (2010) note, the public acquires much
of its knowledge about economics through popular inter-
mediaries (books/newspapers, etc.), but the role of these
intermediaries in shaping the public’s views and opinions
about economics has received little attention.
Second, among all such intermediaries, Harry Potter
books are of particular importance because they are
among the most popular books of our times. The
books are popular among children and adults, men
and women, irrespective of income and education.
In sales, Harry Potter books rank fifth after
The Holy
Quran
with over 3 billion copies sold,
The King James
Bible
with over 2.5 billion copies sold,
The Quotations of
Chairman Mao Zedong
with 800 million copies sold, and
Don Quixote
with 500 million copies sold (Source: www.
stylist.co.uk/books/the-all-time-most-popular-books-
in-the-world-revealed/127306, accessed June 6, 2022.).
Rowling (2005) sold almost 7 million copies in the US
and over two million copies in the UK just on the first
weekend of its release (Source: news.bbc.co.uk/2/hi/
entertainment/4692093.stm, accessed June 6, 2022.).
In total, over 450 million copies were sold in over 200
countries. For comparison, Tolkien’s
The Hobbit
was in
print for more than 60 years and sold over 40 million
copies, while Tolkien’s
The Lord of the Rings
was in print for
almost 50 years and sold over 50 million copies (Shippey,
2002, p. xxiv).
Harry Potter books have been translated into 73
languages, including Afrikaans, Albanian and Arabic,
all the way to Vietnamese, Welsh and Zulu. The books
have even been translated into two dead languages, Latin
(‘Harrius Potter’) and Ancient Greek (‘A
ρει
o
σ IT
o
τ ιηρ
’),
the latter translation being the longest work in the
language since the novels of Heliodorus of Emesa in the
third century AD (Source: https://en.wikipedia.org/wiki/
Harry_Potter_in_translation#List_of_translations_by_
language, accessed June 6, 2022.) In some countries, the
books have been translated into several local languages.
There are also pirate and unofficial translations as well
as counterfeit versions. For example, according to the
July 13, 2007 NPR’s Morning Edition, ‘Faking Harry Potter
books has become a cottage industry in China.’ Examples
include ‘Harry Potter and the Golden Vase,’ ‘Rich Dad,
Poor Dad and Harry Potter, etc.
.......
Don’t worry if you’ve
never heard of these books. They’re totally made up with
no resemblance to the real thing.’ (Source: www.npr.org/
templates/story/story.php?storyId=11945354, accessed
June 6, 2022.).
By our conservative estimates, more than 7.3% of the
world’s population of 6.08 billion has read the books
(Source of population figures: www.infoplease.com/ipa/
A0762181.html, accessed June 6, 2022.). The estimate is
conservative, and thus the actual share likely exceeds it
because (1) the sales figure doesn’t include unauthorized
translations and their sales, and (2) the actual number of
readers likely exceeds the number of copies sold because
a single copy is often read by many, e.g. by an entire
family. Hundreds of millions have also seen their movie
adaptations. In the US alone, Harry Potter movies sold
350 million tickets (Source: https://mrob.com/pub/film-
video/topadj.html, accessed June 6, 2022.). Nine thou-
sand FedEx trucks were used in the US, to deliver the
initial release of
The Goblet of Fire
alone. The last four
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Levy and Snir
books in the Harry Potter series were the fastest-selling
books in history, with the final book selling roughly 11
million copies in the US within 24 hours of its release.
A recent study by Facebook’s computer scientists
reported that in a meme about ‘What Books Stayed
with You,’ 130 000 participants (their average age was 37)
ranked the
Harry Potter
books as the number 1.
The Bible
ranked sixth (Source: ‘Harry Potter Tops List of Facebook
Users’ Favorite Books,’
The Telegraph
, September 10, 2014.
For details about the survey, see the Facebook post of
the authors of the study: https://www.facebook.com/
notes/facebook-data-science/books-that-have-stayed-
with-us/10152511240328859/, accessed June 6, 2022.).
These extraordinary figures underscore the importance
of the messages the books convey.
In that context, compare the Harry Potter books to the
best-selling economics textbooks that were authored by
Samuelson, selling over 4 million copies in 40 languages,
and Mankiw, selling over one million copies in 17 lan-
guages (Source: en.wikipedia.org/wiki/Paul_Samuelson,
and en.wikipedia.org/wiki/Greg_Mankiw, accessed June
6, 2022.). These figures, although impressive, are dwarfed
by the sales figures of Harry Potter. Clearly, it is not fair to
compare a popular fantasy book to academic textbooks,
no matter how successful the latter are. The point, how-
ever, is that to the extent that Harry Potter books teach
millions of people of all ages, principles of economics,
identifying these principles is informative and important.
Third, Potterian economics can teach us about the
formation and dissemination of folk economics (Rubin,
2003)—the intuitive notions of naive individuals who
care about distribution but fail to understand incentives
and efficiency. Cowen (2008), for example, argues that
literary works can help us understand what people think
about economic issues. Following these arguments, our
thesis is that Potterian economics may reveal some of the
ideas of folk economics. Indeed, as far as we know, J.K.
Rowling is not an economist (she majored in French and
Classics), and therefore Potterian economic model may
be viewed as a layman’s model and thus, it might reflect
on the general public’s attitudes and understanding of
the economy.
Fourth, if fiction’s influence is particularly strong
on adolescents, and if a significant proportion of the
readers of Harry Potter are children and teenagers, then
understanding Potterian economics may also shed light
on the sources of illiteracy that studies have documented
among young adults (Tang et al., 2015) (Note: Lunt
& Furnham (1996) contain essays on children’s and
adolescents’ knowledge of economics and economic
matters.) Indeed, many colleges and universities, includ-
ing some Ivy League schools, recognize the influence
of Harry Potter, and try to take advantage of the Harry
Potter bandwagon in their sales’ pitch, in their efforts to
make their institutions more attractive to the candidates
of Harry Potter generation. According to Lauren Edelson,
during her visits to various university campuses, she
heard from numerous host tour guides, how similar
their school was to the Hogwarts. For example, ‘During
a Harvard information session, the admissions officer
compared the intramural sports competitions there to
the Hogwarts House Cup. The tour guide told me that I
wouldn’t be able to see the university’s huge freshman
dining hall as it was closed for the day, but to just
imagine Hogwarts’s Great Hall in its place.’ (Source:
Lauren Edelson, ‘Taking the Magic Out of College,’
New
York Times
(New York Edition), December 6, 2009, Op-Ed
Contribution, p. WK12.).
Literary scholars have also emphasized the unique
importance of Harry Potter books. For example, according
to John Pazdziora, speaking at Britain’s first academic
conference on Harry Potter in 2012, ‘We cannot avoid the
fact that Harry Potter is the main narrative experience of
an entire generation, the children who quite literally grew
up with Harry Potter. The Harry Potter novels are simply
the most important and influential children’s books of
the late 20
th
and early 21
st
centuries. For very many
people, this is their first experience of literature, and of
literary art
...
These are the most important, seminal
texts for an entire generation of readers
...
In 100, 200
years’ time, when scholars want to understand the early
21
st
century, when they want to understand the ethos
and culture of the generation that’s just breaking into
adulthood, it is a safe bet that they’ll be looking at the
Harry Potter novels.’ (See: A. Cramb, ‘Harry Potter and the
Philosophers Conference at St Andrews University,’
The
Telegraph
, May 17, 2012, and A. Flood, ‘Harry Potter and
the Order of the 60 Scholars Gets Mixed Initial Reception,’
The Guardian
, May 18, 2012.)
The importance of Harry Potter books has been rec-
ognized by scholars in other fields besides literature. For
example, they have been used to assess the completeness
of tort theories (Hershovitz, 2010), and to shed light on
the Anglo-American interpretation of rule of law (Liston,
2009; Thomas and Snyder, 2010). Barton (2006) studies
governments’ legitimacy. Sheftell et al. (2007) identify the
headache episodes found in the books as symptomatic of
migraine. Woeste (2010) revisits the debate over free will
and determinism. As of June 6, 2022, Amazon listed over
40 000 items with ‘Harry Potter’ in the title, over 20 000
of them under books. The titles include:
The Psychology
of Harry Potter
,
Harry Potter and History
,
Harry Potter and
International Relations
,
Harry Potter and Philosophy
,
Ethics in
the Bible and the World of Harry Potter
,
The Law and Harry
Potter
, and
The Sociology of Harry Potter
. Other Harry Potter
titles (along with comparable economics titles) include,
Who Killed Albus Dumbledore?
by Wendy Harte 2006 (com-
pare it to
Who Killed John Maynard Keynes?
by Carl Biven
1989),
Rowling Revisited
by James Thomas 2010 (compare
it to
Revisiting Keynes
by Lorenzo Pecchi and Gustavo Piga
2008),
The Complete Idiot’s Guide to the World of Harry Potter
by Tere Stouffer 2007 (compare it to
The Complete Idiot’s
Guide to Economic Indicators
by Mark Rogers 2009),
Harry
Potter and the Classical World
by Richard Spencer 2016
(compare it to
Keynes and the Classics Reconsidered
by James
Ahiakpor 1998), etc.
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In addition to books, there are also hundreds of papers,
published and unpublished. For example,
SSRN
lists 63
Harry Potter studies in law, administrative science, polit-
ical science, philosophy, history, marketing, etc.
SciVerse-
Scopus
lists 46 items in engineering, neuroscience,
psychology, etc. (Source: estrip.org/articles/read/tiny
pliny/45318/Harry_Potter_in_Scientific_Literature.html,
accessed June 6, 2022.). We also found 51 articles in
PubMed
. Finally, the Jstor database includes 159 papers,
with ‘Harry Potter’ in their title (accessed June 6,
2022).
In addition, numerous academic conferences were and
are still devoted to these studies. For example, in 2012,
the University of California, San Diego, and the National
Institute of Health, held a joint lecture series and an
exhibit on ‘Harry Potter’s World: Renaissance Science,
Magic, and Medicine.’ The lecture series featured UCSD
scholars from medicine, mathematics, engineering and
literature. According to the UCSD News center, the inter-
est of the UCSD medical scholars in Harry Potter stems
from the fact that ‘
...
the magic depicted in the popular
Harry Potter novels
...
can be traced to Renaissance
traditions that played a pivotal role in the development
of modern science and medicine.’ (Source: http://
ucsdnews.ucsd.edu/pressrelease/harry_potters_world_
renaissance_science_magic_and_medicine/,
accessed
June 6, 2022.) Chestnut Hill College in Philadelphia, PA,
holds an annual conference on Harry Potter. The interdis-
ciplinary conference includes several parallel sessions,
on such topics as young adult literature, textual analysis,
politics and justice, education and science, literature
and education, psychology and philosophy, character
studies, etc. (Source: https://www.chc.edu/events/10th-
anniversary-harry-potter-academic-conference-hpac-x,
accessed June 6, 2022.).
However, economic studies of Harry Potter are scarce
(Note: Economic analysis of literary works includes Watts
(2002, 2003), Rockoff (1990) and Bookman & Bookman
(2008).). Exceptions include Gouvin (2010) and Schooner
(2010), who study the role of the Potterians’ only bank,
the Gringotts, and Snir & Levy (2010), who try to under-
stand the reasons for the lack of economic growth in the
Potterian economy. Podemska-Mikluch & Deyo (2014) and
Podemska-Mikluch et al. (2016) focus on the benefits of
using Harry Potter series for undergraduate economics
teaching. Salonikov et al. (2022) find evidence that the
Harry Potter books affect readers’ perceptions of vari-
ous economic issues including banks, bureaucracy and
money.
In this paper, we investigate the Potterian economy
by analyzing its full structure. We find that it combines
ingredients from various economic models but is not
fully consistent with any particular model. Some fea-
tures of the Potterian economy are in line with Marx-
ist views, while others fit the public choice perspective.
Prices in the Potterian economy are rigid in the Keynesian
spirit, yet Potterians enjoy full employment as in the
Classical model.
We conclude that the Potterian model reflects folk
economics. As such, although it is sometimes con-
sistent with economists’ views, many of its deeper
aspects of economics are distorted, containing numerous
inaccuracies, which might potentially be absorbed by
the public, and contribute to its lack of literacy on
economic matters. This is particularly true for the young
readers, who figure prominently among Harry Potter
readers.
The paper is organized as follows. In section 2, we
review the economic literacy literature. In section 3, we
discuss fiction’s influence. In section 4, we describe the
setting. In section 5, we study money, credit, and banking.
In section 6, we consider prices and their properties. In
section 7, we focus on the foreign exchange rate and the
commodity value of the Galleon. In section 8, we look
at the Potterian government. In section 9, we discuss
the law and order. In section 10, we focus on monopo-
lies, oligarchies, and other pathologies. In section 11, we
study income distribution in the Potterian economy. In
section 12, we study international trade and migration.
In section 13, we study war economics. In section 14, we
study technological progress. In section 15, we discuss
the Potterian education system and human capital. We
conclude in section 16 by summarizing the implications
of our findings, addressing possible objections to our
interpretation, and discussing some caveats (Note: The
online supplementary appendix contains a detailed ref-
erence to all economic themes, topics and issues we
have identified in the Harry Potter books, along with the
quotations of the relevant texts from the books, and their
exact locations.).
ECONOMIC LITERACY
The topic of economic literacy is not new. Newcomb
(1893, p. 395) wrote over 120 years ago about the need
to educate the public because of the gap between ‘well-
established economic conclusions on the one hand and
the ideas of the public on the other.’
In 1948, at the First Workshop on Economic Education,
Ernest Melby stated that economic education was a key
to the survival of democracies: ‘Democracy will live if it
works and
...
die if it does not...if it fails in the economic
front it will
...
go down to defeat
...
[for] survival of our
way of life, there is no kind of education more important
than that which seeks to make the average American
intelligent about our economic system’ (Troelstrup, 1954,
p. 238).
The importance of economic education was also
emphasized by the US Fed. For example, the Fed Governor
Ben Bernanke (2006) stated: ‘The Federal Reserve’s
mission of conducting monetary policy and maintaining
a stable financial system depends upon the participation
and support of an educated public.’ Bernanke (2011)
further emphasizes the individual benefits of economic
literacy: ‘Well-informed consumers
...
are one of the best
lines of defense against the proliferation of financial
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products
...
that are unsuitable, unnecessarily costly, or
abusive.’
The American Economic Association (AEA) has been
involved in economic education since 1885. Hinshaw &
Siegfried (1991) describe the AEA’s efforts ‘
...
to edu-
cate public
...
about economic questions and economic
literature’ (p. 373). The AEA’s Committee on Economic
Education has been active since the mid-1940s. The AEA
routinely holds panels about teaching economics at its
annual meetings. The establishment of the
Journal of
Economic Education
in 1969 is also noteworthy. The US
Fed has also been engaged in economic education for
decades. For example, it offers teaching resources for K-
12 grades on finance, banking, monetary policy, etc. OECD
is also involved in these efforts (Atkinson and Messy,
2011) (Note: Gleason & Van Scyoc (1995) offer evidence
on economic literacy in the US. Jappelli (2010) offers
international evidence. See also Nelson & Sheffrin (1991)
and the studies cited therein. Lusardi & Mitchell (2014)
offer a survey.).
Despite these projects and efforts, the public rarely
interprets economic ideas the same way as economists
do (Alston et al. (1992) and Blendon et al. (1997).).
Caplan (2007) argues that the public has various biases.
(Note: Many biases of today’s public are remarkably
similar to the biases noted more than a century ago
by Newcomb (1893).), which Rubin (2003, pp. 157–
158) calls folk economics, and which ‘
...
can explain
the beliefs of naïve individuals regarding [economic]
matters
...
[Folk economics] is the economics of wealth
allocation, not production. Naive people
...
think of
prices as allocating wealth but not
...
resources
...
The
world of folk economics is zero-sum...if one person gets
a job someone else must lose a job
...
Economists would
do a better job of persuading others
...
if we paid explicit
attention to folk economics.’ Krugman (1996) lists some
popular books, and notes two features they share: ‘They
all offer a view
...
of international trade as
...
“win-lose”
competition
...
And they all contain little or nothing of
what economists think
...
about international trade’ (p.
viii). Referring to Lunt & Furnham (1996), Rubin (2003,
p. 158) notes that
...
‘the index to the book contains no
entry for efficiency or productivity.’ Paldam & Nannestad
(2000) find that Danish voters are myopic and have
prediction biases.
Blinder & Krueger (2004) and Caplan (2001) find that
educated people tend to think like economists. Jappelli
(2010) finds that the overall economic literacy level is low,
although he documents a positive correlation between
education and economic literacy (Blinder et al., 2008).
Education by itself, however, does not always guarantee
economic literacy. For example, according to Blank (2002,
p. 476), ‘A high share of
...
Congressional staff (never
mind their bosses) do not understand basic economic
principles.
...
in most meetings, my main role
...
was to
lean forward and convincingly apply one of the follow-
ing three concepts to the problem at hand: supply and
demand, opportunity cost, or scarcity.’
To learn economics, one could take college economics
courses. However, ‘only about 10% of adults ever take
college economics.’ It would be better to increase ‘
...
the
quality and quantity of discussion of economics in the
mass media. When a TV show like “West Wing” considers
the benefits and costs of free trade, it probably has more
impact on the economic literacy
...
than all freshmen
economic courses combined’ (Krueger, 2002, pp. 475–476).
Indeed, some studies document the effect of TV shows on
the political attitudes of the audience. See, for example,
French & van Hoorn (1986), Lenart & McGraw (1989),
and Mutz & Nir (2010). Mutz (2016) surveys some of
the studies that find that fictional stories can influence
political opinions, and offers evidence-based on the most
recent data from the 2017 US presidential elections.
Confirming Krueger’s (2002) assessments, Blinder &
Krueger (2004) find that for US adults, print and elec-
tronic mass media serve as the primary source of infor-
mation about economic issues. Similarly, Cruijsen et al.
(2010) find that the Dutch public learns about ECB’s mon-
etary policy through the media. Caplan (2007) suggests
that people are gullible and might believe what they read.
A good analogy is offered by Gottschall (2012) in ana-
lyzing the stubborn persistence of superstitions, which
it turns out, are not limited to the uneducated. Indeed,
according to Park (2008) and Aaronovitch (2010), many
conspiracy theories originate and circulate among the
educated. Many superstitions have survived long periods
of time, and an incredible number of people seem to
believe them.
According to Gottschall (2012, p. 106), ‘Many conspir-
acy theories would be funny except for the fact that
stories
...
have consequences. For example, in Africa,
many believe that AIDS is a racist hoax designed
to
...
perpetrate a bloodless genocide. Believing this gets a
lot of Africans killed.’ On July 21, 2014, Christiane Aman-
pour ended her CNN show with a discussion of a denial
of moon landing: ‘One of man’s greatest achievements
[is] still
...
denied. 45 years ago
...
Armstrong and Aldrin
walked on the moon
...
But almost from the start, there
were those who said
...
that the whole thing had been
staged
...
the deniers persist.’ (Source: edition.cnn.com/
TRANSCRIPTS/1407/21/ampr.01.html, accessed June 6,
2022.).
HOW FICTION REFLECTS AND AFFECTS
POPULAR VIEWS AND PERCEPTIONS
Literary works serve as a mirror of society. According
to Bloch (1961, p. 102), for example, ‘In every litera-
ture, a society contemplates its own image.’ Similarly,
Tiemensma (2010, p. 3) states that ‘Stories are the
structural coding of social values, beliefs, and goals that
underlie human interaction.’ Literature, even fictional,
reflects the life, the views, the norms and the beliefs of
the society. Indeed, texts are often used in social sciences
to learn how people of different societies and different
times view the world (Dickstein, 2005).
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The causal relationship between fiction and society,
however, goes the other direction as well. The recognition
that literature can influence society is not new. Consider,
for example, the list of the books and writings that were
banned throughout the history precisely because of the
conviction that they had a strong and deep influence on
the human mind. According to Newth (2010), the practice
of censorship of books can be traced to the Romans, as
far back as 443 BC, with the establishment of the Office
of Censor: ‘In Rome, as in the ancient Greek communi-
ties, the ideal of good governance included shaping the
character of the people. Hence, censorship was regarded
as an honorable task. In China, the first censorship law
was introduced in 300 AD.’
The invention of the printing press in the 15th cen-
tury increased the need for censorship further, primarily
because of the emerging tensions between the Catholic
Church and the Protestant movement, which led to the
introduction of the first
Index Librorum Prohibitorum
(Index
of Prohibited Books) by Pope Paul IV in 1559. According to
Newth (2010), the Index was re-issued 20 times since then
by different popes, and the last update was published in
1948.
However, book censorship was not limited to religious
authorities, and throughout the history, it served other
goals and motives, primarily political. USSR and its allied
countries took book censorship to new levels (recall the
books of Solzhenitsyn, Sakharov, etc.). Perhaps surpris-
ingly, libraries played an important role in supporting
censorship: Public libraries were expected to act as the
benevolent guardians of literature, particularly books
for young readers. Consequently, this gave teachers and
librarians license to censor a wide range of books in
libraries, under the pretext of protecting readers from
morally destructive and offensive literature.
Even in liberal-minded countries such as Sweden and
Norway, which boasts the earliest press freedom laws,
surveillance of public and school libraries remained a
concern to authors and publishers even through the
latter part of the 20th century. Not less surprising is the
die-hard tradition of surveillance of books in schools and
libraries in the United States. For example, the Library of
Congress is holding a multi-year exhibition featuring
The
Books that Shaped America
(https://www.loc.gov/exhibits/
books-that-shaped-america/overview.html, accessed
June 6, 2022.). According to the curators, ‘Some of
the titles on display have been the source of great
controversy, even derision, yet they nevertheless shaped
Americans’ views of their world and often the world’s
view of the United States.’ Many of the books displayed
at the exhibit were banned in the US (Haight, 1978).
The American Library Association lists on its page the
top 100 banned books during the years 2000–2009. Harry
Potter books top the list, which were banned in the US
by some religious authorities as well as by some schools
(Scheffer, 2010) (Source: http://www.ala.org/advocacy/
bbooks/top-100-bannedchallenged-books-2000-2009,
accessed June 6, 2022.). This, however, was not limited
to the US. For example, Cardinal Joseph Ratzinger, who
later became Pope Benedict 16, in 2003 wrote a letter to
the author of the book,
Harry Potter: Good or Evil
: ‘It is
good that you enlighten us on the Harry Potter matter,
for these are subtle seductions
...
barely noticeable, and
precisely because of that have a deep effect and corrupt
the Christian faith in souls even before it could properly
grow.’ (Source: Pope Benedict XVI, March 2003 Letter,
London Times, July 13, 2005.)
Confirming this view, the Vatican newspaper
L’Osservatore Romano
published an article on January 15,
2008, which stated that Cardinal Ratzinger was right
to worry: ‘Despite the values that we come across in
the narration, at the base of this story, witchcraft is
proposed as a positive ideal. The violent manipulation
of things and people, comes thanks to knowledge of
the occult. The ends justify the means because the
knowledgeable, the chosen ones, the intellectuals know
how to control the dark powers and turn them into good.
This a grave and deep lie, because it is the old Gnostic
temptation of confusing salvation and truth with a secret
knowledge. The characterization of common men who
do not know magic as “muggles” who know nothing other
than bad and wicked things is a truly diabolical attitude.’
(Source: M. Moore and N. Reynolds, ‘JK Rowling’s Harry
Potter condemned in Vatican newspaper,’
The Telegraph
,
January 15, 2008.) Perhaps ironically, however, Amazon-
UK ‘
...
revealed it had received advance orders for
Harry Potter and the Half-Blood Prince
from
...
the Vatican.’
(Source: ‘Pope Criticizes Harry Potter,’ R. Blakely,
The
Times
, July 13, 2005.)
The perceived dangers that Harry Potter books pose,
have been noted by other religious authorities as well.
For example, in orthodox Judaism, some public figures,
newspaper editorials, etc. ridiculed the fascination of so
many people, young and old, with the imaginary tales of
Harry Potter and his friends, arguing that it is indicative
of the ‘... emptiness of the Western cultures’ (Source: Meir
Shalev, ‘Holy Harry Potter,’ Yedioth Ahronoth (daily news-
paper published in Israel in Hebrew), August 4, 2000).
Some Rabbinical authorities, however, were more open
minded. See, for example, Yvette Alt Miller, ‘Harry Potter
and Jewish Values,’ December 21, 2014 (Source: https://
aish.com/harry-potter-and-jewish-values/,
accessed
June 24, 2022), ‘5 Quintessentially Jewish Concepts
in the Harry Potter Saga,’ Forward, (Source: https://
forward.com/opinion/375984/5-quintessentially-jewish-
concepts-in-the-harry-potter-saga/, accessed June 24,
2022), and Judy Siegel-Itzkovich, ‘Researchers: Harry
Potter’s Wizardry OK with Rambam,’ Jerusalem Post, May
17, 2006 (Source: https://www.jpost.com/jewish-world/
judaism/researchers-harry-potters-wizardry-ok-with-
rambam, accessed June 24, 2022).
Similarly, Harry Potter books have been banned
in some Islamic countries, but not everywhere. For
example, the books were banned in the United Arab
Emirates (Source: ‘Emirates Ban Potter Book,’ BBC
News, February 12, 2002,
http://news.bbc.co.uk/2/hi/
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Levy and Snir
entertainment/1816012.stm, accessed June 24, 2022).
According to some Islamic scholars, the books themes
conflict with Islamic teaching because ‘Islam pro-
hibits both pointless entertainment (lahw) and sorcery’
(Source: Khalid Baig, ‘Harry Potter: Facts about Fiction,’
June 21, 2003, http://www.albalagh.net/current_affairs/
harry_potter.shtml, accessed June 24, 2022). In Iran, in
contrast, the books were published by the Ministry of
Culture and Islamic Guidance (Source: https://www.
hogwartsprofessor.com/ayatollah-condemns-harry-
potter/, accessed June 24, 2022).
Peter Smith of the UK Teachers Association warns
against the supernatural: ‘Children who had enjoyed the
magic and wizardry of the stories should be careful about
extending their interest in the occult.’ (Source news.
bbc.co.uk/2/hi/uk_news/education/1638887.stm, June 6,
2022.) Some schools have banned the books because
‘
...
they go against the Bible’s teaching.’ (Source: news.
bbc.co.uk/2/hi/uk_news/education/693779.stm, June 6,
2022.) Some British toy shops have even refused to
stock Potterian merchandise fearing it will attract
children to the occult (Source: news.bbc.co.uk/2/hi/
entertainment/1560335.stm, accessed June 6, 2022.).
According to the American Library Association, in 2005
‘
...
there were 26 challenges to remove the
Harry Potter
books from bookshelves in 16 states.’ (Source: www.
educationworld.com/a_admin/admin/admin157.shtml,
accessed June 6, 2022.)
A recent episode in Israel suggests that even People
of the Book might be afraid of books and find them
dangerous. In 2015, the Israeli Education Ministry has
decided not to include ‘Border Life,’ a novel by Dorit
Rabinyan, in its list of required readings for the matric-
ulation exams, because it includes a love story between
a Jewish Israeli woman and a Muslim Palestinian man.
Many Israeli school directors and educators fought the
Ministry over this decision and insisted on including the
book in their school’s required readings lists.
Authors also believe that their work can affect the
readers. According to Gottschall (2012), Tolstoy believed
that an artist’s job is to ‘infect’ his audience with his
own ideas and emotions—‘the stronger the infection, the
better is the art as art’ (p. 134). Similarly, ‘In his book
“The Act of Reading,” Wolfgang Iser writes that ideally,
a book should transform a reader by “disconfirming” his
habitual notions and perceptions and thus forcing him or
her to a new understanding of them’ (Tuck, 2015). Indeed,
there are many fictional works with a long-lasting impact
on popular views and opinions. These include
Uncle Tom’s
Cabin
,
Black Beauty
,
The Birth of a Nation, Jaws
,
1984
,
Dark-
ness at Noon
,
Roots
, etc.
The belief that books influence the readers has been
corroborated by recent studies in psychology that offer
systematic evidence of fictional stories’ effects on the
human mind and attitudes. These studies find that when
we read fiction, ‘
...
we allow ourselves to be invaded by
the teller (Note: In social psychology, the term ‘attitude’
refers to personal and social norms, prejudices, and
stereotypes. We use the term similarly to describe the
way people perceive and think about the world in which
they live, operate and make decisions.). The story maker
penetrates our skulls and seizes control of our brains
...
fiction subtly shapes our beliefs, behaviors, ethics
...
’
(Gottschall, 2012, pp. xvi–xvii).
Hakemulder (2000) reviews dozens of studies in
psychology that demonstrate that fiction can have a
profound effect on the readers’ thinking. Gottschall
(2012, p. 133–134) argues that ‘Fiction
does
mold our
minds
...
influences our moral logic
...
alters our behav-
ior...shaping our minds without our knowledge
...
Most
of us believe that we know how to separate fantasy
and reality
...
this is not always the case. In the same
mental bin, we mix information gleaned from both
fiction and nonfiction.’ Vezzali et al. (2012) report that
after reading books where characters with different
cultural backgrounds had positive interactions with one
another, Italian teenagers displayed more positive and
less stereotypical attitudes toward immigrants.
Mar (2004, p. 1414), based on evidence from neu-
roimaging, argues that ‘
...
reader attitudes shift to
become more congruent with the ideas expressed in
a narrative after exposure to fiction.’ Appel & Richter
(2007) and Appel (2008) find that fiction shapes readers’
views on fairness and justice (Note: The July 29, 2014
edition of ‘Room for Debate’ of the
NY Times
asked, ‘Will
Fiction Influence How We React to Climate Change?’)
Vezzali et al. (2015) survey psychology literature, which
shows that novels can have positive social impact. Green
et al. (2004) find that fictional worlds alter the way
we process information, and that the deeper we are
immersed in a story, the more influential the story is.
According to Gottschall (2012, p. 135), ‘Fiction readers
who reported a high level of absorption tended to
have their beliefs changed in a more “story-consistent”
way... [and] detected significantly fewer “false notes”
in stories—inaccuracies, infelicities
...
When we read
nonfiction, we read with our shields up. We are critical
and skeptical. But when we are absorbed in a story, we
drop our intellectual guard. We are moved emotionally,
and this seems to leave us defenseless’. See also Sklar
(2009).
We focus on the Harry Potter books because of the evi-
dence that these particular books affect popular views.
Indeed, studies suggest that the attitudes of the readers
of the Harry Potter books are influenced by the messages
these books convey. Hallett (2005) notes that Harry Potter
books influence culture. Brown & Patterson (2009) study
brand assessment by focusing on ‘Pottermania.’ Brown
& Patterson (2010) study consumers’ treatment of the
Harry Potter brand. See also the opening quote from
Barton (2006).
Some studies offer even more direct evidence on the
effect of
Harry Potter books
on the readers. Vezzali et al.
(2015) report that Harry Potter books make the readers’
attitudes toward stigmatized groups such as immigrants,
homosexuals, refugees, etc. more positive and sympa-
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thetic. Gierzynski & Seger (2011) find that the books
influence the readers’ acceptance of difference, toler-
ance, equality and opposition to violence and corrup-
tion. Salonikov et al. (2022) offer evidence suggesting
that the Harry Potter books affect the readers’ attitudes
towards economic issues, including banks, the public
sector, money and monopolies.
Some studies have even documented that the Harry
Potter books affected the readers’ health. Gwilym et al.
(2005), for example, find a drop in the number of chil-
dren visiting the hospital emergency departments on the
weekends that Harry Potter books are released, whereas
Bennett (2003) reports that some of the young readers
of the Harry Potter series have suffered from headaches
because of their insistence to read the books cover-to-
cover without taking a break.
Neuroscientists offer further evidence on the effect of
the Potterian adventures on the human mind. Recently,
for example, in a series of neuroimaging studies on the
influence of Harry Potter books on their readers, Hsu et
al. (2014, 2015a, 2015b) provide fMRI evidence for the
fiction feeling hypothesis, which states that narratives
with emotional content, in contrast to stories with neu-
tral content, cause readers to empathize to a stronger
degree with the protagonists, thus engaging the affective
empathy network of the brain. See also Wehbe et al.
(2014) and Lehne et al. (2015).
In sum, the existing evidence in psychology, sociology
and neuroscience suggests that fictional literature in
general, and Harry Potter books in particular, can have
a subtle yet powerful influence on the readers’ views,
opinions and attitudes. Similar to these influences, and
consistent with Krueger (2002) and Cowen (2008), we
propose that the readers of the Harry Potter books, con-
sciously and/or subconsciously, absorb the ‘economic’
ideas the books implicitly or explicitly convey. These
ideas, we argue, can potentially shape the public’s opin-
ion on economics and economic issues. This is consistent
with the argument of Cowen (2008) who describes this
as a ‘knowledge-generation process.’ Novels and mod-
els, he argues, both are mechanisms for learning that
complement each other. ‘We should recognize the power
of stories. Many models, especially the most relevant
models, are embedded in stories, further illustrating the
complementarities between novels and models
Both
novelists and model builders have tacit knowledge about
how the real world works, and they try to articulate that
knowledge in the form of either a story or equations’ (pp.
333–334).
The success of Harry Potter books suggests that in
addition to telling a story that appeals to a broad and
diverse audience, the author may have also been able
to capture the readers’ popular beliefs. Given the books’
universal appeal, therefore, studying the Potterian econ-
omy and comparing it to standard economic models can
shed light on the beliefs and views of millions of people
with diverse cultures and norms about the economy and
economic ideas.
Thomas and Snyder (2010, p. vii) state along these
lines: ‘Part of the appeal of [Harry Potter] is that the depic-
tions resonate with readers
...
This may suggest that the
depictions are consistent with readers’ and viewers’ val-
ues or opinions. Alternatively, if the depictions are not
reflective, they may influence the development of values
or opinions
...
any influence would be
...
subtle.’
A comparison between economic models and literary
texts is possible because they share several key charac-
teristics (Cowen, 2008, McCloskey, 1998, 2000, Thomson,
2001, Rubinstein 2006) (Note: According to McCloskey
(1998, p. xiv): ‘Economists are poets, but don’t know it.
Economists are storytellers.’ Similarly, Cowen (2008, p.
15) states that ‘Novels are more like models than is
commonly believed’ and recommends studying them to
better understand how people think about economics
and economic matters.). Both offer imaginary tales that
are abstractions of reality. Both are composed of a set of
actors—characters in stories, decision-makers in models
and a set of assumptions—rules in stories and con-
straints and assumptions in models. In addition, the
characters in a story are linked by initial relationships,
the same way as decision-makers and variables in a
model are linked by initial conditions. In both stories and
models, the initial relationships evolve. In models, these
follow the assumptions and optimal decisions and strate-
gies. In stories, they follow the characters’ attributes and
the actions they can and cannot take. Eventually, both
economic models and stories conclude in a final state
(Rockoff, 1990; Watts, 2002).
Consider, for example, Cowen’s (2008, pp. 325–326)
description of the similarities between fictional stories
and economic models: ‘Science fiction stories
...
embody
model-like thinking. The author writes down a descrip-
tion of some new technologies
...
The author then traces
through the effects of these technologies and outlines
how things would work or outlines an equilibrium in
economic terminology. That equilibrium is then “dis-
turbed” by some new change, such as an alien invasion
or a new technology. The bulk of the novel then traces
through the effects of the change, performing a kind
of comparative statics exercise
...
these novels
...
use a
stylized setting to show how one set of causes leads to
particular effects, working through a mechanism of some
generality. The mechanism is not always spelled out
explicitly...They are like the models from earlier in the
history of economics. Before the mathematization of the
economics profession
...
models without explicit math-
ematical forms... It is no accident that contemporary
model builders sometimes refer to earlier, non-formal
economists as “telling stories”.’
Another similarity between models and stories is that
stories must maintain face validity, the same way as
models need to maintain internal validity. Well-defined
rules of math and logic ensure models’ internal valid-
ity. Maintaining face validity in literary texts depends
on the genre, on adhering to the readers’ norms/ex-
pectations and on preserving the story’s internal logic
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Levy and Snir
(Derrida, 1993). For example, if magic can solve all prob-
lems, then the resulting story, even fictional, is unlikely
to be interesting. The Harry Potter books’ success and
near-universal popularity suggest that they satisfy this
condition, and therefore, we believe that Potterian eco-
nomics can offer lessons about the economic principles
the books teach and convey.
GENERAL BACKGROUND
(SPOILER WARNING: SKIP IF YOU HAVE NOT
READ THE HARRY POTTER BOOKS, BUT
PLAN TO READ THEM!)
The Harry Potter story, an imaginary tale of a boy with
extraordinary wizardry powers, is a series of seven books
(Note: See Rowling (1998, 1999a, 1999b, 2000, 2003, 2005
and 2007). The discussion in this section is based on
Anandane’s (2011) descriptive summary of the seven
volumes.). Most of Harry’s adventures take place in
and around Hogwarts, a boarding school of witchcraft
and wizardry located in northern England, where Harry
spends 7 years. The books follow Harry and his friends,
as they grow up and mature, and the 7 volumes describe
correspondingly the 7 years Harry spends at Hogwarts.
The story begins in 1991 with
Harry Potter and the
Philosopher’s Stone
, where Harry is a shy orphan living with
his aunt in a suburb of London. At age 11, Harry learns
that his parents were wizards and that they were killed
by the most powerful wizard of the era, ‘Lord Voldemort’,
whose reputation is so fearsome that his name is not
mentioned and instead is referred to as ‘You-Know-Who’
or ‘He Who Must Not Be Named.’ Harry also learns that
although he grew up among non-wizards (‘
muggles
’), he
has the power to become a wizard (Note: According to
the Oxford dictionary, ‘muggle’ is now an official word,
and it means ‘a person who is not conversant with a
particular activity or skill.’). Furthermore, he discovers
that Lord Voldemort tried to kill him after killing his
parents, which left a scar on his forehead. Harry survived
the attack, which gives him a special role in the wizards’
society. The school headmaster, Dumbledore, who knows
about this incident, leaves Harry with his aunt until he
is 11, when he is ready to enroll in Hogwarts. Following
the Hogwarts’ invitation, which is delivered by an owl,
Harry enters the school, where he and his new friends,
Hermione Granger and Ron Weasley, explore the world
of magic, and slowly discover the powers of witchcraft
and Wizardry. The first year ends when they recover the
Philosopher stone, which can be used to brew an elixir
that can make the drinker immortal.
In the second year at Hogwarts,
Harry Potter and the
Chamber of Secrets
, Ron’s younger sister Ginny, discovers
Voldemort’s old notebook, in which she reads about a
‘Chamber of Secrets,’ which, it turns out, leads to a mon-
ster. In this volume, Harry and his friends learn about
the history of Hogwarts. Harry also discovers that he has
some special skills, such as the ability to communicate
with snakes (rather rare dark art). He also discovers some
secrets about Voldemort. The book ends with Harry and
his friends saving Ginny while fighting the monster. In the
process, they inadvertently destroy a part of Voldemort’s
soul (‘Horcrux’).
In the third volume,
Harry Potter and the Prisoner of
Azkaban
, Harry learns about Remus Lupin and Sirius
Black, who were his father’s friends. Lupin is a teacher
of defensive measures against dark magic. Black, it turns
out, is a murderer believed to have helped Voldemort in
killing Harry’s parents. In volume 4,
Harry Potter and the
Goblet of Fire
, Harry is pressed by a Voldemort supporter,
Barty Crouch (disguised as Professor Alastor Moody), to
participate in a dangerous Tri-Wizard Tournament. Harry
luckily escapes Crouch’s plans, and at the same time
he forces Voldemort to reenter the wizarding world as a
mortal.
In volume 5,
Harry Potter and the Order of the Phoenix
,
Harry learns about a secret society called the ‘Order
of the Phoenix’, which is re-activated to protect Harry
and his friends from Voldemort and his supporters. The
school’s new Headmaster Dolores Umbridge (‘the High
Inquisitor of Hogwarts’) does not permit the students to
learn defense against dark magic. Harry, therefore, forms
a secret study group called ‘Dumbledore’s Army’, where
he teaches his friends how to fight and defeat dark arts.
Eventually, Harry foresees Voldemort’s actions, and thus
manages to save Hogwarts from Voldemort’s supporters,
the Death Eaters.
By the sixth year, in
Harry Potter and the Half-Blood
Prince
, the 17-year-old Harry, who is dating Ginny Weasley,
incidentally, comes across an old potions textbook filled
with annotations signed by an anonymous individual,
the Half-Blood Prince. He also discovers that Voldemort’s
soul is split into a series of horcruxes (evil-enchanted
items hidden in various locations). Draco Malfoy, Harry’s
foe, attempts to attack Dumbledore several times. Even-
tually, Dumbledore is killed by Professor Snape, another
Harry adversary.
In the last volume,
Harry Potter and the Deathly Hallows
,
Lord Voldemort takes control of the Ministry of Magic.
Harry and his friends quit school and go on a mis-
sion of finding and destroying the remaining horcruxes
of Voldemort. Harry discovers, however, that he is one
of the horcruxes, and thus surrenders to Voldemort. It
turns out, however, that the horcrux inside Harry has
been destroyed when Voldemort tried to regain his full
strength. In the end, the Order of the Phoenix, along
with Harry and Harry’s friends, defeat Voldemort and his
supporters, and thus save the world of Witchcraft and
Wizardry.
MONETARY SYSTEM: POTTERIAN MONEY,
CREDIT AND BANKING
Money
Wizards use commodity money. They have three types
of coins: gold Galleons, silver Sickles and bronze Knuts,
where one Galleon equals 17 Sickles, and one Sickle
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Oxford Open Economics
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equals 29 Knuts (Rowling, 1998, p. 49). The wizards’ mon-
etary system is therefore similar to the old English mone-
tary system that existed from medieval times until 1971.
In that system, one pound was worth 20 shillings and one
shilling was worth 12 pennies. The similarity is also in
the types of metals used in minting the coins. The pound
(also known as Guinea) was originally made of gold, the
Shilling (originally Scilling) was made of silver, and the
penny (after 1796) was made of copper.
However, despite their superficial similarity, the
wizards’ monetary system differs greatly from its real-
world counterpart. First, whereas in the old English
system the value of the pound relative to the shilling
and the penny fluctuated freely as a result of changes
in the relative prices of gold, silver and copper, the
relative values of the Galleons, Sickles and Knuts are
fixed. Furthermore, whereas the values of the English
coins depended on the amount of the precious metal
minted in the coins, the values of the Potterian coins
are independent of their physical size and weight. For
example, when wizards from several countries gather, it
seems that the value of all gold coins is the same, even
though the foreign Galleons are ‘the size of hubcaps’
(Rowling, 2000, p. 50), suggesting that the Potterian
money is not homogenous, a key property that money
should have (Levy and Bergen, 1993). The Potterians
however, seem not to care about this.
Thus, although the wizards’ money is a type of com-
modity money, it behaves as if it was fiduciary money.
For example, in the muggle (non-wizard) world, the ratio
of the price of gold to the price of silver, over the period
1991–1998, when Harry Potter’s adventures take place,
varied between 48.2 to 91.6 (Source: https://sdbullion.
com/, accessed June 6, 2022.). Yet the conversion rates
between the Galleon, Sickle and Knut remained fixed.
Indeed, just like fiduciary money, the values of all types
of Potterian coins decrease simultaneously when there
is inflation as a result of a war that disrupts the supply
(Rowling, 2005, p. 43). The values of the three types of coin
denominations, however, do not change relative to each
other, although we are told explicitly that at the same
time as the inflation bout, the demand for silver increases
because silver is used for making charms and apparatus
that are in demand (Rowling, 2005, p. 73).
Thus, in the Potterian economy, commodity value of
the money is distinct from the exchange value of money.
This is counter to the models of commodity money where
the value of the money is pegged to the value of the
commodity it is made of (Sargent and Wallace, 1983;
Rockoff, 1990) (Note: In
The Lord of the Rings
, for example,
the value of gold as a medium of exchange is determined
by weighing it. Thus, Tolkien seems to have understood
this aspect of the difference between commodity money
and fiduciary money.).
Another shortcoming of the Potterian monetary sys-
tem is that, unlike monetary economy models, Potterian
money lacks some key features that would facilitate
trade. One advantage the old English system had over the
modern decimal system is in the number of ways a pound
could be divided into combinations of shillings and pen-
nies. This divisibility allowed the minting of many coins
that were combinations of pennies, shillings and pounds.
For example, common English coins included 2 shillings,
2 shillings 6 pence, 5 shillings and many more.
In the case of Potterian money, however, the exchange
rate between the Galleons and the Sickles and between
the Sickles and the Knuts, are both prime numbers. It is,
therefore, less useful to mint coins that are multiples of
these basic coins.
Whatever the reason for using commodity money, its
use has real effects beyond the opportunity cost of using
the precious metals for making jewelry or silver dag-
gers (Rowling, 1998, p. 8, Rowling, 2000, p. 413, Rowling,
2003, p. 45). Carrying too many coins is risky and cum-
bersome. Therefore, Wizards store most of their money
in bank vaults. Withdrawals and deposits, however, are
time-consuming, as they require a lengthy bureaucratic
procedure, implying a high transaction cost (Rowling,
1998, pp. 47–49). Consequently, wizards make infrequent
withdrawals from the bank (Rowling, 2000, pp. 61, 352).
In sum, the Potterian money lacks some of the basic
properties that economists believe money should have,
for it to serve its functions efficiently: homogeneity,
portability, divisibility and storability (Levy and Bergen,
1993). The Potterian money is not homogenous, it is not
easy to transport, it is not easily divisible and it is difficult
to store. In any efficient economy, the Potterian money
would have therefore been replaced by more efficient
money, which is more divisible and less cumbersome.
It is possible that the Potterians use precious metals
as money because it is harder to counterfeit money that
is minted of precious metals than of other materials.
However, it is possible to counterfeit the wizard’s money.
It is also possible that the Potterians use commodity
money because they believe that pegging the value of
money to commodities might be an effective way of
controlling inflation (Woodford, 2003). However, it turns
out that when the supply chain is disrupted, the outcome
is inflation, as in an economy that uses fiduciary money.
Another important shortcoming of the Potterian mon-
etary system is the lack of paper checks that could be
used to transfer funds without the need to carry cum-
bersome coins, making transactions far more efficient.
Medieval merchants and bankers took advantage of this
benefit of paper checks (Quinn and Roberds, 2008), yet it
seems that Potterians have yet to discover this technol-
ogy.
Banks, interest and credit
Potterians have only one bank,
Gringotts,
making it a
textbook version of a perfect monopoly. The bank serves
mostly wizards, although the bank’s owners and employ-
ees are Goblins (Rowling, 1998, p. 41)—greedy, gold loving,
selfish and unfriendly humanoids (Rowling, 2000, p. 81).
Gringotts offers several services. First, it is in charge of
minting money and preventing its counterfeiting. There
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are, however, several ways to counterfeit money, and
even schoolchildren can do it (Rowling, 2003, p. 297).
The amount of counterfeit money in circulation is low,
nevertheless.
Second, wizards take advantage of the Gringotts’
money-storage and safekeeping services for storing their
gold and other valuables (Rowling, 1998, pp. 48–49).
Third, the bank offers currency exchange services, which
include exchanging wizard money for precious stones,
pieces of art and for muggle money (Rowling, 1998, p. 47,
Rowling, 1999a, p. 37). The amount of money exchanged,
however, is limited. Wizards use muggle money only
when they run errands in the non-wizard parts of
England. This happens rarely, and when it does, they
face significant difficulties in using muggle banknotes
(Rowling, 1998, p. 43, Rowling, 2000, p. 50). Muggles also
have limited opportunities to exchange muggle money
for wizards money because most muggles are not aware
of the wizards’ existence (Rowling, 1998, p. 42, Rowling,
1999b, p. 80, Rowling, 2000, p. 50).
Gringotts, however, is not an ordinary bank, as it does
not offer lending and borrowing services. In fact, Pot-
terians do not have a financial institution that offers
such services. That is, unlike modern banks, the Potte-
rian bank does not operate based on fractional reserves.
For example, we do not find a single case of someone
borrowing money from Gringotts, which suggests that
Gringotts is not offering loans. This is the interpreta-
tion of other Harry Potter scholars as well. For exam-
ple, consider Schooner’s (2010, p. 265) interpretation:
‘Most important, however, is the question of lending. If
Gringotts is a true bank, then it not only takes deposits,
but it also lends out a portion of those deposits to other
customers. The image of Harry and his vault full of
money suggests that all of Harry’s money remains in the
vault at all times. This would mean that Gringotts does
not operate on the basis of fractional reserves, i.e. it does
not lend out a percentage of the money deposited by its
customers.’ Wizards that want to borrow, must therefore
borrow from a friend or from illegal usurers (Rowling,
2005, p. 78, Rowling, 2000, p. 471).
Indeed, we find numerous episodes where wizards bor-
row money from friends, private usurers, or some other
wealthy individuals, but not from Gringotts. For example,
to open their joke shop, the ‘Weasleys’ Wizard Wheezes,’
Fred and George Weasley borrow the necessary start-up
money from Harry Potter (Rowling, 2003, p. 79, Rowling,
2005, p. 78). As another example, Ludo Bagman, a senior
public official who is in debt after running a failing
private enterprise, borrows ‘loads of gold’ from Goblins
(Rowling, 2000, p. 471).
Moreover, we find cases where wizards in need of
money resort to gambling with the hope of winning the
necessary funds. For example, the Weasley twins, before
discovering that they can borrow money from Harry,
consider gambling as a means of obtaining the funds
needed to open their shop (Rowling, 2000, p. 57, Rowling,
2005, p. 78). Because there are no financial markets, the
government also cannot issue debt and, therefore, it
often depends on donations from wealthy individuals for
funding public goods (Rowling, 2000, p. 66, 456).
It appears that it is not because of a lack of willingness
that Gringotts does not lend money. Indeed, Gringotts’
employees sometimes offer private usury services
(Rowling, 2000, p. 471). There is no shortage of demand
for loans either. On the contrary, the lack of borrowing
options is a significant constraint. For example, wizards
that make windfall gains spend them immediately, and
entrepreneurs without capital cannot open businesses,
suggesting that both consumers and businessmen face
credit constraints (Rowling, 1999b, p. 5).
The books do not explain the reasons for the lack
of financial intermediaries. However, it seems that the
Potterians view financial service providers as immoral,
the same way as prisoners of war were suspicious of
those who offered financial services at the POW camp
according to the account of Radford (1945) (Notes: See
Rowling (1998, p. 41), Rowling (2000, pp. 81, 287, 471),
Carlton (1995), and Hillman (2010). Portraying bankers
in fictional works as evil has been common throughout
history. Examples include Shylock in
Merchant of Venice
,
Harpagon in
Miser
, Danglars in
The Count of Monte Christo
,
Mr. Merdle in
Little Dorrit
, Mr. Banks in
Mary Poppins
, the
hero in
American Psycho
, and Le Chiffre in
Casino Royale
.).
The negative image of bankers is so strong that wizards
shy away from such jobs. Consequently, the banking jobs
are taken by Goblins, an inferior social group. (Note:
Gringotts apparently employs some humans. Fleur Dela-
cour (Rowling, 2003, p. 53) and Bill Weasley (Rowling,
2007, p. 196) are two such examples.).
Thus, in the Potterian economy, economic incentives
are overridden by the power of socially stigmatizing
financial service providers. In Europe, such processes
led to the prosecution and stigmatization of minority
groups (Carlton, 1995; Hillman, 2013a). Some have noted
that in the movie adaptation of the Harry Potter books,
the goblin bankers are depicted with aquiline noses and
greedy-looking faces, similar to the cartoons that were
used to depict stereotypical bankers and financiers in
Europe in the late 19th century (Source: momentmaga
zine.wordpress.com/2011/07/14/debunking-the-harry-
potter-anti-semitism-myth/, accessed June 6, 2022.) A
reader has suggested that the goblins are merely a joke
on the theme of
Gnomes of Zurich
. That, however, does
not explain why they are depicted in the movies with
aquiline noses. On the other hand, it could be argued
that even if goblin characters were historically used to
depict financial service providers negatively, currently
they are a part of Western literary characters. (Note: A
eugenics view could also be suggested. See Peart & Levy
(2005) on eugenics in the post-classical 19th century
economics.). Similarly, in the Potterian economy, the
stigmatization of financial intermediation leads to a
tension between wizards and Goblins, with Goblins being
treated as inferiors even though they provide cheap,
efficient,
and economically beneficial services.
It also
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Oxford Open Economics
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inhibits most forms of interaction between wizards and
Goblins (Rowling, 2007, pp. 323, 342).
Such negative attitudes still prevail. For example, in a
2005 Roper poll, ‘Only 9%
...
had full trust in financial ser-
vices institutions, down from 14% last year’ (Source: ‘New
Surveys Show that Big Business Has a P.R. Problem’, by C.
Deutsch,
New York Times
, December 9, 2005, Late Edition-
Final, Sec. C, Column 2). The 2008 financial markets’
troubles have likely deepened the distrust between the
public and bankers even further. For example, in July
2015, Argentines’ President, Cristina Fernández de Kirch-
ner, according to
Wall Street Journal
, told Buenos Aires
schoolchildren, after learning that they were reading
Romeo and Juliet
, that they should ‘
...
read “The Merchant
of Venice” to understand the vulture funds’, alluding to
a decade-long financial battle to collect $1.5 billion from
Argentina on defaulted foreign bonds held by a US hedge
fund. In a follow up tweet, Kirchner added: ‘No, don’t
laugh. Usury and bloodsuckers have been immortalized
in the greatest literature for centuries.’ As the author
notes, ‘The persistence of anti-Semitism over time and
across cultures is one of mankind’s darkest puzzles. So
is the hatred of capitalism, property rights and freedom.’
(Source: ‘The Bigot Defense: The Oldest Prejudice Reap-
pears in Attacks on American Capitalists’,
Wall Street
Journal
, July 10, 2015.
Thus, the Potterians’ ‘ban’ on lending, leads to finan-
cial transactions being handled by goblins, which further
strengthens their stereotypical image as greedy. These
observations are striking given that the books are often
viewed and interpreted as opposing all types of stereo-
typical biases (Gierzynski and Seger, 2011; Vezzali et al.,
2015).
In summary, the ban on lending leads to an outcome
that is opposite to the values that the books are believed
to promote. Further, these credit constraints reduce wel-
fare, increase corruption because it limits the ability
of would-be-entrepreneurs to open new businesses and
thus increase the influence of wealthy wizards (Paldam,
2002; Fudenberg and Levine, 2006).
In sum, in the Potterian economy, the role of financial
intermediation is completely orthogonal to its role in eco-
nomic models. Economists view financial intermediation
as a key mechanism for promoting investment through
efficient channeling of funds from savers to investors.
The Potterians, whose bank enjoys monopoly power,
in contrast, view financial intermediation as means to
impoverish the borrowers and enrich the lenders.
PRICES
The difficulties in carrying and transporting money,
together with the lack of credit market, have real effects
on the price level and on pricing strategies. Since bank
withdrawals and deposits are time-consuming, wizards
make infrequent cash withdrawals, as predicted by the
Baumol–Tobin inventory model of money holding. This,
in addition to the limited (or no) supply of credit in the
Potterian economy, leads to wizards facing a cash (i.e.
Clower) constraint.
The cash constraint forces retailers to set low prices for
basic goods and services, as otherwise wizards would be
caught cashless (Rowling, 1998, p. 41). For example, Harry
Potter withdraws money only once every year, before
going to Hogwarts, and the sum he withdraws has to last
him through the entire school year (Rowling, 1999a, 50).
However, beyond their effect on the price level, the
cumbersomeness of the Potterian money also affects the
pricing strategies and possibly even the extent of price
rigidity (Dutta et al., 2002). Many prices are set in round
numbers, such as 5 Knuts, 10 Sickles, 30 Galleons, etc.
Examples include Goblin-made armor for 500 Galleons
(Rowling, 2005, p. 286), Acromantula venom for 100
Galleons/pint (Rowling, 2005, p. 316), Deflagration Deluxe
for 20 Galleons (Rowling, 2003, p. 472), Omnioculars for 10
Galleons (Rowling, 2000, p. 60), weekly pay of 10 Galleons
to house-elf (Rowling, 2000, p. 244), Metamorph-Medals
for changing appearance for 10 Galleons (Rowling, 2005,
p. 58), Basic Blaze box for 5 Galleons (Rowling, 2003,
p. 472), Glittery-Black Beetle Eyes for 5 Knuts/scoop
(Rowling, 1998, p. 52), etc.
In cases where prices are not round, then they are still
denominated in units of a single type of coin, and thus
they can be paid using one type of coin. Examples of
such convenient prices include a new copy of
Advanced
Potion-Making
for 9 Galleons (Rowling, 2005, p. 144), a
ticket for a night bus to London for 11 Sickles (Rowling,
1999b, p. 22), hot chocolate on a night bus for 2 Sickles
(Rowling, 1999b, p. 22), membership in the Society for the
Promotion of Elfish Welfare for 2 Sickles (Rowling, 2000,
pp. 144–145), etc. Such price-setting rules, however, have
a disadvantage because they lead to a type of grid pricing,
which is inefficient. For example, a Galleon is composed
of 17
×
29
=
493 Knuts, but it seems that prices that are set
in Galleons only change by Galleons, and, consequently,
retailers cannot change them by smaller amounts in
response to small shocks. It is not surprising, therefore,
that once there are disturbances to supply, prices go ‘sky
high’ (Rowling, 2005, p. 65).
Thus, whereas retailers in real economies tend to set
many prices at psychological price points such as 9-
ending prices (Levy et al., 2011, Levy et al., 2020), which
studies find affect the quantity demanded (Snir and Levy,
2021; Chen et al., 2022), Potterian retailers stick to conve-
nient prices. The only product with a 9-ending price we
were able to find is a new copy of
Advanced Potion-Making
from Flourish and Blotts, with a price tag of exactly
9 Galleons (Rowling, 2005, p. 144). Since the Potterian
currency system is not decimal, it could be argued that
the Potterian parallels of the Muggles’ 9-ending prices are
the prices that end with either 16 Sickles or 28 Knuts (i.e.
‘just below prices’), which would be equivalent to prices
like 11 pennies or 19 shillings that were documented
by Gabor and Granger (1966) in the UK under the pre-
decimal currency system. However, we find only one such
good, dragon liver, with a price of 16 Sickles per ounce
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(Rowling, 1998, pp. 55–56). Thus, there are almost no ‘just
below’ prices, despite the widespread recognition that
they increase sales (Anderson and Simester 2003) and
despite the fact that they were common in the old English
monetary system (Gabor and Granger 1966). Thus, the
inefficiency of the monetary system leads to inefficien-
cies in sellers’ price setting practices.
Thus, unlike modern marketing practitioners and
scholars, the Potterian retailers do not use psychological
price points. It might be that unlike Muggle retailers
(Anderson and Simester, 2003), Potterian sellers do not
believe that psychological price points affect consumer
demand. It might also be that the computational efforts
needed in the triple coinage system are cognitively
demanding and, consequently, the retailers use prices
that reduce the cognitive load (Dehaene, 1997; Knotek II,
2008, 2011; Snir et al., 2022). This seems likely because
it is clear that many wizards find it difficult to calculate
the value of goods denominated in foreign currency units
(Rowling, 1998, p. 43, Rowling, 2000, p. 50), similar to the
difficulties reported in the EU during the transition to
the Euro (Ehrmann, 2011). Thus, it is possible that wizards
also find that converting prices between Galleons, Sickles
and Knuts is a cognitively difficult task especially given
that the exchange rates are prime numbers.
It could be that the complicated exchange rate
between the Knut, Sickle and Galleon may have confused
even the author and/or her book’s editor. In the first
edition of Rowling (1998), the price of one ounce of dragon
liver is 17 sickles, that is, one galleon. But that would be
like saying that an item costs 100c, instead of $1. After the
mistake was noticed, the price in the later editions was
changed to 16 sickles (Source: http://harrypotter.wikia.
com/wiki/Dragon_liver, accessed June 6, 2022, and www.
hp-lexicon.org/edits-changes-text-ps/, accessed June 6,
2022.).
The abundance of convenient prices seems to affect
price rigidity (Snir et al., 2021). Prices in the Potterian
economy change only infrequently. For example, the
price of Floo-powder remained the same for over
100 years, two Sickles a scoop (Source: pottermorehead.
tumblr.com/post/102175802190/floo-powder, accessed
June 6, 2022.). For comparison, the longest spell of price
rigidity that economists have documented belongs to
the 6.5 ounces Coca-Cola, whose price remained 5 cents
between 1886 and 1960, over 74 years (Levy and Young,
2004). Thus, price rigidity in the Potterian economy is at
least as prevalent as in the US, in line with the findings
reported in some recent New Keynesian studies.
One reason for the price rigidity might be that retail-
ers that set prices to maximize transaction convenience
are reluctant to change them, as changing the price
might, like in modern markets, make a transaction less
convenient because of the increase in the number of
coins used in the transaction, or because round prices
are cognitively more accessible (Dehaene, 1997; Knotek
2008 and 2011; Snir et al., 2022, Fisher & Konieczny,
2006) (Note: This price rigidity cannot be explained by
menu cost (Levy et al., 1997 and 1998, Dutta et al., 1999,
Zbaracki et al., 2004, Fisher & Konieczny, 2006) because
most prices in the Potterian economy are not posted.). In
that case, round prices will be adjusted only if the round
endings can be preserved. Coca-Cola faced a similar con-
straint in 1950s. It was unable to adjust the price because
increasing it while allowing people to use a single coin
to buy it, meant doubling the price from 5c (a nickel) to
10c (a dime) (See Levy & Young (2004, 2021) and Young
& Levy (2014).). In modern markets, unlike the Potterian
markets, however, round prices are usually limited to
particular types of goods and settings (Snir et al., 2022).
Thus, the Potterians’ currency structure and the resulting
pricing practices lead to prices that are set at a few
convenient price points, which hinder price changes.
Another aspect of the behavior of prices that we
should note is that there is very little price dispersion,
even across highly heterogeneous goods, suggesting
that the prices in the Potterian economy are not set
in perfectly competitive markets. For example, the
Omnioculars (Rowling, 2000, p. 60), Metamorph-Medals
for changing one’s appearance, one week’s work of
a house-elf (Rowling, 2005, p. 58), Slytherin’s Locket
(Rowling, 2005, p. 171) and Unicorn hair (Rowling, 2005, p.
320) all cost 10 Galleons. This type of pricing resembles
somewhat the pricing of modern dollar stores, where
highly heterogeneous products are all sold for $1.
Moreover, the Potterian economy is not growing, im-
plying that there is no upward trend in the aggregate
demand (Snir and Levy, 2010). Nor do the Potterian retail-
ers experience major changes in their cost structure.
These factors, along with the currency structure decrease
the need and the willingness of the Potterian retailers to
adjust prices. Simply, there are not sufficient changes in
the market conditions that would warrant such price ad-
justments, except when a war breaks out (see section 13).
In sum, the price rigidity in the Potterian economy
seems to be due to a combination of three factors. First,
thanks to the monopolistic structure of the market, the
Potterian retailers have relatively high profit margins,
which allows them not to change the prices in response
to small cost changes, and still remain profitable. Second,
the lack of growth of the Potterian economy makes large
changes in the cost and demand rare. Third, the prevalent
use of convenient prices suggests that retailers believe
that such prices increase the quantities sold. Retailers
therefore change prices only when the cost or demand
shock is large enough to merit a change to another
convenient price. Given the low price level, however, this
means a large price change (in percentage terms), which
is unlikely because the Potterian economy is not growing
(Snir and Levy, 2010).
FOREIGN EXCHANGE RATE AND THE
COMMODITY VALUE OF THE GALLEON
The Potterian monetary system has another important
flaw: there is an unreasonably large gap between the
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commodity value of a gold Galleon and its exchange
value. We draw this conclusion based on the Galleon–
Dollar exchange rate on the one hand, and the estimated
weight of the Gold Galleon, on the other.
Consider first the Galleon–Dollar exchange rate (i.e.
the exchange rate between the muggles’ money and the
wizards’ money), which is not mentioned explicitly in the
original 7-volume Harry Potter books, but we know from
the books that the Gringotts handles such exchanges
(Rowling, 1999a, p. 50). Based on information from three
sources, we estimate that the Galleon–Dollar exchange
rate is about $7.30/Galleon.
First, J.K. Rowling authored two additional, although
less known, Harry Potter books as a charity for the UK
Comic Relief: (a)
Fantastic Beasts & Where to Find Them
, and
(b)
Quidditch through the Ages
.
Fantastic Beasts & Where to
Find Them
is included in the list of the things the first-year
students are required to have at the Hogwarts School of
Witchcraft and Wizardry (Rowling, 1998, p. 43).
Quidditch
through the Ages
is mentioned in Rowling (1998, p. 93),
where we are told that Hermione Granger borrows the
book from the Hogwarts library, and then later we are
told that she lends the book to Harry to help him better
prepare for Quidditch practice (Rowling, 1998, p. 117). The
foreword to both books is ‘written’ by Albus Dumbledore
himself. In the foreword to
Fantastic Beasts & Where to
Find Them
, Dumbledore writes that ‘Comic Relief U.K. has
raised over 250 million dollars since 1985 (that’s also
174 million pounds, or thirty-four million, eight hundred
and seventy-two Galleons, fourteen Sickles and seven
Knuts)’ (Rowling, 2001a, pp. vii–viii). In the foreword to
Quidditch through the Ages
, Dumbledore writes that ‘Comic
Relief U.K. uses laughter to fight poverty, injustice, and
disaster. Widespread amusement is converted into large
quantities of money (over 250 million dollars since they
started in 1985—which is the equivalent of over 174
million pounds or thirty-four million Galleons)’ (Rowling,
2001b, p. vii). These figures imply that one Galleon is
equivalent to £4.95 or $7.30, and one Sickle is equivalent
to £0.30 or $0.45.
Second, we compare the prices of the products
consumed by wizards to the prices of similar products
consumed by ordinary muggles in the same period,
using the above exchange rate, i.e. one Galleon equals
£4.95 or $7.30. For example, Hermione, Ron and Harry
pay six Sickles for three butter beers (Rowling, 2003, p.
251), i.e. two Sickles per butter beer. We can reasonably
assume that butter beer is not a real beer with significant
alcoholic content, because otherwise, it would imply
that Harry Potter and his friends, all of them underage
wizards, are consuming alcoholic beverages, which is
unlikely. In other words, we assume that butter beer
is more like Muggles’ root beer or cream soda. In that
case, the price of a single bottle of butter beer, two
Sickles, which is equivalent to about £0.60 or $0.90,
seems reasonable for a price paid by school kids for a
soft drink. Hot chocolate on a night bus also costs two
Sickles (Rowling, 1999b, p. 22), i.e. £0.60 or $0.90, also
reasonable. As another example, Arthur Weasley, the
Head the Office for the Detection and Confiscation of
Counterfeit Defensive Spells and Protective Objects, is
fined 50 Galleons for bewitching a Muggle car (Rowling,
1999a, p. 142), which is equivalent to about $375.00.
This is comparable to the monetary fines assessed for
various types of traffic violations in the real Muggle
world, such as in California (Source: catrafficticket.com/
ca-traffic-ticket-fines/, accessed on June 6, 2022.). Other
examples include the cost of traveling on a night bus
to London, 11 Sickles or about $4.95 (Rowling, 1999b, p.
22), birthday present of 10 Galleons, which is equivalent
to about $73 (Rowling, 1999b, p. 36), etc. All these
prices seem reasonable (Note: Using the above exchange
rate, $7.5/Galleon, CNN has even published the Wizard
Calculator, offering conversion services to/from the US
dollars to/from the Potterian currency units. Source:
money.cnn.com/2001/10/23/saving/wizard_calc/index.
htm, accessed on June 6, 2022.).
Third, in an interview on March 12, 2001, when
asked by Rebecca Boswell, ‘What is the approximate
value of a galleon?’ J.K. Rowling’s reply was ‘About
five pounds, though the exchange rate varies!’ (Source:
https://www.hp-lexicon.org/2007/02/04/wizard-money/,
accessed June 6, 2022.) We conclude therefore that the
Galleon–Dollar exchange rate is about $7.30/Galleon.
Next, consider the commodity value of a gold Galleon.
To assess it, we need to know the weight of the gold it
contains. Galleon’s weight, however, is not mentioned in
the Harry Potter books, although we know that it is not
trivial. For example, in Rowling (2000, p. 61), Harry Potter
finds that his money bag is ‘considerably lighter’ after
paying 20–30 Galleons for some goods he bought.
To estimate the Galleon’s weight, we take the aver-
age weight of three gold coins that were issued in the
Kingdom of England. These are (1) the Noble, weighing
7.74 gr, which was issued during King Edward III, (2) the
Ryal, weighing 7.58 gr, which was issued during King
Edward IV and (3) the Angel, weighing 5.20 gr, which
was issued during King Henry VII (Deutsche Bundes-
bank, 1983). These figures yield an average weight of
6.84 gr. Alternatively, we could consider the gold Guinea,
which was used in England until 1814, and weighed up to
8.50 gr. (Source: https://www.royalmint.com/our-coins/
ranges/guinea/, accessed June 6, 2022.). We thus estimate
the weight of a gold Galleon to be in the range of 6.84–8.50
gr., which we consider an upper bound of the Galleon’s
true weight.
The actual price of 1 gr. gold in the years the Harry
Potter story takes place, 1991–1998, varied between
$10.14–$13.80 (Source: www.kitco.com/charts/historical
gold.html, accessed June 6, 2022.), which implies that
the commodity value of a gold Galleon is in the range
of $69.36–$117.30. Thus, the commodity value of a
gold Galleon is between 9 and 16 times the Galleon–
Dollar exchange rate. As a lower bound of the Galleon’s
weight, we consider the estimate of Generalov (2006),
who assess the weight of a gold Galleon and reaches a
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conclusion that a Galleon weighs about 2 gr. This is a
more conservative estimate, yielding a commodity value
of gold Galleon in the range of $20.28
−
$27.60, which is
3
−
4 times the Galleon–Dollar exchange rate. Because
we know that wizards value gold, using gold for making
coins with such a low purchasing value relative to its
commodity value seems to be a misallocation: instead
of using gold as a commodity, it is used as a medium of
exchange. In this setting, gold is not directed to its most
beneficial use, which is inefficient (Friedman, 2002).
Furthermore, the ridiculously low exchange rate points
at an arbitrage opportunity. Wizards could melt the gold,
sell it to muggles as a commodity and then exchange
the muggle money for Galleons at Gringotts. However,
wizards do not seem to take advantage of this arbitrage
opportunity, although it promises immense profits and
no risk. Not even the bankers, including the greediest
ones, seem to notice it. Nor do rich businessmen who
have interest in undermining the Potterians’ political
stability. Clearly, in any commodity money model, at least
some of those who stand to make a profit would have
exploited such profitable arbitrage opportunities lead-
ing to their eventual disappearance. Thus, the foreign
exchange valuation of the gold Galleon is a textbook
example of an inefficient market outcome.
Indeed, if gold in the Potterian economy is so cheap
for the bank officials that they value it at $7.30 while
muggles’ valuation is as much as $69.36–$117.30, wizards
could melt the gold and sell it to muggles in return for
other things they value, such as other precious metals,
gems, etc. They could buy, for example, silver and copper,
because the commodity values of silver and copper in
the Potterian economy, as can be deduced from the value
of the Sickle and the Knut, are closer to the values of
silver and copper in the muggle economy, in comparison
to the value of gold. If they were to do so, the price differ-
ences between the two economies should have become
smaller, or disappeared altogether, following the law of
one price.
Some possible arguments could be made to confront
the arbitrage opportunity puzzle (See: Generalov (2006),
gilletts.com.au/jewellery-metal-information-i-39.html,
www.goldpriceoz.com/gold-karat.html,
taxfreegold.co.
uk/goldcoinsbriefhistory.html,
en.wikipedia.org/wiki/
Gold_coin, and https://harrypotter.fandom.com/wiki/
Wizarding_currency, all accessed June 6, 2022.). First,
it could be that gold Galleons are not made of real gold
but rather they are only gold colored, although there is
nothing in the books that indicates this. Also, if wizards
were to use coins that do not contain precious metals,
then they could just as well use paper money, whose
commodity value would be zero, or close to zero, like
colored coins, but more convenient. Further, there are
fake Galleons, made of Leprechaun gold, which look like
the real gold Galleons, but they vanish within hours
(Rowling, 2000, p. 350). The mere existence of ‘fake’
Galleons, however, suggests that the ‘real’ Galleons are
‘real,’ i.e. they are made of real gold, unlike the ‘fake’
ones. Also, it seems that wizards can fake Galleons
relatively easily—Hermione does that when she was
16, in Rowling (2003) (Note: One of the readers of this
paper, when he was young, was bewildered why wizards
and witches did not fake 10 Euro bills from the muggle
world with the appropriate charm so that they could at
least live well in the muggle world.). Bank officials can
probably identify counterfeit coins. Most wizards, how-
ever, cannot. Therefore, the only way to prevent wizards
from counterfeiting Galleons on a large scale is if its cost
is prohibitively high—i.e. if the coins are made of gold,
because the only magical way to produce gold is by using
the extremely rare philosopher’s stone. This is essential
for the stability of the Potterian currency as otherwise
the Potterian economy would be flooded with fake gold
coins, which would quickly make the Potterian money
worthless.
Second, it could be that Galleons are made of real gold,
but there are some limitations on the wizards’ ability to
take advantage of it for arbitrage purposes. For exam-
ple, there may be some spell, prohibition or some other
kind of restriction that prevents the wizards, even the
greediest ones, from engaging in arbitrage. We, however,
do not find any explicit mention of such restrictions in
the books. Even if wizards are prohibited from melting
the gold and selling it to muggles, the goblins that mint
the coins are not. The goblins, however, also do not take
advantage of this opportunity, although they trade with
muggles regularly.
Third, it could be that gold Galleons are not made of
pure, 100% gold. Indeed, gold is a soft substance and
therefore 24 k gold is rarely used for making coins or
jewelry. Historically, actual gold coins in circulation in
the UK were made from 22 k (91.6%, known as ‘Crown
Gold’) or 23 k (95.83%) gold. For example, the gold Pound
Sterling coin that was issued in 1489 under King Henry
VII was made of 23 k gold. In 1526, under King Henry
VIII, and in 1549, under King Edward VI, lower grade
gold, 22 k, was used to make the coins. The Crown gold
became the standard for making English gold coins from
1526 onward. In the US, 21.6 k (90% gold) became the
standard for making American coins for circulation from
1837 onward.
However, even if the Galleon is made of 21 k–23 k gold
like the Muggle gold coins, the puzzle remains because
the price difference between 21 k gold and 24 k gold is not
that significant and thus the Galleon’s commodity value
as gold is still high.
POTTERIAN PUBLIC SECTOR: THE
GOVERNMENT
The Potterian government is large, corrupt and ineffi-
cient. The government controls and regulates the pro-
duction of every major good and service produced in the
economy, including health, law, education, etc. Thus, to
a large extent, the Potterian economy is planned. The
government determines which products will be produced
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or imported and which will not. The government policies
also ensure economic stability, as in the Marxian model,
in the sense that Potterians do not experience busi-
ness cycle fluctuations and, consequently, all workers are
employed at all times.
Yet there is a private bank, and there is some private
enterprise. The regulations, however, restrict competition
in the private sector (Shughart II and Thomas, 2015).
Firms in the private sector, therefore, do not have to
fire workers or reorganize. Thus, Potterians have both
stable prices and stable output in an economy that is not
growing.
The public, however, knows very little about their
government’s decision-making process because of its
lack of transparency, which makes it easier for corrupt
public officials and interest groups to engage in rent-
seeking activities (Tullock, 1967, 1989).
The lack of transparency is partly because in the Pot-
terian economy there is a monopoly on information. The
only important information source is a daily newspaper,
the
Daily Prophet
, and its editors are on good terms with
senior public officials and wealthy individuals. The latter
often fund public goods and thus have a significant influ-
ence on the officials and their policy (Rowling, 2003, p.
116). The newspaper’s reporters, therefore, publish infor-
mation that favors the officials, who reciprocate by mak-
ing decisions favoring the reporters and wealthy wizards
(Rowling, 2003, p. 423, Strömberg, 2004, Gentzkow and
Shapiro, 2006).
Power concentration and lack of transparency help
senior officials in seeking rent and in obtaining other ben-
efits such as bribes (Rowling, 2007, pp. 144, 172). Wealthy
wizards that fund their office expenditures are recip-
rocated by getting access to the officials, and swaying
their decisions (Rowling, 1999a, pp. 33–34, Rowling, 2003,
p. 116). Although not identical, this process resembles
political benefits gained through campaign donations
(Ursprung, 1990).
Consider the following exchange that reads like a text-
book case of rent-seeking, as surveyed for example, in
Hillman (2013b): ‘What are you doing here, anyway?’
Harry asked Lucius Malfoy. ‘I don’t think private mat-
ters between myself and the Minister [of Magic, a posi-
tion that parallels the position of Prime Minister in the
muggle-world] are any concern of yours, Potter,’ said
Malfoy
...
Harry distinctly heard the gentle clinking of
what sounded like a full pocket of gold. ‘
...
shall we
go up to your office, then, Minister?’ ‘Certainly,’ said
Fudge
...
‘This way, Lucius’
...
‘What private business
have they got together, anyway?’ ‘Gold, I expect,’ said
Mr. [Arthur] Weasley angrily. ‘Malfoy’s been giving gen-
erously to all sorts of things for years
...
gets him in with
the right people
...
then he can ask favors
...
delay laws
he doesn’t want passed
...
oh, he’s very well-connected,
Lucius Malfoy’ (Rowling, 2003, pp. 115–116).
Nepotism is common and family members and asso-
ciates of senior officials receive perks and benefits not
offered to others. For example, Arthur Weasley and two
of his sons, Percy and Ron, are all employed by the Min-
istry of Magic. Arthur Weasley works as the head of the
Office for the Detection and Confiscation of Counterfeit
Defensive Spells and Protective Objects (Rowling, 2005,
p. 56), after promotion from his former position as the
Head of the Office for the Misuse of Muggle Artifacts.
Percy Weasley worked in the Department of Interna-
tional Magical Cooperation under Barty Crouch, Sr., until
he became a Junior Assistant to the Minister of Magic
(Rowling, 2000, p. 268, Rowling, 2003, p. 229). In Rowling
(2003), Ron Weasley is about to become an Auror in the
Ministry of Magic (Rowling, 2003, p. 170, Rowling, 2000,
p. 392).
Junior public officials engage in rent-seeking (Hillman,
2013b) by putting effort into pleasing their superiors
rather than doing their jobs, thereby increasing their
prospects for promotion and for gaining higher status
(Kahana and Liu, 2010). This, however, further deepens
the inefficiency and corruption (Rowling, 2000, pp. 56,
58–59, 273). The tenure system makes it impossible to
fire even the most inefficient workers, leading to hidden
unemployment. In addition, undeserving promotions
create underemployment. As a result, many offices
are overstaffed with low productivity workers. For
example, Bertha Jorkins’ disappearance from her office
is unnoticed for several weeks (Rowling, 2000, p. 40).
These inefficiencies persist because the budget of
each department depends primarily on the influence
its head has in the Ministry or with the media. The
resulting contest for contacts with powerful politicians
and influence on their policy decisions over budgetary
allocations leads to wasteful social welfare loss (Katz
and Rosenberg, 1989).
However, junior public employees seem to be doing
their best at carrying out their jobs, which contradicts
the internal, bureaucratic rent-seeking noted above. Even
extremely inefficient workers like Bertha Jorkins seem to
be doing their best, and it is only their lack of talent that
makes them inefficient, not their lack of effort (Rowling,
2000, p. 40). Thus, as in the Marxian model, the work-
ers contribute according to their ability, and it is their
work efforts, more than the pecuniary compensation
that gives them satisfaction.
However, unlike the workers, those high in the social
hierarchy behave as predicted by public choice theory.
Senior public officials use their powers and the lack
of transparency to advance their own goals, by taking
advantage of the rent-seeking opportunities the Potterian
government offers, from promoting their associates to
releasing their relatives from jail. They also reciprocate
by benefiting wealthy landowners, granting special ben-
efits to those who donate to causes of their interest.
Senior officials also do not hesitate to use fear and
violence, if needed, to achieve their goals or hide their
mistakes (Levin and Satarov, 2015). When Harry and his
colleagues express doubts about the threat of war, the
press is used to intimidate and silence them, and some
of those that raise doubts like the headmaster of the
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school lose their jobs. Others, including Harry Potter, are
threatened (Rowling, 2005, pp. 341–348). At least on one
occasion, a senior public official orders a ‘neutralization’
of a man to silence him (Rowling, 2000, pp. 453–454).
Thus, consistent with public choice theory, when pub-
lic officials amass power over the entire economy and
transparency is low, they use their power to advance their
private goals and procure more power. The officials that
comprise the upper layers of the public sector share sim-
ilar values because only those with similar backgrounds
are promoted.
Furthermore, it seems that one of the incentives
to climb the ranks of the civil service is ego rents
provided by status and power (Olson, 1965). The school
headmaster, Dumbledore, for example, does not want to
become a minister of magic because he is not as power
hungry as those who apply for the job (Rowling, 2003, p.
89). The urge to satisfy his ego rent ambition for power
even drives the Minister of Magic Pius Thicknesse to fight
on the side of He-Who-Must-Not-Be-Named, the evil
Voldemort (Rowling, 2007, p. 636). Hayek (2006) predicts
that in a society in which power is concentrated in the
hands of a few, the ones to get to the top are those that
are the most power and status hungry, not the most
competent or the most benevolent. Many characters
that hold high positions in the Potterian economy fit this
characterization.
Despite these inefficiencies, the government has con-
siderable public support. Some of this support might be
due to the public being unaware of the inefficiencies, due
to the low transparency. It might also be because of the
government’s size (Alesina & Fuchs-Schuendeln, 2007).
The public sector is the largest employer, and wizards
depend on it for both work and services. Furthermore, the
size of the government allows for full employment, with
even the most unproductive workers finding a job in the
public sector. Indeed, it seems that for most wizards, a job
in the public sector is the default, and many of them do
not even consider a job in the private sector. Therefore,
further rent-seeking may be taking place through the
benefits of a majority from the government (Paldam,
2015).
Thus, the support for the government seems to be
partly because the public is unaware of much of the
inefficiencies, and partly because those that are aware
ignore them and look the other way, to protect their
private benefits such as job security.
LAW AND ORDER
Consider the following: ‘What would you think of a gov-
ernment that engaged in this list of tyrannical activities:
tortured children for lying; designed its prison specifi-
cally 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 with-
out defense counsel; used truth serum to force confes-
sions; maintained constant surveillance over all citizens;
offered no elections and no democratic law-making pro-
cess, 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 Potterians’ legal institutions are rather limited
in both breadth and scope. There are no lawyers, no
independent court system or other muggle-type judicial
entities. The Ministry of Magic seems to have all the
regulatory, legislative and judicial powers, implying that
the Potterians are not familiar with the notion of separa-
tion of powers. For example, the Ministry of Magic is not
subject to any practical limits on its powers since there
are no laws or regulations that impose any restrictions
on what it can or cannot do. The Ministry operates the
court, and the Minister of Magic himself serves as one of
the ‘inquisitors,’ the Potterian equivalent of a prosecutor,
as well as one of the judges.
Even the laws that are in place cannot be trusted
because according to the Minister of Magic, there is
no prohibition on their retroactive revision. On the
contrary, the Ministry changes and manipulates the laws
at will depending on its interests and circumstances.
For example, the Ministry decides to change the time of
Harry’s court hearing but informs him of this change at
the last minute, causing Harry to be late for the hearing
(Rowling, 2003, p. 103). Moreover, the presiding judge (the
‘Chief Inquisitor’) in the hearing, the Minister of Magic
himself, states during the court proceedings that ‘laws
can be changed.’ For example, During Harry’s trial for
using underage magic, which the Ministry’s laws prohibit,
Dumbledore (who attends the court hearing as a witness)
debates the Minister of Magic Cornelius Fudge about
the applicability of the relevant laws (Rowling, 2003, p.
112): ‘The Ministry does not have the power to expel
Hogwarts students, Cornelius, as I reminded you on the
night of the second of August,’ said Dumbledore. ‘Nor
does it have the right to confiscate wands until charges
have been successfully proven
...
In your admirable
haste to ensure that the law is upheld, you appear,
inadvertently I am sure, to have overlooked a few laws
yourself.’ ‘Laws can be changed,’ said Fudge savagely. ‘Of
course, they can,’ said Dumbledore, inclining his head.
‘And you certainly seem to be making many changes,
Cornelius. Why, in the few short weeks since I was asked
to leave the Wizengamot [the court of the Ministry of
Magic], it has already become the practice to hold a full
criminal trial to deal with a simple matter of underage
magic!’
There are not even rules that govern the process of
elections. There is no evidence of elections taking place
for any key public office position. For example, we are
told that Rufus Scrimgeour is appointed (not elected) as
a Minister of Magic, but we do not know by who (Rowl-
ing, 2005, p. 27). Ministry officials often take advantage
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of their powers by drafting laws and regulations that
promote their and/or their friends’ interests. Further, the
implementation and enforcement of the laws are often
done selectively. For example, Harry has committed in
the past a worse crime, blowing up Ms. Marjorie Dursley,
but no charges were filed against him because, in that
period, Harry was still the darling of the Minister of Magic
(Rowling, 1999b, p. 28). There are even cases where wiz-
ards are accused and sentenced without any trial or court
hearing. Since there is no constitution, the authoritarian
Ministry can arbitrarily manipulate the existing laws and
regulations to fit its needs. For example, at a certain point,
the Ministry decides that all halfblood and mudblood
wizards must be questioned to make sure that they did
not ‘steal’ magic powers (Rowling, 2007, p. 136) (Note:
Wizards with one muggle-parent are called ‘halfblood’
(Rowling, 2003, p. 584). Wizards with two muggle parents
are called ‘mudbloods’ (Rowling, 1999a, p.96).). The wiz-
ards that fail the test are imprisoned.
Day-to-day policing is done by the wizards and witches
that work at the Ministry. Some of them are aurors—
wizards whose job is to locate and apprehend ‘dark
wizards’—wizards that practice various types of ‘dark
arts’ and are known for their dislike of muggles. There
are also divisions in the Ministry that handle specific
types of offenses and crimes. Examples include 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. Some of the offenses
they deal with include buying and selling stolen caldrons
(Rowling, 2003, pp. 18, 80), car theft (Rowling, 2003, p. 377),
sale of fake amulets that supposedly protect against
werewolves (Rowling, 2005, p. 73) and various kinds of
fake protections that supposedly guard against You-
Know-Who and Death Eaters (Rowling, 2005, p. 56), etc.
Thus, like muggles, the Potterians seem to have their
share of thieves, crooks and other common criminals.
Further, in the Potterian legal system, we see very little
of what might resemble private laws such as tort laws
or contract laws. For example, although the Hogwarts
students are often injured (e.g. during the Quidditch
games), there is no mention of any kind of lawsuit in this
context.
The word ‘contract’ is mentioned only three times in
the 7-volume set. The first time it is mentioned when
Dumbledore explains the Triwizard Tournament rules
and warns the students: ‘Once a champion has been
selected by the Goblet of Fire, he or she is obliged to
see the tournament through to the end. The placing of
your name in the goblet constitutes a binding, magical
contract’ (Rowling, 2000, pp. 166, 179). However, we are
not told how this contract is enforced.
The second time contract is mentioned is when
Hermione Granger organizes a study group of students
that take lessons (without the school’s permission)
from Harry on how to defend against Voldemort’s
Death Eaters. At the meeting where they decide on the
formation of the group, they agree to keep the group’s
existence secret by adding their name to a list of the
attendees: ‘So if you sign, you’re agreeing not to tell
Umbridge or anybody else what we’re up to.’ ‘There was
an odd feeling in the group now. It was as though they
had just signed some kind of contract’ (Rowling, 2003,
p. 259).
The third time the term ‘contract’ is mentioned when
we are told that the house-elf Hokey’s contract prohibits
her from saying what she thinks about her mistress
Hepzibah Smith’s looks (Rowling, 2005, 285–286): ‘“How
do I look?” Said Hepzibah, turning her head to admire the
various angles of her face in the mirror. ‘Lovely, madam,’
squeaked Hokey. Harry could only assume that it was
down in Hokey’s contract that she must lie through her
teeth when asked this question because Hepzibah Smith
looked a long way from lovely in his opinion’. As Gava
& Paterson (2010) note, however, this does not consti-
tute a contract in a legal sense because it is not signed
voluntarily: house elves are enslaved by their masters
and thus they must follow their orders. In addition, there
is a mention of an ‘unbreakable vow’ that Snape made
with Draco Malfoy’s mom that he would protect Draco
(Rowling, 2005, p. 214). The vow, however, more resembles
a promise than a contract.
‘Private property’ is mentioned in the story only once,
when Mr. Gaunt tells a ministry official that he cannot
just show up unannounced on his private property (Rowl-
ing, 2005, p. 132, Demsetz, 1967). But there is indirect
evidence that Potterian wizards respect private property,
at least in the context of inheritance, which seems to
be rather common in their economy. For example, Harry
inherits a large amount of money from his parents (Rowl-
ing, 1998, p. 48, Rowling, 1999a, p. 30). He also inherits
Sirius Black’s house along with everything in the house,
including the house-elf Kreacher (Rowling, 2005, pp. 33–
34). There are numerous other cases of inheritance trans-
fer from generation to generation.
The
government
, however, does not seem to be com-
mitted to respecting the Potterians’ inheritance wills.
The Decree for Justifiable Confiscation
gives the Ministry the
power to confiscate ‘within 31 days’ anything that is
inherited. This particular law was created to prevent wiz-
ards from passing on Dark Artifacts, and it can be applied
only if there is ‘powerful evidence that the deceased’s
possessions are illegal’ (Rowling, 2007, p. 80). However,
the Ministry of Magic applies to the law its own inter-
pretation, by arbitrarily and selectively using it to con-
fiscate valuable artifacts. For example, the Minister of
Magic Rufus Scrimgeour relies on this law to harass and
interrogate Harry and his friends when he informs them
about the inheritance Dumbledore has left for them
(Rowling, 2007, pp. 80–85). Moreover, the Minister refuses
to hand the sword of Godric Gryffindor to Harry, against
the will that Dumbledore has left, arguing that ‘the sword
of Godric Gryffindor is an important historical artifact’
(Rowling, 2007, p. 85). As another example, the High
Inquisitor and Head Mistress of Hogwarts, Ms. Dolores
Umbridge uses her absolute powers and authority to
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arbitrarily confiscate Harry Potter’s and Ron Weasley’s
broomsticks without any hearing or other due process
(Rowling, 2003, p. 311).
The Potterian government also interferes at will in the
operation of private businesses. Goblins, for example,
complain at one point that the Ministry interferes with
Gringotts’ affairs, making it unsafe for its employees
(Rowling, 2007, p. 296).
According to Hayek (2006), rule of law ‘
...
means that
government in all its actions is bound by rules fixed and
announced beforehand—rules which make it possible to
foresee with fair certainty how the authority will use its
coercive powers in given circumstances
...
the essential
point, that the discretion left to the executive organs
wielding coercive power should be reduced as much
as possible, is clear enough
...
under the Rule of Law,
the government is prevented from stultifying individual
efforts by ad hoc action
...
It is the Rule of Law, in the
sense of the rule of formal law, the absence of legal
privileges of particular people designated by authority,
which safeguards that equality before the law which is
the opposite of arbitrary government’ (pp. 75–76, 82).
Clearly, Potterians’ legal system is far from a rule of
law, as characterized by Hayek (2006). Rather, it seems
closer to a rule of government in Nietzschean spirit (Niet-
zsche 1997, Hillman, 2009). Since there are no lawyers, no
independent judiciary and no court system, rule of law is
doubtful. Moreover, given the low ethical and moral stan-
dards of many of the Ministry’s officials, the Potterians’
fate, freedom and welfare seem to depend entirely on the
goodwill of the government’s officials. The Potterian wiz-
ards are not equal before the law. The Ministry of Magic
has no regard for the rule of law, has no ethical restraints,
uses its monopoly power selectively by applying its own
interpretation to the laws and by denying the rights of the
wizards that it dislikes. Since the government does not
treat or view them equally, the wizards cannot trust their
government or its intentions. They are terrified by the
government’s powerful bureaucrats and officials, and by
the ease at which they selectively interpret, manipulate
or even retroactively change the laws and regulations to
harass citizens they dislike, while protecting and helping
their, usually wealthy and well-connected, friends.
MARKET STRUCTURE: MONOPOLIES,
OLIGARCHIES, AND OTHER PATHOLOGIES
The number of consumers in the Potterian economy
is relatively small. Moreover, the population size has
remained stable for generations. Hogwarts was founded
around 990 A.D. and its size has not changed since,
suggesting that the number of wizard children remained
stable for at least that long. In addition, most wizards
live in London or near Hogsmeade, a village in north-
ern England. Consequently, two shopping centers, one
in Hogsmeade and the other in Diagon Alley in London,
seem to satisfy the shopping needs of the English wiz-
ards.
Most businesses operating at these shopping centers
have been around for a long period. The low business
turnover is the result of several factors. First, the
Potterian government’s regulations give few existing
well-connected businesses monopoly power. By applying
these regulations selectively, public officials block com-
petition. Consequently, new businesses open rarely. For
example, at one point an entrepreneur, Ali Bashir, wants
to import flying carpets that would substitute for flying
brooms. The proposal is supported by a senior official, Mr.
Barty Crouch, who has a personal interest in the importa-
tion of carpets. However, his initiative is blocked because
the Ministry defines carpets as Muggle Artifacts, i.e. as
objects that are ‘too similar to objects used by muggles’
(Rowling, 2000, p. 59). Although the argument is weak,
the regulations cannot be changed due to technicalities.
The same official, however, does not prohibit his sons
from selling muggle products (Rowling, 2005, p.118).
In another instance, a public official, Percy Weasley, is
asked to formulate and pass a law that will prohibit the
importation of caldrons (Rowling, 2000, pp. 36–37), and
thus protect the interests of a local producer. The public
ends up paying higher prices because of these import
restrictions.
Second, the lack of financial markets further reduces
business turnover. Most wizards do not have the capital
needed to open a business and are therefore forced to
solicit the help of wealthy wizards. That is how Borgin
and Burkes opened a shop in the 19th century, and that
is how the Weasley twins managed to open a shop about
100 years afterward. There is no mention in the books
of any other shop opening in Diagon Alley during that
period.
A third factor contributing to the low business
turnover is the monopoly on information. The
Daily
Prophet
has a monopoly, and its reporting is system-
atically biased in favor of wealthy wizards (Rowling,
2000, p. 213, Rowling, 2003, pp. 72, 423) (There is another
publication,
The Quibbler
(Rowling, 2003, p. 144), which
is as reliable as the modern-day tabloids that publish
articles such as ‘I Was Kidnapped by Aliens!’ ‘I Saw
Bigfoot in My Back Yard!’ etc.). Also, it selectively prevents
information about new products from reaching the
public. When the Weasley twins open their shop, the
paper does not publish their advertisements, nor share
with the public information about the shop, despite the
shop’s success. (For example, it seems that the wizards
that read the
Daily Prophet
, including Harry Potter—a
devoted reader of the newspaper, know nothing about
the twins’ joke shop (Rowling, 2000, p. 36).
These barriers and restrictions lead to high entry costs,
limit the number of sellers and give the existing firms
market power. For example, the UK wizards have only one
wand-maker, the Ollivanders (Rowling, 1998, p. 53). While
it is hard to assess the effect of the market concentration
on markups, the extent of price rigidity and the frequent
use of convenient prices suggest that the Potterian retail-
ers have substantial profit margins. These margins would
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likely fall if the markets were to open to imports (Rowling,
2000, pp. 36–37).
The low business turnover also limits product variety
and innovations. For example, the same textbooks have
been used for over 20 years. Similarly, children eat the
same candies and collect the same cards as did their
parents (Rowling, 2005, p. 31). Thus, the lack of compe-
tition limits the choice of the Potterians, although there
is demand for new products. For example, after Zonko’s
Joke Shop goes bankrupt, the Weasleys’ Wizard Wheezes
has no competition, although there is a demand for the
new jokes and tricks that the Weasleys sell (See Rowling
(2000, p. 36), Rowling (2003, p. 403), Rowling (2005, pp. 76,
78, 158–159) and Tirole (1988).).
Thus, the Potterian economy is a small, monopoly-
dominated economy with a large corrupt public sector
and an inefficient credit market. Potterian markets lack
competition because of the government’s selective use
of its regulatory powers in many spheres of life. This
leads to low business turnover, a limited variety of goods
and services, and thus to a limited choice, welfare loss
and inefficient outcomes. The monopoly on information
worsens the state of affairs further because the wizards
have no access to useful information that could help
them improve their private lives (Note: Compare this
with the effect of the internet, which allows consumers
to compare the prices of similar goods from thousands
of sellers almost effortlessly, on the demand for goods at
shopping malls.).
The inefficient and selective regulatory interventions
of the Potterian public officials suggest that the world-
view the books promote is in line with the economic
models of public choice. At the same time, however,
the actions of these officials and their outcomes for the
Potterian economy and the Potterian public resemble the
communist model. The
Daily Prophet
reminds us of the
Soviet
Pravda
, which had a monopoly on information in
the former Soviet Union and served as a propaganda
machine for the communist government. More generally,
the limited choice of the Potterians very much resembles
the limited choice in the former USSR and other Soviet-
bloc communist countries.
INCOME DISTRIBUTION, INCOME
INEQUALITY, AND SOCIAL IMMOBILITY
The wizards’ society is composed of a low class, a large
middle class and a 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 lifestyle and own almost all
the assets and capital (Rowling, 1999a, p. 19).
Social mobility between the high class and the other
classes is mostly downward. There is just one promi-
nent character that makes it from the bottom to the
top, Voldemort, but several characters, including Sirius
Black, Andromeda Tonks (Black) and the Gaunts, that
moved down the social ladder (Note: Voldemort comes
from a well-established family that was stripped of its
assets (Rowling, 2005, p. 138).). Mobility between low-
and middle-class wizards is more common. For example,
Hermione starts as a mudblood wizard and ends as the
Minister of Magic (Source: https://harrypotter.fandom.
com/wiki/Hermione_Granger, accessed August 5, 2021.).
Most of the Weasley brothers have also improved their
economic conditions.
One reason for the limited social mobility is the insuf-
ficient free enterprise due to negative social images of
businesspeople in the Potterian society. The Weasleys’
mother does not encourage her children’s business aspi-
rations because she believes that public sector jobs bring
a better reputation (Rowling, 2000, p. 36, Rowling, 2003,
p. 79).
Another reason for the low social mobility is that
wealthy wizards view themselves as superior, especially
to wizards with muggle predecessors (Rowling, 2003,
pp. 84, 584, Rowling, 2005, p. 417), who are considered
a threat because of their different culture (Rowling,
2000, p. 66). Muggle-born wizards are subject to constant
harassment, ridicule, abuse and discrimination, and are
derogatorily called ‘mudbloods’ (Rowling, 1999a, pp. 72–
74, Rowling, 2005, p. 74). Wealthy wizards favor policies
that limit the influence of middle-class wizards. Most
of the supporters of Voldemort, for example, come from
wealthy families, and their goal is to enslave the middle
class, especially the mudbloods.
The middle-class wizards are unlikely to move up the
social ladder through marriage as they rarely socialize
with wealthy wizards. Wealthy wizards are often dis-
inherited by their families if they associate themselves
with middle-class wizards (Rowling, 1999a, p. 96, Rowling,
2003, p. 103), which along with intermarriages further
block upward mobility (Rowling, 2003, p. 85). Thus,
the biases of the elite against lower-class wizards
minimize the opportunities for upward social mobility,
resulting in social mobility being mostly downward
(Dearden et al., 1997) and is expected to persist (Mulligan,
1999).
The social structure of the wizard society leads to a
struggle between middle- and higher-class wizards. The
upper-class wizards use their influence and even vio-
lence, to repress the middle class, while the middle-class
wizards scorn the upper-class wizards. The upper-class
wizards even try to control the thoughts and beliefs of
the middle-class wizards by influencing the curriculum
used in the school.
Although this seems like a Marxian-style social strug-
gle, it is a struggle that is fought in a society with central
planning where the government owns and regulates pro-
duction. In the Marxian model, free markets are usually
considered the cause of social struggles because the own-
ers of the capital (‘capitalists’) can collect riches only by
robbing the middle class (‘proletariat’). Also in Marxian
models, central planning is the solution, because it takes
the power away from the upper classes and transfers it
to the government officials who represent the proletariat,
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Levy and Snir
and who make the decisions for all. Yet in the Potterian
model, the government is controlled by the elite, and
the elite use the government to repress the middle class
(Murphy et al., 1993).
The outcome is that in the Potterian model, the class
struggle focuses on controlling the government. The
Marxian model predicts that once the middle class
enjoys a relatively high standard of living and good
education, there will be a class struggle that ends in
the collapse of the class system and greater equality.
In the Potterian economy, however, even after a class
struggle that ends in the defeat of the high class,
the income differences remain large. Thus, when it
comes to inequality outcomes in a society with a large
government, the Potterian model is more consistent with
the public choice model than with the Marxian one.
INTERNATIONAL TRADE AND MIGRATION
Wizards can travel long distances easily and cheaply.
There are hardly any restrictions on international travel.
Nevertheless, there is little international trade, which
is partly due to regulations protecting local producers.
Trade and travel are limited also by linguistic barriers
as most wizards are monolingual. In addition, there are
cultural barriers, as the wizards do not know much about
other people’s customs, traditions, etc. (Rowling, 2000, pp.
163–164, 363).
These barriers reduce the demand for foreign goods,
which may explain the absence of foreign or ethnic
restaurants in Potterian London and Hogsmeade. Wiz-
ards also know very little about the quality of foreign
goods. For example, when a leading English wand-maker
disappears, wizards do not know where to find another
wand-maker although there are several quality wand
producers in other countries (Rowling, 2005, p. 70).
In addition, prejudices against foreigners and non-
wizards eliminate interactions with muggles almost
completely. Indeed, one of the main responsibilities of
the Ministry of Magic is to ensure that muggles are
not aware of wizards’ existence (Rowling, 1998, p. 42).
For example, Arthur Weasley’s job in The Office of
Misuse of Muggle Artifacts is to prevent any interaction
between muggles and wizards (Rowling, 1999a, p. 20).
Thus, although trade in muggle goods could be beneficial,
it takes place only under special circumstances and
only for specific goods (Rowling, 2005, p. 77). Another
barrier to trade is the absence of immigrant networks
(Rauch, 2001). In the Potterian economy, immigrants
are rare. For example, there are only three characters
with substantive roles, which have a foreign background,
or their names suggest so. These are Viktor Krum,
a Bulgarian wizard, Fleur Delacour, who came from
France and Cho Chang. Just one of them Cho Chang,
studies at Hogwarts. Thus, whereas almost 20% of the
UK primary school pupils are exposed at home to a
language other than English, there are very few, if any,
such students in the only school for wizards in the UK
(Source: the UK Department of Education’s Statistical
Frist Release, ‘Schools, pupils, and their characteristics:
January 2015.’).
These social norms and prejudices translate into
formal trade barriers. For example, there is no protest
when a junior official uses quality as a pretext to block
the importation of considerably cheaper foreign goods,
although the official himself admits that they are of
almost the same quality as the locally produced goods
(Rowling, 2000, pp. 36–37, 59).
However, some types of foreign work are so profitable
that they are tolerated. Wizards use ‘house elves’, a
special kind of humanoids, to do manual and dirty work,
perhaps analogous to foreign workers. Although the elves
provide many useful services, they work in terrible con-
ditions for almost no pay. They do not own even their
clothing. They are nevertheless diligent, work without a
break for many years, accept slavery conditions and are
extremely afraid of being sacked because unemployment
is almost certain death for them. These considerations
make the use of elves so profitable, that despite the
wizards’ prejudices against any type of humanoids, they
employ elves in large numbers (Rowling, 2000 pp. 64, 80,
89).
In sum, wizards could benefit by trading with muggles.
They could also import muggle-produced goods or adapt
their designs and thus increase the variety of goods at
a relatively low cost. However, trade is limited by cul-
tural norms and prejudices that make most wizards view
muggle-made goods as inferior (Rowling, 1999a, p. 25,
Rowling, 2005, p. 77). Further, cultural differences prevent
most trade between wizards from different countries,
and between wizards and other humanoids. It, therefore,
seems that unlike most models of trade, transaction
opportunities in the Potterian economy are limited by
culture. Thus, much of the potential trade in the Potterian
economy is blocked by protectionism (Grossman and
Helpman, 1994) and cultural prejudices (Bala and Long,
2005).
In summary, whereas in economic models, invest-
ments depend on borrowing cost and rate of return,
in the Potterian model, they are determined primarily
by prejudices and social norms. This is consistent with
studies that show that social norms are a barrier to trade,
except that in the Potterian economy, the effect of social
norms on trade is perhaps an order of magnitude higher
in comparison to the effects reported in empirical studies
(See McCallum (1995), Nunn & Wantchekon (2011) and
Clerides et al. (2015).).
WAR ECONOMICS
In Rowling (2005, 2007), the wizards fight a war against
‘Death Eaters’, a group of wizards that either belongs to
the upper class or aspire to associate themselves with the
upper class. Their goal is to take control over the wizard
world, thereby enslaving the middle class and driving out
those wizards whose ancestors were not wizards. They
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are extremely committed and are willing to use any form
of violence, including suicide attacks, to achieve their
goal.
The signs of danger appear two years before the first
acts of violence, but the government ignores them (Rowl-
ing, 2000) (Note: Compare this to the recent criticisms
of the US government concerning its slow and delayed
responses to ISIS terror (www.nytimes.com/2014/09/29/
world/middleeast/president-obama.html, accessed June
6, 2022), flood water (www.msnbc.msn.com/id/9614737/,
accessed
June
6,
2022),
bird
flu
(www.msnbc.msn.
com/id/9661312/, accessed June 6, 2022) and Ebola
outbreak
(www.nytimes.com/2014/09/26/world/africa/
obama-warns-of-slow-response-to-ebola-crisis.html?_
r=0, accessed June 6, 2022).). This is consistent with
Tuchman’s (1990) theory of march of folly: the govern-
ment not only ignores signs of warning but also silences
anybody who expresses opinions other than the official
ones.
When violence breaks out, however, the government
has a sudden need to obtain military equipment. As
more resources are spent on supplying military needs,
common people find it hard to obtain the goods they
need for daily life. Indeed, one of Harry Potter’s teachers,
Professor Slughorn, complains that due to the war, prices
are sky-high and that it is difficult to obtain even the most
elementary products (Rowling, 2005, p. 43).
The government also fails to prepare adequately
and, consequently, it has to buy costly equipment that
would be unnecessary if it had provided its staff with
proper training. Additional cost born by the public
because of the government inefficiency is the price paid
for goods sold by swindlers that offer a false sense
of security (Rowling, 2005, pp. 73, 78) (Note: Similar
security needs lead some modern governments to spend
millions of dollars on useless bomb detectors sold by
swindlers. Source: www.guardian.co.uk/uk/2013/apr/23/
somerset-business-guilty-fake-bombs, accessed
June
6, 2022. After the crash of the Russian Metrojet flight
9268 in Egypt on October 31, 2015, it was reported that
many Sharm el-Sheikh hotels use fake bomb detectors.
A November 10, 2015 report of CNN described them
as ‘magic wand’ detectors. Source: http://edition.cnn.
com/2015/11/10/middleeast/egypt-sharm-fake-bomb-
detectors/, accessed June 6, 2022.).
In addition, Terror generates fear, which influences
people’s moods by making everything less enjoyable
(Note: The effects of fear might be long lasting. Indeed,
many wizards remember and react irrationally when
they hear the name Voldemort even though for many
years, he was thought to be dead (Huddy et al., 2002).).
Indeed, the usually crowded ‘Leaky Cauldron’ bar is
empty because even the most loyal consumers seem to
have lost their appetite (Rowling, 2005, p. 72). In Rowling
(2005, p. 72), the bar owner notices Hagrid, who is well
known for his fondness for alcohol. From the barman’s
reaction, it is clear that Hagrid is one of his last loyal
customers.
These events demonstrate that influential events such
as wars can have long-term effects on people’s prefer-
ences. For example, as predicted by recent studies, the
war brings about a significant drop in the demand for
dining at restaurants and bars (Gould and Klor, 2010;
Becker and Rubinstein, 2011). In Israel, during the Sec-
ond Intifada in 2000–2002, there were Palestinian ter-
ror attacks in public places. The consumers responded
by eating more at home/office. Restaurants responded
by offering delivery services. The share of restaurants
offering delivery services, however, did not decrease after
the cessation of violence, suggesting that the taste for
deliveries remained.
When the Potterians see the inability of their govern-
ment to respond, they form the ‘Order of the Phoenix,’
whose goal is to fight the terrorists. Their efforts, however,
do not fully compensate for the lack of government
action because of the high private costs of fighting ter-
rorists. Indeed, those who fight the terrorists become
primary targets.
The members of the Order of the Phoenix are therefore
isolated and gain little public support. Without pub-
lic support, their efforts can at best only slow down
the progress of the terrorists, but they cannot prevent
them from gaining almost full control over most of the
institutions of the Potterian economy (Rowling, 2003,
p. 88).
The Potterian model is therefore consistent with the
economists’ insight that governments should provide
basic public goods such as security because the private
sector cannot provide them efficiently (Samuelson, 1954).
In the Potterian model, however, the government also
controls the production of many goods that are not pub-
lic, suggesting public-choice type distributive outcomes
(Tullock, 1959).
The war underscores the Potterian government’s inef-
ficiency in responding in a timely fashion to the signs
of danger. Furthermore, although the war might seem
like a class struggle, its outcome contradicts the Marxian
interpretation of a class struggle. In the Potterian model,
as in the Marxian model, the upper class struggles to
secure its status. In the Marxian model, however, once
the middle class becomes aware of the struggle, it fights
back and ultimately all classes are eliminated and a new
economic order is established.
In addition, in the Marxist model, class struggle is an
outcome of capitalistic motives, where the high class
robes the middle class of its share in production. The
solution in the Marxist model is central planning by the
government. In the Potterian model, however, there is
already central planning. The government, however, is
controlled by the upper class who uses it as means to
control the middle class.
The Potterians’ war ends when more middle-class
wizards join their comrades in the fight (Rowling, 2007,
p. 511). The outcome, however, is not a new social order.
Although the middle-class wins, the high-class wizards
still
preserve
their
high-class
status
(Rowling, 2007,
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Levy and Snir
p. 605) and their hold over the government, which
controls the economy.
INNOVATIONS AND TECHNOLOGICAL
PROGRESS
According to Snir and Levi (2010), the Potterian economy
is not growing because there is no growth in the labor
force, there is no accumulation of physical or human cap-
ital, and there is no evidence of any kind of technological
progress.
The Potterians’ broomstick industry is an exemption.
A careful reading of the Harry Potter books suggests that
the Potterian broomstick industry has been experiencing
significant technological progress over time. For exam-
ple, we are told that there are several makes and mod-
els of broomsticks. These include Cleansweep-5 (Rowl-
ing, 1999a, p. 71), Cleansweep-6 (Rowling, 2003, p. 143),
Cleansweep-7 (Rowling, 1998, p. 98) and Cleansweep-11
(Rowling, 2003, p. 202), Nimbus-2000 (Rowling, 1998, p.
108) and Nimbus-2001 (Rowling, 1999a, p. 71), Comet-
260 (Rowling, 1998, p. 107) and Comet-290 (Rowling, 2003,
p. 128), the Shooting Star (Rowling, 1999a, p. 30), the
Bluebottle (Rowling, 2000, pp. 62–63), the Silver Arrow
(Rowling, 1999b, p. 162) and the top-of-the-line Firebolt
(Rowling, 1999b, p. 32).
There is also evidence that over time there were non-
trivial improvements in the broomsticks’ production,
especially in their quality. For example, some of the
early models were simple and basic, but more recent
ones are more advanced. For example, the Shooting
Star, the model owned by the Hogwarts School, is a
basic broomstick, relatively cheap, ‘very slow and jerky’
(Rowling, 1999a, p. 30, Rowling, 1999b, p. 121), similar to
the Bluebottle family series with an anti-burglar buzzer
(Rowling, 2000, pp. 62–63). Nimbus-2000, on the other
hand, is a top-of-the-line broomstick from the time of
its release (Rowling, 1999a, p. 30), until Nimbus-2001
is released. The Firebolt, which is the latest addition,
is perhaps ‘the Ferrari’ of the broomsticks. It is the
best, fastest and most aerodynamically efficient model,
offering a smooth action and fine control. It is a dream
broomstick. Indeed, Harry repeatedly visits ‘Quality
Quidditch Supplies’ to look at and admire the prototype
Firebolt model that the store displays, and is considering
spending all his savings to buy it (Rowling, 1999b, p. 32).
The way the Potterian broomstick industry func-
tions and develops is comparable to the modern auto
industry, particularly because new broomstick models
are released almost every year. The newer model
broomsticks use better materials (e.g. type of wood
such as Spanish Oak), have better precision, offer better
balance, are faster, etc. The Firebolt, for example, can
accelerate from 0 to 150 mph in 10 seconds, which is at
least twice as fast as the Cleansweep. Comet-260 looks
‘
...
like a joke next to the Firebolt’ (Rowling, 1999b, p.
162). Thus, each model is of better quality than the older
one, which is indicative of technological improvements
in the broomstick industry, a process resembling a
Schumpeterian mechanism of creative destruction.
An interesting question that follows from these obser-
vations is how much of the broomstick technological
innovations translate into economy-wide innovations.
Our reading of the books suggests that broomsticks are
primarily used for leisure-related activities, especially for
the Quidditch games. For day-to-day purposes, Potterians
use other means of transportation including apparition—
a spell that allows the caster to move from one spot
to another instantaneously (Rowling, 2000, pp. 43–44),
magic-propelled boats (Rowling, 1998, p. 42), flying
horseless carriages (Rowling, 2000, p. 109), the Floo-
network that allows immediate transportation to any
place in the network (Rowling, 2000, p. 29), Knight-Bus
(Rowling, 1999b, p. 21), a magical train, the Hogwarts
Express (Rowling, 1998, p. 60), the Ministry of Magic
cars (Rowling, 1999b, p. 45) and Portkeys—objects that
transport to a pre-determined location when touched
(Rowling, 2000, p. 46).
In other words, the technological progress in the pro-
duction of broomsticks contributes to the Potterians’
leisure-related activities, the game of Quidditch being
the primary example. This conclusion is also consistent
with the observation that most stores in Diagon Alley
sell the same old stuff over centuries, except for the
Weasley twins’ Joke Shop, which sells some new models
of games and toys, which are also an example of leisure
goods.
Thus, in general, we do not see any evidence of the
innovations in the broomstick industry spreading to the
general economy. This is consistent with the finding that
the Potterian economy is stagnating; there is hardly any
growth in the labor force, there is no accumulation of
knowledge (human capital) and we see no evidence of
large-scale capital investments. Consequently, we con-
clude that very little (if any) of the broomstick technology
innovations spread to other industries, or more generally,
to the wider economy.
The lack of technological progress is also consistent
with the common image of centrally planned economies.
In the Potterian economy, with the government either
producing many goods or regulating their production,
government officials do not benefit from the introduction
of new products and therefore they have little incentive
to introduce them. On the contrary, they might have
incentives to erect barriers to such innovations if they see
technological progress as a threat to their employment,
which is a common view among labor unions. Perhaps
it is not surprising, therefore, that the only industry in
which technology is progressing is not a part of the public
sector.
POTTERIAN EDUCATION SYSTEM:
INVESTMENT IN HUMAN CAPITAL
Harry Potter books revolve around the life at Hogwarts
School of Magic. It is fitting, therefore, to end with
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a short discussion of the Potterian education system
(Note: See Snir & Levy (2010) for a discussion of the
Potterian education system in the context of Solow
growth model.). The wizards’ education system is
publicly financed. It gives the students basic training
and ensures that all wizards graduate with knowledge
that allows them to find a job. The school is also one of
the only institutions where the rules treat all members
of society equally. It is also the only institution where
middle- and high-class wizards interact on a day-to-day
basis.
The wizards value education highly, and thus the pub-
lic image of teachers is positive, so much so that they are
even willing to sacrifice future income opportunities just
to become teachers. For example, Gilderoy Lockhart, the
celebrity author of seven books (Rowling, 1999a, pp. 28–
29, 38), becomes a professor at Hogwarts (Rowling, 1999a,
p. 64). The value of education is further underscored by
the high status of the school headmaster. The current
headmaster, for example, is considered by many to be the
greatest wizard of his time (Rowling, 1998, p. 66) (Note:
See the number of Hogwarts’ former headmasters that
are included in the list of the most famous wizards: www.
hp-lexicon.org/wizards/card_wizards.html, accessed
June 6, 2022.).
The Potterian education system is not problem-free,
however. Hogwarts is under the supervision of the Min-
istry of Magic and, thus, subject to the influence of politi-
cians. The government can interfere with the school cur-
riculum at will (Rowling, 2003, p. 229). Another weakness
of Hogwarts is that its curriculum has not been revised
for hundreds of years. Consequently, the graduates do
not know more than their predecessors. The subjects
and classes they take are those that were taken by the
students of previous generations (Rowling, 1999a, p. 161).
Similarly, the textbooks they use were also used by their
parents and even grandparents. For example, the used
copy of
Advanced Potion-Making
that Harry Potter bor-
rowed from Professor Slughorn (Rowling, 2005, pp. 123,
125) was also used by Professor Snape’s mom, Eileen
Prince (Rowling, 2005, p. 417), and by the Half-Blood
Prince—Professor Snape (Rowling, 2005, p. 126), who was
a classmate of Harry’s parents (Rowling, 2005, p. 360). The
old-fashioned curriculum does not encourage innovative
and creative thinking (Snir and Levy, 2010). The Potterian
students focus primarily on practical skills but learn very
little theory, literature, arts or philosophy. Most lack cre-
ative skills and cannot think originally or independently
(Rowling, 2000, p. 437).
Potterians do not have elementary schools or insti-
tutes of higher education like universities. Upon gradu-
ating from Hogwarts, wizards choose a profession and
usually stick to it (Rowling, 1999a, pp. 161–162). Since
there is no incentive to study further, Potterians’ stock of
knowledge does not increase beyond what is acquired in
the school. Their education system, therefore, resembles
the Marxian system. Education is compulsory and all
students receive the same education. Yet even in this
seemingly equal education system, there are inequalities.
Upon arrival at Hogwarts, the students are divided into
four ‘houses’ based, to a large extent, on their ancestral
history. Most high-class wizards end up in one particular
house, whereas the middle-class wizards are scattered
between the other three houses.
The students, school experience depends largely on
the house to which they belong. They, therefore, grad-
uate with a strong association with the students from
their own house, and thus the high-class wizards leave
the school with different values, norms and associates
than the wizards that belonged to other houses. Thus,
the system that should have fostered equality of values
ends up instead fomenting social division, tension and
struggle.
Given the central role of education in the Potterian
economy, we could consider the role of the Hog-
warts School as a mechanism that contributes to the
Potterians’ economic growth via endogenous accumula-
tion of human capital (Uzawa, 1965; Lucas Jr., 1988). In
Lucas’ model, human capital accumulation is modeled
in the same way as physical capital accumulation is
modeled in the Solow model. However, there is no
knowledge accumulation in the Potterian economy.
Thus, the stock of human capital is essentially fixed.
Moreover, the contribution of education to the wizards’
productivity after they graduate and start working,
most of them for the Potterian government, is unclear.
Since there is no evidence of significant physical capital
investment in the Potterian economy, the contribution
of the wizards’ schooling to the productivity of physical
capital is also doubtful. Along with the evidence that
the Potterian economy is not growing (Snir and Levy,
2010), this suggests that the endogenous human capital
accumulation mechanism does not play a role in the
Potterian economy. As Long (2005) notes, ‘If only “He-
Who-Must-Not-Be-Named” understood neo-classical
endogenous growth theory, it might have been a different
story.’
CONCLUSION: SUMMARY, POSSIBLE
OBJECTIONS AND CAVEATS
This paper is motivated, first by the evidence that much
of the general knowledge about economic issues is trans-
mitted and learned through various print and electronic
media, and second, by the recent findings in psychol-
ogy and neuroscience about the powerful influence that
literary works, particularly fiction, have on the human
mind. Building on these findings, we analyze the Potte-
rian economy to assess the economic ideas and insights
that these books convey to the readers, i.e. the principles
of Potterian economics.
We find that the Potterian model is not in line with a
single economic model. Rather, it is a mix of ideas from
various models. These include Marxian notions of class
struggle and equality, public choice aspects of inefficient
and corrupt government, sticky prices in the Keynesian
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Levy and Snir
spirit, full employment of the type found in Classical
models, etc.
Because the Potterian economics mixes ideas from
different models and worldviews, many elements of
the Potterian model are mutually inconsistent and
contradictory, and thus perhaps even confusing. For
example, the Potterian economic model is critical of
market-based systems, yet it belittles government. The
government is corrupt, yet it has public support. Many
welfare-improving and mutually beneficial transactions
do not take place, and there are no credit markets
because of biases and prejudices, yet the books are often
viewed and described as rejecting stereotypes. Potterian
money is made of precious metals, yet its purchasing
power is unrelated to its commodity value. The Potterian
wizards value education, yet their school curriculum
excludes theoretical subjects, their knowledge does not
exceed much of their parents’ knowledge and they do not
have institutes of high education, such as universities or
colleges.
Moreover, the Potterian model misses many deep and
fundamental aspects of economic analysis. For exam-
ple, the Potterian bank does not serve as an intermedi-
ary between savers and investors, the Potterian money
lacks some key attributes (e.g. divisibility, portability, and
homogeneity) that are essential for it to serve as an
efficient medium of exchange or store of value, arbitrage
opportunities are not exploited and efficiency-improving
transactions go unnoticed.
In addition, the Potterian model lacks discussion of
important aspects of real-world economies and societies.
One important theme that is absent from the world of
Harry Potter is religion. There are only two occasions
where religion-related acts take place. One is the Christ-
mas dinner party, which is held annually at the Hog-
warts (e.g. Rowling, 1998, pp. 131–132). The second is the
inscription Harry finds on his parents’ gravestone: ‘The
last enemy that shall be destroyed is death’ (Rowling,
2007, pp. 216–217), which comes from the
New Testament,
1 Corinthians
15:26, King James Version.
Taxes of any kind are absent as well. The word ‘tax’ is
mentioned in the seven-book series only once, in Rowling
(2000, p. 3), in the context of the ownership of Riddle
House: ‘The wealthy man who owned the Riddle House
these days neither lived there nor put it to any use; they
said in the village that he kept it for “tax reasons,” though
nobody was very clear what these might be.’ Thus, if the
wizards are subject to some taxes like ordinary muggles
are, the author does not give us any information about
it. It could be that taxes in the Potterian economy come
in the form of constraints and limitations, for example,
limitations on what the Potterian wizards can and can-
not do. Such limitations could be interpreted as a tax.
That, however, still leaves unanswered the question: why
do Potterians choose this kind of ‘limitation-tax’ over
income tax, which is more standard? The puzzle is par-
ticularly interesting given that the Potterian government,
that is the Ministry of Magic, is quite powerful, and it is
the main employer in the Potterian economy. Therefore,
it would have no difficulty collecting such taxes.
According to Ross (2015), ‘“In a July 2015 story, a jour-
nalist estimated it would cost more than $43,000 a year to
go to Hogwarts, including all the Diagon Alley necessities
like wands, robes, books and so on.” “My friends and I are
having a super-intense debate about the cost of tuition
at Hogwarts. Thanks.” “Rowling quickly shut down the
idea on Twitter, clarifying that magical education is, in
fact, free”: “There’s no tuition fee! The Ministry of Magic
covers the cost of all magical education!”’ (Source: A.
Ross, ‘The 50 Most Important Things We’ve Learned from
J.K. Rowling,’
Time
, July 30, 2015.)
Thus, according to J.K. Rowling, there are no tuition fees
at Hogwarts. But then the absence of taxes is particu-
larly puzzling because, in any economy, taxes would be
essential for funding public expenditures, such as public
education. How is ‘free education’ funded? Who pays for
it? The lack of taxes cannot be explained by the medieval
structure of the Potterian society either, since taxes are
mentioned numerous times in the
Bible
, in both the
Old
Testament
(e.g.
Exodus
30:11–16) and the
New Testament
(e.g.
Romans
13:1–7). It is well known also that taxes were
collected in Ancient Greece (e.g. Sosin, 2014), as well as
in the Roman Empire (e.g. Hopkins, 1980). The absence of
taxes in the Potterian economy is therefore mystifying,
difficult to understand and a significant distortion.
It follows that a naïve reader of Harry Potter would
get a distorted view of economics. Consider some of the
lessons that the principles of Potterian economics teach:
governments are corrupt, wasteful and not trustwor-
thy; markets are not fair because transactions are zero-
sum; political process is not transparent; government is
big and controls much of the production; governments
cannot provide security, the most basic public good; in
the marketplace, the wealthy have advantage over the
poor; markets encourage crony capitalism; capitalists
want to enslave the proletariat; bankers are goblins; busi-
nessmen are deceptive and devious; wealthy people are
mean and unethical; there is monopoly on information;
power is concentrated; wealth is used to influence the
government; domestic producers should be protected
from foreign competition even if they are inefficient;
international trade is not good; ignorance about foreign-
ers, foreign cultures and foreign languages is the norm;
lack of institutions offering financial intermediary ser-
vices is the norm; no interest payments are expected
on deposits; commodity money, coin denominations and
attributes, and their exchange rates, all lead to higher
transaction costs; paper checks are non-existent; arbi-
trage opportunities are not exploited; monopolies are
common; economic growth is not important; economic
stagnation is not something that should bother us; tech-
nological progress is not essential; innovative and cre-
ative thinking is rare; prices are expected to remain
unchanged; capital investment is non-existent; human
capital does not accumulate; public employees should
expect life-time job-security regardless of how inefficient
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Oxford Open Economics
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and unproductive they are; the default employer is the
public sector, not the private sector; downward social
mobility is the norm; there are no taxes yet education
is free; high education is not critical; curriculum can
remain unchanged for centuries; only practical skills
are valued, theoretical knowledge is of no value; there
is a constant class struggle; and this is only a partial
list.
Many of these lessons seem shallow and uninformed
characterizations of markets, market institutions and
arrangements and market participants and their motives
and goals. In light of the evidence about the potential
influence of popular fiction on readers’ views and opin-
ions, these can influence and shape the public’s under-
standing of economic issues and matters.
Perhaps more importantly, however, these distorted
views of the economy can potentially contribute to
the public’s biases, misconceptions and more generally
to their economic illiteracy, as documented by Caplan
(2007), Rubin (2003) and others. Because most of the
public never take college- or university-level courses
in economics, they are susceptible to these kinds of
subtle influences (Salonikov et al., 2022). It is likely,
therefore, that the public that is exposed to such
views and sentiments about economics, economic
institutions, economic decisions and their outcomes, can
be persuaded more easily by populist arguments against
certain policies, against businessmen, against bankers
and other beneficial service providers, against authorities
(e.g. the central bank), etc.
Moreover, the confusing insights the Harry Potter
books convey about economics and economic matters
by mixing various conflicting and mutually inconsistent
messages, observations and arguments can lead to a
process where a naïve citizen might lose faith in both
market institutions as well as in government authority.
The results might be apathy and indifference, which
should be troubling.
These findings imply that popular literature along with
other information intermediaries may be contributing to
the public’s lack of understanding of many economic
issues, as some studies of economic and financial literacy
have documented recently. But we should note that some
of the biases we identify, many of them stereotypical, are
not new, as they have been around for centuries (Harap,
2003). For example, the negative portrayal of bankers
has been a recurring theme in popular literature for
a long time. Similarly, populist views and criticisms of
governments, class struggles and other social ills and
institutions are not new.
These observations suggest that in addition to directly
influencing the public views and opinions, Harry Pot-
ter books could be reinforcing the existing norms and
beliefs. This reinforcement mechanism might be play-
ing an important role in transmitting the biases and
other social treats through generations, via the process of
cultural transmission of values (Bisin and Verdier, 2000,
2008; Necker and Voskort, 2014). Moreover, the formation
and propagation of these biases and norms may be taking
place from the period of early youth, because this is the
age group in which fiction’s influence is likely to be par-
ticularly strong and long-lasting. Further, an entire gen-
eration of children and youngsters grew up along with
Harry Potter, closely following his adventures for over
20 years since the first book in the series was published
in 1998. Therefore, given the books extraordinarily large
worldwide audience, and given that a significant propor-
tion of the readers are kids, these biased and distorted
views about many fundamental economic issues could
potentially persist, and even spread further. A folk eco-
nomic interpretation of the Potterian model, therefore,
suggests that popular intermediaries might be playing
an important role in spreading biases and ignorance on
important economic issues.
We shall note two possible objections to our inter-
pretation. First, one could argue that because many of
the Potterian economic principles coincide with popular
folk economics, we should not expect them to be con-
sistent with professional economists’ models, views or
insights. For example, Harry Potter books are liked by
many adults that read them, but they were primarily
written for children. That might explain, one could argue,
why the Potterian economy is so simple, with no capital
markets, no taxes, etc. Potterian principles of economics
pay attention to the Potterians’ unequal income distribu-
tion, emphasizing the affluence of the upper-class wiz-
ards and the poverty of the lower-class wizards, perhaps
because children can relate to poor vs rich, but not to
deeper notions of incentives and efficiency. These sim-
plifying assumptions are necessary to make the books
children-friendly.
Following this line of argument, other aspects of the
Potterian world can be explained by the fact that the
books belong to a fantasy genre, and the events they
describe are set in medieval times. Indeed, wizards, gob-
lins, dragons and other similar creatures are typically
associated with medieval times. That can explain also
the use of commodity money, why goblins are unfriendly,
etc.
Similarly, the stagnation of the Potterian economy is
necessary for making the story credible, as it takes place
during the medieval period, a period in which the world
was stagnating because there was no increase in capital
stock or population, and there was little technological
progress. The corrupt and inefficient government could
be a literary device similar to those used in comic books
such as ‘Superman’ or ‘Batman’: corrupt characters are
required to have a need for a hero in the form of Harry
Potter and his sidekicks.
The second type of argument could be that Potte-
rian economics merely captures the author’s subjec-
tive opinions and views, which reflect her personal
experiences and biases about economic issues, and
the financial consequences of her life experience as
a divorced, unemployed and welfare-dependent sin-
gle parent, followed by phenomenal success (Source:
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Levy and Snir
https://www.businessinsider.com/the-rags-to-riches-
story-of-jk-rowling-2015-5, accessed June 6, 2022.).
These observations and arguments are important.
However, the books’ broad, near-universal success
suggests that in addition to telling a story, which seems
to appeal to a large and diverse audience, the author
may have also been able to capture the popular beliefs
and sentiments of hundreds of millions of people across
the globe. In other words, people from a broad and
varied range of backgrounds, values, cultures, societies,
religions and places, irrespective of age and gender, all
seem to be able to relate to the Potterian story and
the sentiments it conveys, consciously and perhaps
subconsciously.
Under this reasoning, we argue, Potterian economics
can still inform us about the formation of folk economics,
even if from the author’s point of view, it merely reflects
her personal opinion based on her private life experi-
ences, or even if the entire project was intended just for
children’s bedtime reading. For similar reasons, the value
of studying Potterian economics is not diminished even
if the author is ‘expressive’ (Hillman, 2010b), i.e. she is
expressing not necessarily her own beliefs about eco-
nomic matters, but rather her beliefs about her readers’
beliefs.
Thus, regardless of the motivation of the author for
writing these books, and regardless of whether the books
reflect her private opinions, or her beliefs about her
readers’ opinions, interpreting the Potterian economic
model as a reflection of folk economics suggests that
popular intermediaries could potentially play an impor-
tant role in spreading biases, distorted opinions and igno-
rance on important economic issues. Thus, rather than
dismissing the ‘mishmash’ of mutually inconsistent and
contradictory economic ideas found in the Harry Potter
books, we suggest taking them seriously to try and under-
stand their sources and persistence.
As Gary Becker is quoted in the August 21, 2011,
New York Times
article (p. SR5), writers do not always
understand the intricacies of how markets work and
function. It is not easy to write an adventure story that
contains all social and market institutions and get it fully
right. It is similar to writing a formal economic model:
it requires a solid and deep understanding of economic
ideas. But this is not limited to economics, however, as it
applies to other fields of knowledge as well. Therefore, it
is not surprising that some of the most successful fiction
authors, it turns out, have spent an enormous amount of
time on research and study (Francis, 2012; Popoola, 2015).
For example, according to Freedman (2005, p. xiii), Isaac
Asimov was the best physicist among non-physicists,
and the best zoologist among non-zoologists, hinting
at the seriousness in which Asimov did his research
before writing his books and essays. Similarly, it took
J.R.R. Tolkien 17 years to complete
The Lord of the Rings
(Source: middle-earth.xenite.org/2011/09/16/how-long-
did-it-take-j-r-r-tolkien-to-write-the-lord-of-the-rings/,
accessed June 6, 2022.).
As a caveat, we should note that the interpretation
of Potterian economics, which we lay out in this paper,
is based on our understanding of the economics of
Harry Potter. Many of the ideas and the interpretations
we offer seem non-controversial and consistent with
the interpretations of other scholars and writers cited
above, most of them outside the field of economics.
However, on some aspects of the Potterian world, there
is less consensus and thus they are subject to different
interpretations.
For example, in an essay published in June 2004 in
the French daily
Le Monde
, Ilias Yocaris, a professor of
literary theory and French literature, argued that ‘the
fantastic universe of Harry Potter is a capitalist universe.’
In July 2004, however, the same newspaper published an
article by Isabelle Smadja, a professor of philosophy, in
which she argues exactly the opposite: ‘Far from being a
capitalist lackey, Harry Potter is, in fact, the first fictional
hero of the anti-globalist, anti-free market, pro-Third
World, “Seattle” generation
...
[Smadja] suggests that
Yocaris has been confused by the fact that the Potter
books are, themselves, such a global, commercial and
marketing success. Examination of the text suggests
that they are, in fact, a “ferocious critique of consumer
society and the world of free enterprise.”’ (Source:
http://www.nzherald.co.nz/lifestyle/news/article.cfm?
c_id=6&objectid=3576571, accessed June 6, 2022.
New
York Times
translated Ilias Yocaris’ article to English
and published it on its editorial page in July 18,
2004, available at http://www.nytimes.com/2004/07/18/
opinion/harry-potter-market-wiz.html, accessed June 6,
2022.)
We agree that some of the aspects of the Potterian
economy may be subject to a different interpretation
than ours. We believe, however, that one main reason for
these discrepancies is precisely what we argued above—
principles of Potterian economics are a mix of ideas
from different models, not always consistent with each
other, quite often mutually orthogonal and contradictory.
A story that contains a mix of ideas and worldviews
that are inconsistent with each other will likely lead to
different interpretations, depending on readers’ points of
view.
Before we end, consider the following thought exper-
iment. Suppose that we took the same approach as
we employed in this paper, and used it to analyze
the economies of Sweden, or China, or Zimbabwe, or
Lichtenstein, or Myanmar, or Georgia, or any other set
of countries. These real-world economies will unlikely
be consistent with any specific professional economic
model. Rather, like the Potterian economic model, they
will likely be consistent with some parts of some of the
models.
For example, the Potterian economy is one where
international trade is severely restricted by protection-
ism, there is hardly any migration, the economy is in
permanent stagnation, innovations and technological
progress are limited to the broomstick industry without
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economy-wide spillovers, the stock of human capital is
not increasing and investments are non-existent. These
are not consistent with a model where decision-makers
seek to maximize social welfare. Yet these are also
characteristics of certain real economies.
We believe this point highlights a key advantage
of this paper. It shows why the Potterian economy
resonates with people. Despite its shortcomings and
inaccuracies, it is consistent with folk economics, which
while perhaps problematic for human flourishing in
a Smithian sense, it captures and reflects people’s
views on many economic and social issues. It is stable
equilibrium, just not one that will get us to today’s level
of prosperity in the developed world, even with Wizarding
powers.
Future studies should analyze the economic content
of other literary texts to better understand how popu-
lar opinions about the economy are influenced by fic-
tion and media, and how they form and change over
time (Cowen, 2008; Miller and Watts, 2011). For example,
the Potterian model points to a change in the image
of the government as reflected in fiction. For example,
Tolkien’s
Lord of the Rings
, published in the 1950s (Tolkien,
1993), depicts the government as efficient and benevo-
lent. In contrast to this idealistic and perhaps naïve view,
the Harry Potter books portray the government officials
as corrupt, dishonest, incompetent and unkind, imply-
ing that today’s public is perhaps more realistic. Inter-
estingly, this change occurred during the period when
economists moved away from studying normative mod-
els of the government to studying models that emphasize
the role of private and group-specific incentives (Hillman,
2009).
As another example, Adhia (2013) provides evidence
of ideological change in India. Since the 1980s, he notes,
the popular sentiments in India have evolved from con-
demning profits as anti-social to accepting—and even
applauding—business success. Applying the method of
content analysis to Hindi films, he finds that rich mer-
chant characters have changed from being depicted as
villains to being depicted as heroes (Note: The methodol-
ogy we have employed in this paper is similar in spirit to
content analysis, a widely used empirical methodology
employed in other social sciences and humanities. See
Levy et al. (2002) for an example and a brief survey.).
These developments point to changes that modern soci-
eties experience and suggest fruitful avenues for future
research.
SUPPLEMENTARY DATA
Supplementary data are available at
Oxford Open Eco-
nomics
online.
Funding
We have not received any grant from funding agencies in
the public, commercial or not-for-profit sectors.
Conflict of Interest
None declared.
Data Availability
Data availability does not apply in this case. The online
supplementary appendix contains a detailed reference to
all economic themes, topics and issues we have identified
in the Harry Potter books, along with the quotations
of the relevant texts from the books, and their exact
locations.
Acknowledgments
We thank an anonymous reviewer for helpful comments
and the editor Amrita Dhillon for guidance. Many
colleagues and students have commented on earlier
versions of this paper. In particular, we would like
to thank Zurab Abramishvili, Markus Brückner, Roger
Congleton and Pierre-Guillaume Méon, the discussants
at the Silvaplana Workshop on Political Economy. In
addition, we thank Anat Alexandron, Sima Amram, Paul
Anglin, Katrina Babb, Anindya Banerjee, Bob Barsky,
Yoram Bauman, Mark Bergen, Sabrina Artinger, Helen
Casey, Allan Chen, Ong EeCheng, Raphael Franck, Max
Gillman, Allen Goodman, Danielle Gurevitch, Yuval
Heller, Arye Hillman, Daniel Houser, Miriam Krausz,
Christoph Kuzmics, Frank Lechner, Steven Levitt, Sarit
Levy, Lorence Maimony, Asher Meir, Hugo Mialon, Igal
Milchtaich, Lavinia Moldovan, Shmuel Nitzan, Chryssa
Papathanassiou, Ron Peretz, Paul Rubin, Adi Schnytzer,
Matthew Shapiro, Ainit Snir, the late Heinrich Ursprung,
Timothy Wong, and the seminar participants at Bar-
Ilan University, at the Silvaplana Workshop on Political
Economy, at the International School of Economics Tbilisi
(ISET), at the National University of Singapore, at the
American Economic Association Conference on Teaching
and Research in Economic Education, and at the
American Economic Association’s annual conference,
for comments, suggestions and conversations about
the economics of magic. Avihai Levy and Eliav Livneh,
two part-time wizards, provided research assistance.
Earlier versions of this paper were circulated under the
titles ‘Abracadabra! Social Norms and Public Perceptions
through Harry Potter’s Looking Glasses’ and ‘Popular
Perceptions and Political Economy in the Contrived World
of Harry Potter.’ All errors are ours.
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1
Online Supplementary Appendix
Potterian Economics
Last Revision: June 9, 2022
The tables below list the economic ideas, principles, concepts, observations, and events that we
identify in the Potterian economic model and the corresponding quotes from the Harry Potter
books. Many of the economic ideas appear in the Harry Potter books more than once. For
example, various make and model broomsticks which are listed in Appendix E, and which we
discuss in the paper in section 12 in the context of technological innovations, are mentioned in
the books numerous times. To construct these tables, we tried to identify the episodes and the
locations in the story where these ideas appear for the first time. We shall note that the list is not
exhaustive and there are many more economic ideas in the world of Harry Potter.
Contents
Appendix A. Economic Ideas p. 2
Appendix B. Additional Economic Ideas p. 30
Appendix C. Round Prices p. 33
Appendix D. Convenient Prices p. 35
Appendix E.
Broomstick Industry – Technological Progress
p. 37

2
Appendix A. Economic Ideas1
Economic
Idea
Quote
Reference
Commodity
money
denominations
“The gold ones are Galleons,” he explained. “Seventeen
silver Sickles to a Galleon and twenty-nine Knuts to a
Sickle, it’s easy enough.”
Rowling,
1998, p.
49
Foreign
currency
“You’re not the first one who’s had trouble with money,”
said Mr. Roberts, scrutinizing Mr. Weasley closely.”
Rowling,
2000, p.
50
Coin values are
independent of
their values as
a commodity
“I had two try and pay me with great gold coins the size of
hubcaps ten minutes ago.”
Rowling,
2000, p.
50
Commodity
money - heavy
and
cumbersome
“Ron purchased a dancing shamrock hat and a large green
rosette, he also bought a small figure of Viktor Krum, the
Bulgarian Seeker…“Wow, look at these!” said
Harry…“Omnioculars,” said the saleswizard
eagerly…”Bargain - ten Galleons each.”…“Three pairs,”
said Harry firmly to the wizard…Their money bags
considerably lighter, they went back to the tents.
Rowling,
2000, pp.
60–61
Counterfeit
money
“Well, let’s check how yeh’ve done!” said Hagrid. “Count
yer coins! An’ there’s no point tryin’ ter steal any, Goyle,”
he added, his beetle-black eyes narrowed. “It’s leprechaun
gold. Vanishes after a few hours.”
“I know that, Harry, but if she wakes up and the locket’s
gone – I need to duplicate it – Geminio! There…That
should fool her…”
“They have added Germino…Curse!” said Griphook.
“Everything you touch will…multiply, but the copies are
worthless – and if you continue to handle the treasure, you
will eventually be crushed to death by the weight of
expanding gold!”
Rowling,
2000, p.
350
Rowling,
2007, p.
173
Rowling,
2007, p.
356
Constraints on
Converting
metals into
gold
“Sorcerer’s Stone…will transform any metal into pure
gold…but the only Stone currently in existence belongs to
Mr. Nicolas Flamel…who celebrated his six hundred and
sixty-fifth birthday last year.”
Rowling,
1998, p.
143
Opportunity
cost of using
precious metals
for making
coins
“And now Wormtail was whimpering. He pulled a long,
thin, shining silver dagger from inside his cloak.”
“Harry walked up the worn stone steps, staring at the
newly materialized door. Its black paint was shabby and
scratched. The silver doorknocker was in the form of a
Rowling,
2000, p.
413
Rowling,
2003, p.
45
1 This appendix contains a list of the ideas found in Potterian economics which are discussed in the body of the paper.

3
twisted serpent. There was no keyhole or letterbox.”
“Dumbledore gave a great sniff as he took a golden watch
from his pocket and examined it.”
Rowling,
1998, p. 8
Transaction
cost of
withdrawing
money from
the bank
“An’ I’ve also got a letter here from Professor
Dumbledore,”… “Very well,” he said…“I will have
someone take you down…” Griphook whistled and a
small cart came…hurtled through a maze of twisting
passages…left, right, right, left, middle fork, right,
left,…The rattling cart seemed to know its own way…
they plunged even deeper “…I think I’m gonna be
sick.”…Hagrid…had to lean against the wall to stop his
knees from trembling…Inside were mounds of gold
coins…silver…bronze Knuts…He turned to Griphook.
“…can we go more slowly?” “One speed only,” said
Griphook. They were going even deeper now and
gathering speed. The air became colder and colder…One
wild cart ride later they stood…outside Gringotts.”
Rowling,
1998, pp.
47–49
The amount of
money that
Harry
withdraws
from the bank
completely fills
his bag
Once Harry had refilled his money bag with gold
Galleons, silver Sickles, and bronze Knuts from his vault
at Gringotts, he had to exercise a lot of self-control not to
spend the whole lot at once.
Rowling,
1999b, p.
31
Cash (Clower)
constraint
“I haven’t got any money — and you heard Uncle Vernon
last night…he won’t pay for me to go and learn magic.”
Rowling,
1998, p.
41
Wizards’
difficulties in
handling
foreign
currency
“They had reached the station. There was a train to
London in five minutes’ time. Hagrid, who didn’t
understand “Muggle money,” as he called it, gave the bills
to Harry so he could buy their tickets.”
“Help me, Harry,” he muttered, pulling a roll of Muggle
money... “This one’s a - a - a ten? Ah yes, I see the little
number on it now…So this is a five?” “A twenty,” Harry
corrected him... “Ah yes, so it is…I don’t know, these
little bits of paper…” “You foreign?” said Mr. Roberts as
Mr. Weasley returned with the correct notes. “Foreign?”
repeated Mr. Weasley, puzzled. “You’re not the first one
who’s had trouble with money”
“Stored in an underground vault at Gringotts in London
was a small fortune that his parents had left him. Of
course, it was only in the Wizarding world that he had
money; you couldn’t use Galleons, Sickles, and Knuts in
Muggle shops.”
Rowling,
1998, p.
43
Rowling,
2000, p.
50
Rowling,
1999a, p.
30

4
Just-below (or
psychological)
prices
“A plump woman outside an Apothecary was shaking her
head as they passed, saying, “Dragon liver, sixteen Sickles
an ounce, they’re mad…”
Rowling,
1998, p.
46
Sticky prices I
– Daily
Prophet costs 1
Knut for 7
years
“Hermione, however, had to move her orange juice aside
quickly to make way for a large damp barn owl bearing a
sodden Daily Prophet in its beak. “What are you still
getting that for?” said Harry irritably, thinking of Seamus
as Hermione placed a Knut in the leather pouch on the
owl’s leg and it took off again.”
Rowling,
2003, p.
167
Sticky prices II
– Floo
Powder’s price
is the same for
over 100 years
“No shortage of Floo powder has ever been reported, nor
does anybody know anyone who makes it. Its price has
remained constant for one hundred years: two Sickles a
scoop. Every wizard household carries a stock of Floo
powder, usually conveniently located in a box or vase on
the mantelpiece.”
pottermore
head.tumb
lr.com/pos
t/1021758
02190/floo
-powder,
accessed
on May,
31, 2015
Gringotts bank
– a monopoly
run by goblins
“They didn’ keep their gold in the house, boy! Nah, first
stop fer us is Gringotts. Wizards’ bank.” “Wizards have
banks?” “Just the one. Gringotts. Run by goblins.”
Rowling,
1998, p.
41
Goblins –
greedy bankers
“They passed a group of goblins who were cackling over a
sack of gold that they had undoubtedly won betting on the
match, and who seemed quite unperturbed by the trouble
at the campsite.”
Rowling,
2000, p.
81
Counterfeit
money – even
school boys
can do that
“Hermione soon devised a very clever method of
communicating the time and date of the next meeting…
She gave each of the members of the D.A. a fake Galleon
…“You see the numerals around the edge of the coins? ...
On real Galleons that’s just a serial number referring to
the goblin who cast the coin. On these fake coins, though,
the numbers will change to reflect the time and date of the
next meeting. The coins will grow hot when the date
changes.”
Rowling,
2003, p.
297
Introduction of
counterfeit
gold Galleons
– makes people
extra cautious
“Yeah…I prefer your way,” said Harry, grinning, as he
slipped his Galleon into his pocket. “I suppose the only
danger with these is that we might accidentally spend
them.” “Fat chance,” said Ron, who was examining his
own fake Galleon with a slightly mournful air, “I haven’t
got any real Galleons to confuse it with.”
Rowling,
2003, p.
298
Withdrawing
money from
the bank – the
Gringotts
“Morning,” said Hagrid to a free goblin. “We’ve come ter
take some money outta Mr. Harry Potter’s safe.” “You
have his key, sir?”…“Got it,” said Hagrid at last, holding
up a tiny golden key. The goblin looked at it closely.
“That seems to be in order.”
Rowling,
1998, p.
47
Services
offered at
“When the cart stopped…Griphook unlocked the door…
Inside were mounds of gold coins. Columns of silver.
Rowling,
1998, pp.

5
Gringotts - safe
keeping
Heaps of little bronze Knuts. “All yours,” smiled Hagrid
…“The gold ones are Galleons,” he explained. “Seventeen
silver Sickles to a Galleon and twentynine Knuts to a
Sickle, it’s easy enough. Right, that should be enough fer
a couple o’ terms, we’ll keep the rest safe for yeh.”
“Harry. Gringotts is the safest place in the world fer
anything yeh want ter keep safe.”
48–49
Rowling,
1998, p.
41
Services
offered at
Gringotts –
exchange of
wizard money
for precious
stones
“A pair of goblins bowed them through the silver doors
and they were in a vast marble hall. About a hundred more
goblins were sitting on high stools behind a long
counter… examining precious stones through eyeglasses.”
Rowling
1998, p.
47
Services
offered at
Gringotts –
exchange of
wizard money
for Muggle-
money
“You be careful, Arthur,” said Mrs. Weasley sharply as
they were bowed into the bank by a goblin at the door.
“…Hermione’s parents…were standing nervously at the
counter that ran all along the great marble hall…“But
you’re Muggles!” said Mr. Weasley delightedly…“What’s
that you’ve got there? Oh, you’re changing Muggle
money. Molly, look!” He pointed excitedly at the ten-
pound notes in Mr. Granger’s hand.”
Rowling,
1999a, p.
37
Wizards face
difficulties in
using Muggle
money
“There was a train to London in five minutes’ time.
Hagrid, who didn’t understand “Muggle money,” as he
called it, gave the bills to Harry so he could buy their
tickets.”
“Help me, Harry,” he muttered, pulling a roll of Muggle
money... “This one’s a - a - a ten? Ah yes, I see the little
number on it now…So this is a five?” “A twenty,” Harry
corrected him... “Ah yes, so it is…I don’t know, these
little bits of paper…”
Rowling,
1998, p.
43
Rowling,
2000, p.
50
Wizards’ and
Muggles’ lack
of interaction
“But what does a Ministry of Magic do?” “Well, their
main job is to keep it from the Muggles that there’s still
witches an’ wizards up an’ down the country.”
“Hey, Harry,”…“have you heard?...Sirius Black’s been
sighted.” “Where?” said Harry and Ron quickly. “Not too
far from here,” said Seamus…“It was a Muggle who saw
him…‘Course, she didn’t really understand. The Muggles
think he’s just an ordinary criminal, don’t they?”
“You foreign?” said Mr. Roberts as Mr. Weasley returned
with the correct notes. “Foreign?” repeated Mr. Weasley,
puzzled. “You’re not the first one who’s had trouble with
Rowling,
1998, p.
42
Rowling,
1999b, p.
80
Rowling,
2000, p.
50

6
money”
Wizards need
to borrow from
illegal usurers
or friends
“Turns out he’s [Ludo Bagman] in big trouble with the
goblins. Borrowed loads of gold off them. A gang of them
cornered him in the woods after the World Cup and took
all the gold he had, and it still wasn’t enough to cover all
his debts. They followed him all the way to Hogwarts to
keep an eye on him.”
“Harry, you help yourself to anything you want…No
charge.” “I can’t do that!” said Harry, who had already
pulled out his money bag to pay…“You don’t pay here,”
said Fred firmly, waving away Harry’s gold…“You gave
us our start-up loan, we haven’t forgotten,” said George
sternly.”
Rowling,
2000, p.
471
Rowling,
2005, p.
78
Fred and
George
Weasley
borrow from
Harry Potter
“Harry…had forced the Weasley twins to take the
thousand Galleons prize money he had won in the
Triwizard Tournament to help them realize their ambition
to open a joke shop.”
Rowling,
2003, p.
79
Wizards
borrow from
Goblins
“Turns out he’s [Ludo Bagman] in big trouble with the
goblins. Borrowed loads of gold off them. A gang of them
cornered him in the woods after the World Cup and took
all the gold he had, and it still wasn’t enough to cover all
his debts. They followed him all the way to Hogwarts to
keep an eye on him.”
Rowling,
2000, p.
471
Weasley twins
consider
gambling to
obtain funds
needed for
opening their
Joke-Shop
“We’ll bet thirty-seven Galleons, fifteen Sickles, three
Knuts,” said Fred as he and George quickly pooled all
their money, “that Ireland wins - but Viktor Krum gets the
Snitch. Oh and we’ll throw in a fake wand.”…“Boys,”
said Mr. Weasley under his breath, “I don’t want you
betting…That’s all your savings”
Rowling,
2000, p.
57
Government
depends on
donations from
wealthy
individuals
“Mr. Weasley and Mr. Malfoy looked at each other…
Malfoy’s cold gray eyes swept over Mr. Weasley, and
then up and down the row. “Good lord, Arthur,” he said
softly. “What did you have to sell to get seats in the Top
Box? Surely your house wouldn’t have fetched this
much?” Fudge, who wasn’t listening, said, “Lucius has
just given a very generous contribution to St. Mungo’s
Hospital for Magical Maladies and Injuries, Arthur. He’s
here as my guest.”
Rowling,
2000, p.
66
Gringotts’
employees
offer private
usury services
“Turns out he’s [Ludo Bagman] in big trouble with the
goblins. Borrowed loads of gold off them. A gang of them
cornered him in the woods after the World Cup and took
all the gold he had, and it still wasn’t enough to cover all
his debts. They followed him all the way to Hogwarts to
keep an eye on him.”
Rowling,
2000, p.
471

7
Wizards that
make windfall
gains spend
them
immediately
“The clipping had clearly come out of the wizarding
newspaper, the Daily Prophet…Harry picked up the
clipping…and read:…Arthur Weasley…has won the
annual Daily Prophet Grand Prize Galleon Draw.
A delighted Mr. Weasley told the Daily Prophet, “We will
be spending the gold on a summer holiday in Egypt.”
Rowling,
1999b, p.
5
Wizards view
financial
service
providers as
immoral
“Wizards have banks?” “Just the one. Gringotts. Run by
goblins.” Harry dropped the bit of sausage he was
holding. “Goblins?” “Yeah — so yeh’d be mad ter try an’
rob it, I’ll tell yeh that. Never mess with goblins, Harry.
“They passed a group of goblins who were cackling over a
sack of gold that they had undoubtedly won betting on the
match, and who seemed quite unperturbed by the trouble
at the campsite.”
“Absolute nightmare,” said Bagman to Harry in an
undertone, noticing Harry watching the goblins too.
“Their English isn’t too good…it’s like being back with
all the Bulgarians at the Quidditch World Cup…but at
least they used sign language another human could
recognize.”
“The goblins play as dirty as him. They say you drew with
Diggory, and Bagman was betting you’d win outright. So
Bagman had to run for it. He did run for it right after the
third task.”
Rowling,
1998, p.
41
Rowling,
2000, p.
81
Rowling,
2000, p.
287
Rowling,
2000, p.
471
Goblins’
inferior image
inhibits most
forms of
interaction
between
wizards and
Goblins
“If there was a wizard of whom I would believe that they
did not seek personal gain,” said Griphook finally, “it
would be you, Harry Potter. Goblins … are not used to…
the respect that you have shown this night. Not from
wand-carriers.”
“Then I have to say this,” Bill went on. “If you have
struck any kind of bargain with Griphook, and most
particularly if that bargain involves treasure, you must be
exceptionally careful. Goblin notions of ownership,
payment, and repayment are not the same as human ones.”
…However, there is a belief among some goblins, and
those at Gringotts are perhaps most prone to it, that
wizards cannot be trusted in matters of gold and treasure,
that they have no respect for goblin ownership.”
Rowling,
2007, p.
323
Rowling,
2007, p.
342
Rent-seeking -
Wealthy
individuals
often fund
public goods
“I’ll leave a note for Dumbledore when I drop you off, he
ought to know Malfoys been talking to Fudge again.”
“What private business have they got together, anyway?”
“Gold, I expect,” said Mr. Weasley angrily. “Malfoy’s
been giving generously to all sorts of things for years…
Rowling,
2003, p.
116

8
and thus exert
influence on
public officials
and public
policy
gets him in with the right people…then he can ask favors
…delay laws he doesn’t want passed…oh, he’s very well-
connected, Lucius Malfoy.”
Newspaper
reports portray
the officials
positively, who
reciprocate by
making
decisions
favoring the
reporters and
wealthy
wizards
“Rita…said…“All right, Fudge is leaning on the Prophet,
but it comes to the same thing. They won’t print a story
that shows Harry in a good light. Nobody wants to read it.
It’s against the public mood.”
Rowling
2003, p.
423
The Minister of
Magic is
appointed, not
elected
“Newly appointed Minister of Magic, Rufus Scrimgeour,
spoke today of the tough new measures taken by his
Ministry to ensure the safety of students returning to
Hogwarts School of Witchcraft and Wizardry this
autumn.”
Rowling
2005, p.
27
Government –
Ministry of
Magic
“Hagrid read his newspaper, the Daily Prophet. “Ministry
o’ Magic messin’ things up as usual,” Hagrid muttered,
turning the page. “There’s a Ministry of Magic?” Harry
asked...“’Course,” said Hagrid. “They wanted
Dumbledore fer Minister, o’ course, but he’d never leave
Hogwarts, so old Cornelius Fudge got the job. Bungler if
ever there was one. So he pelts Dumbledore with owls
every morning, askin’ fer advice.”
Rowling,
1998, p.
42
Inept public
employees
“You wouldn’t believe how many people, even people
who work at the Ministry, can’t do a decent Shield
Charm”
Rowling,
2005, p.
78
Bribery
“It was Umbridge’s lie that brought the blood surging into
Harry’s brain and obliterated his sense of caution – that
the locket she had taken as a bribe from a petty criminal
was being used to bolster her own pure-blood
credentials.”
“When you stripped this house of all the valuables you
could find,” Harry began again, “you took a bunch of stuff
from the kitchen cupboard. There was a locket there.”
Harry’s mouth was suddenly dry: He could sense Ron and
Hermione’s tension and excitement too. “What did you do
with it?” “Why?” asked Mundungus. “Is it valuable?”
“You’ve still got it!” cried Hermione. “No, he hasn’t,”
said Ron shrewdly. “He’s wondering whether he should
have asked more money for it.” “More?” said Mundungus.
Rowling,
2007, p.
172
Rowling,
2007, p.
144

9
“That wouldn’t have been effing difficult…bleedin’ gave
it away, di’n’ I? No choice.” “What do you mean?” “I was
selling in Diagon Alley and she come up to me and asks if
I’ve got a license for trading in magical artifacts. Bleedin’
snoop. She was gonna fine me, but she took a fancy to the
locket an’ told me she’d take it and let me off that time,
and to fink meself lucky.” “Who was this woman?” asked
Harry. “I dunno, some Ministry hag.”
Nepotism is
“What does your dad do at the Ministry of Magic,
Rowling,
common
anyway?” “He works in the most boring department,” said
1999a, p.
Ron. “The Misuse of Muggle Artifacts Office.” “The
20
what?” “It’s all to do with bewitching things that are
Muggle-made, you know, in case they end up back in a
Muggle shop or house. Like, last year, some old witch
died and her tea set was sold to an antiques shop. This
Muggle woman bought it, took it home, and tried to serve
her friends tea in it. It was a nightmare — Dad was
working overtime for weeks.”
“You are sweet,” beamed Mrs. Weasley…“Yes, Rufus
Rowling,
Scrimgeour has set up several new offices in response to
2005, p.
the present situation, and Arthur’s heading the Office for
56
the Detection and Confiscation of Counterfeit Defensive
Spells and Protective Objects.”
“I’ve been promoted,” Percy said before Harry could even
Rowling,
ask, and from his tone, he might have been announcing his
2000, p.
election as supreme ruler of the universe. “I’m now Mr.
268
Crouch’s personal assistant, and I’m here representing
him.”
“In a surprise move last night the Ministry of Magic
Rowling,
passed new legislation… “‘The Minister has been
2003, p.
growing uneasy about goings-on at Hogwarts for some
229
time,’ said junior Assistant to the Minister, Percy
Weasley.”
“D’you know what you want to do after Hogwarts?”
Rowling,
Harry asked the other two... “Not really,” said Ron slowly.
2003, p.
“Except…well…” He looked slightly sheepish. “What?”
170
Harry urged him. ‘“Well, it’d be cool to be an Auror [at
the Ministry of Magic],’ “ said Ron in an off-hand voice.
“Yeah, it would,” said Harry fervently. “But they’re, like,
the elite,” said Ron.”
“Good training for when we’re all Aurors,” said Ron
Rowling,
excitedly, attempting the Impediment Curse on a wasp
2000, p.
that had buzzed into the room and making it stop dead in
392

10
midair.”
Rent-seeking:
Wealthy
wizards that
fund public
officials’ office
expenditures
have access to
the officials
and influence
their decisions
“Malfoy’s been giving generously to all sorts of things for
years… gets him in with the right people…then he can ask
favors …delay laws he doesn’t want passed…oh, he’s
very well-connected, Lucius Malfoy.”
Rowling,
2003, p.
116
Mr. Malfoy
“Mr. Malfoy, what a pleasure to see you again,” said Mr.
Rowling,
knows in
Borgin in a voice as oily as his hair. “Delighted — and
1999a, pp.
advance about
young Master Malfoy, too — charmed. How may I be of
33–34
the Ministry’s
assistance? I must show you, just in today, and very
planned raid
reasonably priced —” “I’m not buying today, Mr. Borgin,
but selling,” said Mr. Malfoy. “Selling?” The smile faded
slightly from Mr. Borgin’s face. “You have heard, of
course, that the Ministry is conducting more raids,” said
Mr. Malfoy, taking a roll of parchment from his inside
pocket and unraveling it for Mr. Borgin to read. “I have a
few — ah — items at home that might embarrass me, if
the Ministry were to call…” Mr. Borgin fixed a pair of
pince-nez to his nose and looked down the list. “The
Ministry wouldn’t presume to trouble you, sir, surely?”
Mr. Malfoy’s lip curled. “I have not been visited yet. The
name Malfoy still commands a certain respect, yet the
Ministry grows ever more meddlesome. There are rumors
about a new Muggle Protection Act — no doubt that flea-
bitten, Muggle-loving fool Arthur Weasley is behind it —
” Harry felt a hot surge of anger. “— and as you see,
certain of these poisons might make it appear —” “I
understand, sir, of course,” said Mr. Borgin. “Let me
see…“I am in something of a hurry, Borgin, I have
important business elsewhere today —” …They started to
haggle. “Done,” said Mr. Malfoy at the counter. “Come,
Draco —”… “Good day to you, Mr. Borgin. I’ll expect
you at the manor tomorrow to pick up the goods.”
Junior public
officials make
efforts to
please their
superiors
“Percy hurried forward with his hand outstretched.
Apparently his disapproval of the way Ludo Bagman ran
his department did not prevent him from wanting to make
a good impression.”
Rowling,
2000, p.
56
“Mr. Crouch!” said Percy breathlessly, sunk into a kind
of halfbow that made him look like a hunchback. “Would
you like a cup of tea?” “Oh,” said Mr. Crouch, looking
Rowling,
2000, pp.
58–59

11
over at Percy in mild surprise. “Yes - thank you,
Weatherby.” Fred and George choked into their own cups.
Percy, very pink around the ears, busied himself with the
kettle.”
“I just can’t justify taking more time off at the moment,”
Rowling,
he told them. “Mr. Crouch is really starting to rely on
2000, p.
me.” “Yeah, you know what, Percy?” said George
104
seriously. “I reckon he’ll know your name soon.”
“Are you sure you wouldn’t like to stay at Hogwarts
Rowling,
tonight, Barty?” “No, Dumbledore, I must get back to the
2000, p.
Ministry,” said Mr. Crouch. “It is a very busy, very
182
difficult time at the moment…I’ve left young Weatherby
in charge…Very enthusiastic…a little overenthusiastic, if
truth be told…”
“What do they think they’re doing, annoying senior
Rowling,
Ministry members?” Percy hissed, watching Fred and
2000, p.
George suspiciously. “No respect…” Ludo Bagman shook
273.
off Fred and George fairly quickly, however, and, spotting
Harry, waved and came over to their table. “I hope my
brothers weren’t bothering you, Mr. Bagman?” said Percy
at once.”
Many offices
“You realize Bertha Jorkins has been missing for over a
Rowling,
are overstaffed
month now? Went on holiday to Albania and never came
2000, p.
with low
back?”
40
productivity
workers
Hogwarts’
“How exactly did it happen, Harry?” Harry retold the
Rowling,
Healer, Madam
story “…and then I got the bezoar down his throat and his
2005, p.
Pomfrey cures
breathing eased up a bit, Slughorn ran for help,
263
them all
McGonagall and Madam Pomfrey turned up, and they
brought Ron up here. They reckon he’ll be all right.
Madam Pomfrey says he’ll have to stay here a week or
so…keep taking essence of rue…”
Private
Property and
inheritance
“Ministry, is it?” said the older man, looking down at
Ogden. “Correct!” said Ogden angrily, dabbing his face.
“And you, I take it, are Mr. Gaunt?” “S’right,” said Gaunt.
“Got you in the face, did he?” “Yes, he did!” snapped
Ogden. “Should’ve made your presence known, shouldn’t
you?” said Gaunt aggressively. “This is private property.
Can’t just walk in here and not expect my son to defend
himself.”
Rowling,
2005, p.
132
“When the cart stopped at last beside a small door in the
passage wall, Hagrid got out and had to lean against the
Rowling,
1998, p.

12
wall to stop his knees from trembling. Griphook unlocked
48
the door. A lot of green smoke came billowing out, and as
it cleared, Harry gasped. Inside were mounds of gold
coins. Columns of silver. Heaps of little bronze Knuts.
“All yours,” smiled Hagrid. All Harry’s — it was
incredible. The Dursleys couldn’t have known about this
or they’d have had it from him faster than blinking. How
often had they complained how much Harry cost them to
keep? And all the time there had been a small fortune
belonging to him, buried deep under London.”
“Stored in an underground vault at Gringotts in London
Rowling,
was a small fortune that his parents had left him. Of
1999a, p.
course, it was only in the Wizarding world that he had
30
money; you couldn’t use Galleons, Sickles, and Knuts in
Muggle shops.”
“You see,” Dumbledore said, turning back to Harry and
Rowling,
again speaking as though Uncle Vernon had not uttered,
2005, pp.
“if you have indeed inherited the house, you have also
33–34
inherited —”…“As you can see, Harry,” said Dumbledore
loudly, over Kreacher’s continued croaks of “wont, won’t,
won’t,” “Kreacher is showing a certain reluctance to pass
into your ownership.”… “Give him an order,” said
Dumbledore. “If he has passed into your ownership, he
will have to obey.”…“Well, that simplifies matters,” said
Dumbledore cheerfully. “It means that Sirius knew what
he was doing. You are the rightful owner of number
twelve, Grimmauld Place and of Kreacher.”
“Can’t the Order control Mundungus?” Harry demanded
Rowling,
of the other two in a furious whisper. “Can’t they at least
2005, p.
stop him stealing everything that’s not fixed down when
161
he’s at headquarters?” “Shh!” said Hermione desperately,
looking around to make sure nobody was listening; there
were a couple of warlocks sitting close by who were
staring at Harry with great interest, and Zabini was lolling
against a pillar not far away. “Harry, I’d be annoyed too, I
know it’s your things he’s stealing—” “Harry gagged on
his butterbeer; he had momentarily forgotten that he
owned number twelve, Grimmauld Place. “Yeah, it’s my
stuff!” he said. “No wonder he wasn’t pleased to see me!
Well, I’m going to tell Dumbledore what’s going on, he’s
the only one who scares Mundungus.”
Inheritance
confiscation
attempts by the
government
“I have some questions for the three of you, and I think it
will be best if we do it individually…“We’re not going
anywhere,” said Harry, while Hermione nodded
vigorously. “You can speak to us together, or not at
Rowling,
2007, pp.
80-85

13
all.”…“I am here, as I’m sure you know, because of Albus
Dumbledore’s will.” Harry, Ron, and Hermione looked at
one another. “A surprise, apparently! You were not aware
then that Dumbledore had left you anything?” “A-all of
us?” said Ron, “Me and Hermione too?” “Yes, all of –”
But Harry interrupted. “Dumbledore died over a month
ago. Why has it taken this long to give us what he left
us?” “Isn’t it obvious?” said Hermione, before Scrimgeour
could answer. “They wanted to examine whatever he’s
left us. You had no right to do that!” she said, and her
voice trembled slightly. “I had every right,” said
Scrimgeour dismissively. “The Decree for Justifiable
Confiscation gives the Ministry the power the confiscate
the contents of a will –” “That law was created to stop
wizards passing on Dark artifacts,” said Hermione, “and
the Ministry is supposed to have powerful evidence that
the deceased’s possessions are illegal before seizing them!
…Harry spoke: “So why have you decided to let us have
our things now? Can’t think of a pretext to keep them?”
“No, it’ll be because thirty-one days are up,” said
Hermione at once. “They can’t keep the objects longer
than that unless they can prove they’re dangerous. Right?”
“… how do you account for the fact that he remembered
you in his will? He made exceptionally few personal
bequests. … Why do you think you were singled out?”
“I…dunno,” said Ron…Scrimgeour… removed a scroll of
parchment which he unrolled and read aloud. “‘The Last
Will and Testament of Albus Percival Wulfric Brian
Dumbledore’…Yes, here we are…‘To Ronald Bilius
Weasley, I leave my Deluminator, in the hope that he will
remember me when he uses it.’” Scrimgeour took from the
bag an object … leaned forward and passed the
Deluminator to Ron, who took it and turned it over in the
fingers looking stunned. “That is a valuable object,” said
Scrimgeour, watching Ron. … To what use did he think
you would put to the Deluminator, Mr. Weasley?” “Put
out lights, I s’pose,” mumbled Ron. “What else could I do
with it?” Evidently Scrimgeour had no suggestions. After
squinting at Ron for a moment or tow, he turned back to
Dumbledore’s will. “‘To Miss Hermione Jean Granger, I
leave my copy of The Tales of Beedle the Bard, in the
hope that she will find it entertaining and instructive.’”
Scrimgeour now pulled out of the bag a small book …
Harry saw that the title was in runes; he had never learned
to read them. As he looked, a tear splashed onto the
embossed symbols. “Why do you think Dumbledore left
you that book, Miss Granger?” asked Scrimgeour.
“He…he knew I liked books,” said Hermione in a thick

14
voice, mopping her eyes with her sleeve. “But why that
particular book?” “I don’t know. He must have thought
I’d enjoy it.” “Did you ever discuss codes, or any means
of passing secret messages, with Dumbledore?” “No, I
didn’t,” said Hermione,…Scrimgeour turned back to the
will. “‘To Harry James Potter,’” he read, and Harry’s
insides contracted with a sudden excitement, “‘I leave the
Snitch he caught in his first Quidditch match at Hogwarts,
as a reminder of the rewards of perseverance and skill.’”
As Scrimgeour pulled out the tiny, walnut-sized golden
ball, …“Why did Dumbledore leave you this Snitch?”
asked Scrimgeour. “No idea,” said Harry…“What …could
it be?” “I’m asking the questions,” said Scrimgeour,.“I
notice that your birthday cake is in the shape of a Snitch,”
Scrimgeour said to Harry…“I don’t think there’s anything
hidden in the icing,” said Scrimgeour, “but a Snitch would
be a very good hiding place for a small object…“Because
Snitches have flesh memories,” she said…“Correct,” said
Scrimgeour…“It occurs to me that Dumbledore, who had
prodigious magical skill, whatever his other faults, might
have enchanted this Snitch so that it will open only for
you.”…“Take it,” said Scrimgeour quietly…“That’s all,
then, is it?” asked Hermione, making to raise herself off
the sofa. “Not quite,” said Scrimgeour, who looked bad
tempered now. “Dumbledore left you a second bequest,
Potter.” “What is it?” asked Harry…“The sword of Godric
Gryffindor,” he said…“So where is it?” Harry asked
suspiciously. “Unfortunately,” said Scrimgeour, “that
sword was not Dumbledore’s to give away. The sword of
Godric Gryffindor is an important historical artifact, and
as such, belongs –” “It belongs to Harry!” said Hermione
hotly. “It chose him, he was the one who found it, it came
to him out of the Sorting Hat –” “According to reliable
historical sources, the sword may present itself to any
worthy Gryffindor,” said Scrimgeour. “That does not
make it the exclusive property of Mr. Potter, whatever
Dumbledore may have decided.” …“You go too far!”
shouted Scrimgeour, standing up: Harry jumped to his feet
too. …“No! D’you want to give him an excuse to arrest
us?” “Remembered you’re not at school, have you?” said
Scrimgeour breathing hard into Harry’s face.
“Remembered that I am not Dumbledore, who forgave
your insolence and insubordination? You may wear that
scar like a crown, Potter, but it is not up to a seventeen-
year-old boy to tell me how to do my job! It’s time you
learned some respect!”…“I don’t like your methods,
Minister,” said Harry.

15
Contract
“Finally, I wish to impress upon any of you wishing to
compete that this tournament is not to be entered into
lightly. Once a champion has been selected by the Goblet
of Fire, he or she is obliged to see the tournament through
to the end. The placing of your name in the goblet
constitutes a binding, magical contract. There can be no
change of heart once you have become a champion. Please
be very sure, therefore, that you are wholeheartedly
prepared to play before you drop your name into the
goblet. Now, I think it is time for bed. Good night to you
all.”
“Empty threat, Karkaroff,” growled a voice from near the
door. “You can’t leave your champion now. He’s got to
compete. They’ve all got to compete. Binding magical
contract, like Dumbledore said. Convenient, eh?”
“I – I think everybody should write their name down, just
so we know who was here. But I also think,” she took a
deep breath, “that we all ought to agree not to shout about
what we’re doing. So if you sign, you’re agreeing not to
tell Umbridge or anybody else what we’re up to.”…When
the last person – Zacharias – had signed, Hermione took
the parchment back and slipped it carefully into her bag.
There was an odd feeling in the group now. It was as
though they had just signed some kind of contract.”
“How do I look?” said Hepzibah, turning her head to
admire the various angles of her face in the mirror.
“Lovely, madam,” squeaked Hokey. Harry could only
assume that it was down in Hokey’s contract that she must
lie through her teeth when asked this question, because
Hepzibah Smith looked a long way from lovely in his
opinion.
Rowling,
2000, p.
166
Rowling,
2000, p.
179
Rowling,
2003, p.
259
Rowling,
2005, pp.
285–286
Unbreakable
Vow
“So Snape was offering to help him?”…“Yes, Snape was
offering to help him!” said Harry. “He said he’d promised
Malfoy’s mother to protect him, that he’d made an
Unbreakable Oath or something —” “An Unbreakable
Vow?” said Ron, looking stunned. “Nah, he can’t
have…Are you sure?” “Yes, I’m sure,” said Harry. “Why,
what does it mean?” “Well, you can’t break an
Unbreakable Vow…” “I’d worked that much out for
myself, funnily enough. What happens if you break it,
then?” “You die,” said Ron simply. “Fred and George
tried to get me to make one when I was about five. I
nearly did too, I was holding hands with Fred and
everything when Dad found us. He went mental,” said
Ron.
Rowling,
2005, p.
214

16
The Ministry
decides to
change the
time of Harry’s
court hearing
but informs
him on this
change at the
last minute
A cold male voice rang across the courtroom. “You’re
late.” “Sorry,” said Harry nervously “I — I didn’t know
the time had been changed.” “That is not the
Wizengamot’s [the court of the Ministry of Magic] fault,”
said the voice. “An owl was sent to you this morning.
Take your seat.”
Rowling,
2003, p.
103
According to
the Minister of
Magic, laws
can be changed
“The Ministry does not have the power to expel Hogwarts
students, Cornelius, as I reminded you on the night of the
second of August,” said Dumbledore. “Nor does it have
the right to confiscate wands until charges have been
successfully proven…In your admirable haste to ensure
that the law is upheld, you appear, inadvertently I am sure,
to have overlooked a few laws yourself.” “Laws can be
changed,” said Fudge savagely. “Of course they can,” said
Dumbledore, inclining his head. “And you certainly seem
to be making many changes, Cornelius. Why, in the few
short weeks since I was asked to leave the Wizengamot
[the court of the Ministry of Magic], it has already
become the practice to hold a full criminal trial to deal
with a simple matter of underage magic!”
Rowling,
2003, p.
112
Hogwarts’
Head Mistress
and High
Inquisitor
amasses
absolute power
and authority
I contacted the Minister at once, and he quite agreed with
me that the High Inquisitor has to have the power to strip
pupils of privileges, or she – that is to say, I – would have
less authority than common teachers!…I was reading out
our amendment…hem, hem…‘High Inquisitor will
henceforth have supreme authority over all punishments,
sanctions and removal of privileges pertaining to the
students of Hogwarts, and the power to alter such
punishments, sanctions and removals of privileges as may
have been ordered by other staff members. Signed,
Cornelius Fudge, Minister of Magic, Order of Merlin First
Class, etc., etc.’” She rolled up the parchment and put it
back into her handbag, still smiling. “So…I really think I
will have to ban these two from playing Quidditch ever
again,” she said, looking from Harry to George and back
again. Harry felt the Snitch fluttering madly in his hand.
“Ban us?” he said, and his voice sounded strangely
distant. “From playing …ever again?” “Yes, Mr. Potter, I
think a lifelong ban ought to do the trick,” said Umbridge,
her smile widening still further as she watched him
struggle to comprehend what she had said. “You and Mr.
Weasley here. And I think, to be safe, this young man’s
twin ought to be stopped, too – if his teammates had not
restrained him, I feel sure he would have attacked young
Mr. Malfoy as well. I will want their broomsticks
Rowling,
2003, pp.
310–311.

17
confiscated, of course; I shall keep them safely in my
office, to make sure there is no infringement of my ban.
Selective
enforcement of
the laws by the
Ministry of
Magic
“So all that remains,” said Fudge, now buttering himself a
second crumpet, “is to decide where you’re going to spend
the last two weeks of your vacation. I suggest you take a
room here at the Leaky Cauldron and…” “Hang on,”
blurted Harry. “What about my punishment?” Fudge
blinked. “Punishment?” “I broke the law!” Harry said.
“The Decree for the Restriction of Underage Wizardry!”
“Oh, my dear boy, we’re not going to punish you for a
little thing like that!” cried Fudge, waving his crumpet
impatiently. “It was an accident! We don’t send people to
Azkaban just for blowing up their aunts!”
Rowling,
1999b, p.
28
Half-blood and
mud-blood
wizards must
be questioned
to make sure
that they did
not “steal”
magic powers
“Muggle-born Register!” she read aloud. “‘The Ministry
of Magic is undertaking a survey of so-called “Muggle-
borns” to better understand how they came to possess
magical secrets. “‘Recent research undertaken by the
Department of Mysteries reveals that magic can only be
passed from person to person when Wizards reproduce.
Where no proven Wizarding ancestry exists, therefore, the
so-called Muggle-born is likely to have obtained magical
power by theft or force. “‘The Ministry is determined to
root out such usurpers of magical power, and to this end
has issued an invitation to every so-called Muggle-born to
present themselves for interview by the newly appointed
Muggle-born Registration Commission.’” “People won’t
let this happen,” said Ron. “It is happening, Ron,” said
Lupin. “Muggle-borns are being rounded up as we speak.”
“But how are they supposed to have ‘stolen’ magic?” said
Ron. “It’s mental, if you could steal magic there wouldn’t
be any Squibs, would there?” “I know,” said Lupin.
“Nevertheless, unless you can prove that you have at least
one close Wizarding relative, you are now deemed to have
obtained your magical power illegally and must suffer the
punishment.”
Rowling,
2007, p.
136
Criminal
activities
“And you off buying stolen cauldrons! Didn’t I tell you
not to go? Didn’t I!” “I – well, I –” Mundungus looked
deeply uncomfortable. “It — it was a very good business
opportunity, see –”
“Mundungus!” said Hermione. “What’s he brought all
those cauldrons for?” “Probably looking for a safe place
to keep them,” said Harry. “Isn’t that what he was doing
the night he was supposed to be tailing me? Picking up
dodgy cauldrons?” “Yeah, you’re right!” said Fred, as the
front door opened; Mundungus heaved his cauldrons
through it and disappeared from view. “Blimey, Mum
Rowling,
2003, p.
18
Rowling,
2003, p.
80

18
won’t like that…”
Once they had eaten their Christmas lunch, the Weasleys,
Rowling,
Harry and Hermione were planning to pay Mr. Weasley
2003, p.
another visit, escorted by Mad-Eye and Lupin.
377
Mundungus turned up in time for Christmas pudding and
trifle, having managed to ‘borrow’ a car for the occasion,
as the Underground did not run on Christmas Day. The
car, which Harry doubted very much had been taken with
the knowledge or consent of it's owner, had had a similar
Enlarging Spell put upon it as the Weasley's old Ford
Anglia;
On the other hand, a number of shabby-looking stalls had
Rowling,
sprung up along the street. The nearest one, which had
2005, p.
been erected outside Flourish and Blotts, under a striped,
73
stained awning, had a cardboard sign pinned to its front:
AMULETS - Effective Against Werewolves, Dementors,
and Inferi! A seedy-looking little wizard was rattling
armfuls of silver symbols on chains at passersby. “One for
your little girl, madam?” he called at Mrs. Weasley as
they passed, leering at Ginny. “Protect her pretty neck?”
“If I were on duty…” said Mr. Weasley, glaring angrily at
the amulet seller. “Yes, but don’t go arresting anyone
now, dear, we’re in a hurry,” said Mrs. Weasley,
nervously consulting a list.
“Well, you see, in all the panic about You-Know-Who,
Rowling,
odd things have been cropping up for sale everywhere,
2005, p.
things that are supposed to guard against You-Know-Who
56
and the Death Eaters. You can imagine the kind of
thing…so-called protective potions that are really gravy
with a bit of bubotuber pus added, or instructions for
defensive jinxes that actually make your ears fall
off…Well, in the main the perpetrators are just people like
Mundungus Fletcher, who’ve never done an honest day’s
work in their lives and are taking advantage of how
frightened everybody is.”
New
businesses
open rarely
“It’s this joke shop idea they’ve got,” said Ron. “I thought
they were only saying it to annoy Mum, but they really
mean it, they want to start one. They’ve only got a year
left at Hogwarts, they keep going on about how it’s time
to think about their future, and Dad can’t help them, and
they need gold to get started.”
Rowling,
2000, pp.
366–367
Attempts by an
“He wants a word with you about your embargo on flying
Rowling,
entrepreneur to
carpets.” Mr. Weasley heaved a deep sigh…“Carpets are
2000, p.
import flying
defined as a Muggle Artifact by the Registry of Proscribed
59
carpets are
Charmable Objects”…“Well, they’ll never replace brooms

19
blocked
in Britain, will they?” said Bagman. “Ali thinks there’s a
niche in the market for a family vehicle,” said Mr.
Crouch. “I remember my grandfather had an Axminster
that could seat twelve - but that was before carpets were
banned, of course.”
The Squibbler
“Of course not,” said Hermione scathingly, before Harry
Rowling,
– unreliable
could answer. “The Quibbler’s rubbish, everyone knows
2003, p.
tabloids
that.”
144
Daily Prophet
“Harry…was talking more than he’d talked in days -
Rowling,
publishes
about how no one believed he hadn’t entered the
2000, p.
biased
tournament of his own free will, how Rita Skeeter had lied
213
information
about him in the Daily Prophet”
“They’re trying to discredit him,” said Lupin. “Didn’t you
Rowling
see the Daily Prophet last week? They reported that he’d
2003, p.
been voted out of the Chairmanship of the International
72
Confederation of Wizards because he’s getting old and
losing his grip, but it’s not true”
Harry Potter
“What are Weasleys’ Wizard Wheezes?” Harry asked…
Rowling
knows nothing
Ron and Ginny both laughed, although Hermione didn’t.
2000, p.
about the
“Mum found this stack of order forms when she was
36
Weasleys’
cleaning Fred and George’s room,” said Ron quietly.
Wizard
“Great long price lists for stuff they’ve invented. Joke
Wheezes – the
stuff, you know. Fake wands and trick sweets,…I never
Weasley twins’
knew they’d been inventing all that”…“and, you know,
joke shop
they were planning to sell it at Hogwarts to make some
money”
The wizards
“Don’ mention it,” said Hagrid gruffly. “Don’ expect
Rowling,
have only one
you’ve had a lotta presents from them Dursleys. Just
1998, p.
wand-maker
Ollivanders left now — only place fer wands, Ollivanders,
53
and yeh gotta have the best wand.”
Opening the
“What are you working on?” said Harry. “A report for the
Rowling,
market to
Department of International Magical Cooperation,” said
2000, pp.
caldron
Percy smugly. “We’re trying to standardize cauldron
36–37
imports is
thickness. Some of these foreign imports are just a shade
expected to
too thin - leakages have been increasing at a rate of almost
drive the prices
three percent a year”… “unless some sort of international
down
law is imposed we might well find the market flooded
with flimsy, shallow bottomed products that seriously
endanger -”
Kids eat the
“Madam Rosmertas finest oak-matured mead,” said
Rowling,
same candies
Dumbledore, raising his glass to Harry, who caught hold
2005, p.
and collect the
of his own and sipped. He had never tasted anything like it
31
same cards as
before, but enjoyed it immensely...Harry could not
their parents
suppress a suspicion that Dumbledore was rather enjoying
himself.
Zonko’s Joke
“The walk into Hogsmeade was not enjoyable…More
Rowling,

20
Shop goes out
of business
than once Harry wondered whether they might not have
had a better time in the warm common room, and when
they finally reached Hogsmeade and saw that Zonko’s
Joke Shop had been boarded up, Harry took it as
confirmation that this trip was not destined to be fun.”
2005, pp.
158–159
Lack of
competition
limits the
Potterians’
choice
although
there’s demand
for new
products
“Mum found this stack of order forms when she was
cleaning Fred and George’s room,” said Ron quietly.
“Great long price lists for stuff they’ve invented. Joke
stuff, you know. Fake wands and trick sweets, loads of
stuff. It was brilliant, I never knew they’d been inventing
all that…”
“But the common room was packed and full of shrieks of
laughter and excitement; Fred and George were
demonstrating their latest bit of joke shop merchandise.”
“…they headed farther along the street in search of
Weasleys’ Wizard Wheezes, the joke shop run by Fred
and George.”…“And he and Harry led the way into the
shop. It was packed with customers; Harry could not get
near the shelves.”
“We’ve just developed this more serious line,” said
Fred…“Well, we thought Shield Hats were a bit of a
laugh, you know, challenge your mate to jinx you while
wearing it and watch his face when the jinx just bounces
off. But the Ministry bought five hundred for all its
support staff! And we’re still getting massive orders!” “So
we’ve expanded into a range of Shield Cloaks, Shield
Gloves…” “And then we thought we’d get into the whole
area of Defense Against the Dark Arts, because it’s such a
money spinner,” continued George enthusiastically. “This
is cool. Look, Instant Darkness Powder… Handy if you
want to make a quick escape.” “And our Decoy
Detonators…”
Rowling,
2000, p.
36
Rowling,
2003, p.
403
Rowling,
2005, p.
76
Rowling,
2005, p.
78
Wizards view
muggle-made
goods as
inferior
“Why would anyone bother making door keys shrink?”
said George. “Just Muggle-baiting,” sighed Mr. Weasley.
“Sell them a key that keeps shrinking to nothing so they
can never find it when they need it. Of course, it’s very
hard to convict anyone because no Muggle would admit
their key keeps shrinking — they’ll insist they just keep
losing it.”
“Harry left Hermione dabbing her black eye with paste
and followed Fred toward the back of the shop, where he
saw a stand of card and rope tricks. “Muggle magic
tricks!” said Fred happily, pointing them out. “For freaks
like Dad, you know, who love Muggle stuff. It’s not a big
Rowling
1999a, p.
25
Rowling,
2005, p.
77

21
earner…”
Wealthy
wizards enjoy a
luxurious life
style, and own
almost all the
assets and
capital
“Judging by the fact that Draco Malfoy usually had the
best of everything, his family was rolling in wizard gold;
he could just see Malfoy strutting around a large manor
house.”
Rowling,
1999a, p.
19
Voldemort
comes from a
well-
established
family that was
stripped of its
assets
“That old man was —?” “Voldemort’s grandfather, yes,”
said Dumbledore. “Marvolo, his son, Morfin, and his
daughter, Merope, were the last of the Gaunts, a very
ancient Wizarding family noted for a vein of instability
and violence that flourished through the generations due
to their habit of marrying their own cousins. Lack of sense
coupled with a great liking for grandeur meant that the
family gold was squandered several generations before
Marvolo was born. He, as you saw, was left in squalor and
Poverty.”
Rowling,
2005, pp.
138
Businessmen’s
negative image
“Mum wants them to go into the Ministry of Magic like
Dad, and they told her all they want to do is open a joke
shop.”
“Mrs. Weasley…did not think running a joke shop was a
suitable career for two of her sons.”
Rowling,
2000, p.
36
Rowling,
2003, p.
79
Wizards with
muggle
predecessors,
are considered
by wealthy
wizards a
threat because
of their
different
culture
“Harry knew exactly what was making Mr. Malfoy’s lip
curl like that. The Malfoys prided themselves on being
purebloods; in other words, they considered anyone of
Muggle descent, like Hermione, second-class. However,
under the gaze of the Minister of Magic, Mr. Malfoy
didn’t dare say anything.”
Rowling,
2000, p.
66
Wealthy pure-
blood wizards
consider
themselves
superior to
mud-blood
wizards
“I would have thought you’d be ashamed that a girl of no
wizard family beat you in every exam,” snapped Mr.
Malfoy.”
“Malfoy called her ‘Mudblood,’ Hagrid”…Hagrid looked
outraged…“But I don’t know what it means. I could tell it
was really rude, of course.” “It’s about the most insulting
thing he could think of,” gasped Ron…“Mudblood’s a
really foul name for someone who is Muggle-born — you
know, non-magic parents. There are some wizards — like
Malfoy’s family — who think they’re better than
everyone else because they’re what people call pure-
Rowling,
1999a, p.
34
Rowling,
1999a, pp.
72–74

22
blood.”
“If you’re wondering what the smell is, Mother, a
Mudblood just walked in,” said Draco Malfoy.”
“You’re lying, filthy Mudblood, and I know it! You have
been inside my vault at Gringotts! Tell the truth, tell the
truth!”
Rowling,
2005, p.
74
Rowling,
2007, p.
308
Wealthy pure-
blood wizards
consider
themselves
superior to
half-blood
wizards
“Shut your mouth!” Bellatrix shrieked. “You dare speak
his name with your unworthy lips, you dare besmirch it
with your half-blood’s tongue, you dare”
“…they thought Voldemort had the right idea, they were
all for the purification of the wizarding race, getting rid of
Muggle-borns and having pure-bloods in charge. They
weren’t alone, either, there were quite a few people,
before Voldemort showed his true colors, who thought he
had the right idea about things”
“He’d play up the pure-blood side so he could get in with
Lucius Malfoy and the rest of them…he’s just like
Voldemort. Pure-blood mother, Muggle father…ashamed
of his parentage”
Rowling,
2003, p.
584
Rowling,
2003, p.
84
Rowling,
2005, p.
417
Wealthy
wizards
associated with
middle class
wizards are
often
disinherited by
their families
“The tapestry looked immensely old…the golden thread
with which it was embroidered still glinted brightly
enough to show them a sprawling family tree dating back
(as far as Harry could tell) to the Middle Ages. Large
words at the very top of the tapestry read: “The Noble and
Most Ancient House of Black Toujours pur.” “You’re not
on here!” said Harry, after scanning the bottom of the tree
closely. “I used to be there,” said Sirius, pointing at a
small, round, charred hole in the tapestry, rather like a
cigarette burn. “My sweet old mother blasted me off after
…I’d had enough.” “Where did you go?” asked Harry,
staring at him. “Your dad’s place,” said Sirius…“when I
was seventeen I got a place of my own. My Uncle
Alphard had left me a decent bit of gold – he’s been wiped
off here, too, that’s probably why”
Rowling,
2003, pp.
83–84
Intermarriages
further block
upward
mobility
“The pure-blood families are all interrelated,” said Sirius.
“If you’re only going to let your sons and daughters marry
pure-bloods your choice is very limited; there are hardly
any of us left. Molly and I are cousins by marriage and
Arthur’s something like my second cousin once
removed.”
Rowling,
2003, p.
85
Cultural
“There was a greater variety of dishes in front of them
Rowling,

23
barriers –
wizards lack
basic
knowledge
about other
people’s
customs and
traditions
than Harry had ever seen, including several that were
definitely foreign. “What’s that?” said Ron, pointing at a
large dish...“Bouillabaisse,” said Hermione…“It’s
French,” said Hermione, “I had it on holiday summer
before last. It’s very nice.” “I’ll take your word for it,”
said Ron, helping himself to black pudding.”
“Excuse me, are you wanting ze bouillabaisse?” It was the
girl from Beauxbatons…Ron…stared up at her, opened
his mouth to reply, but nothing came out except a faint
gurgling noise. “Yeah, have it,” said Harry, pushing the
dish toward the girl. “You ‘ave finished wiz it?” “Yeah,”
Ron said breathlessly. “Yeah, it was excellent.”...Ron was
still goggling at the girl as though he had never seen one
before.”
“When the second course arrived they noticed a number
of unfamiliar desserts too. Ron examined an odd sort of
pale blancmange closely, then moved it carefully a few
inches to his right, so that it would be clearly visible from
the Ravenclaw table.”
“I’ll be havin’ a few words with her, an’ all,” said Hagrid
grimly, stomping up the stairs. “The less you lot ‘ave ter
do with these foreigners, the happier yeh’ll be. Yeh can
trust any of ‘em.”
2000, pp.
162–163
Rowling,
2000, p.
163
Rowling,
2000, p.
164
Rowling,
2000, p.
363
When a leading
English wand-
maker
disappears,
wizards can’t
find another
wand-maker
“Talking of Diagon Alley,” said Mr. Weasley, “looks like
Ollivander’s gone too.” “The wandmaker?” said Ginny,
looking startled. “That’s the one. Shop’s empty. No sign
of a struggle. No one knows whether he left voluntarily or
was kidnapped.” “But what’ll people do for wands?”
Rowling,
2005, p.
70
Trade in
Muggle goods
takes place
only under
very special
circumstances
and only for
very specific
goods
“But what does a Ministry of Magic do?” “Well, their
main job is to keep it from the Muggles that there’s still
witches an’ wizards up an’ down the country.”
“What does your dad do at the Ministry of Magic,
anyway?” “He works in the most boring department,” said
Ron. “The Misuse of Muggle Artifacts Office.” “The
what?” “It’s all to do with bewitching things that are
Muggle-made, you know, in case they end up back in a
Muggle shop or house. Like, last year, some old witch
died and her tea set was sold to an antiques shop. This
Muggle woman bought it, took it home, and tried to serve
her friends tea in it. It was a nightmare — Dad was
working overtime for weeks.”
Rowling,
1998, p.
42
Rowling,
1999a, p.
20

24
“Harry…followed Fred toward the back of the shop,
where he saw a stand of card and rope tricks. “Muggle
magic tricks!” said Fred happily, pointing them out. “For
freaks like Dad, you know, who love Muggle stuff. It’s
not a big earner…”
Rowling,
2005, p.
77
A junior
official uses
quality as a
pretext to block
an importation
of considerably
cheaper foreign
goods
“What are you working on?” said Harry. “A report for the
Department of International Magical Cooperation,” said
Percy smugly. “We’re trying to standardize cauldron
thickness. Some of these foreign imports are just a shade
too thin - leakages have been increasing at a rate of almost
three percent a year”… “unless some sort of international
law is imposed we might well find the market flooded
with flimsy, shallow bottomed products that seriously
endanger -”
“He wants a word with you about your embargo on flying
carpets.” Mr. Weasley heaved a deep sigh…“Carpets are
defined as a Muggle Artifact by the Registry of Proscribed
Charmable Objects”…“Well, they’ll never replace brooms
in Britain, will they?” said Bagman. “Ali thinks there’s a
niche in the market for a family vehicle,” said Mr.
Crouch. “I remember my grandfather had an Axminster
that could seat twelve - but that was before carpets were
banned, of course.”
Rowling,
2000, pp.
36–37
Rowling,
2000, p.
59
Senior wizard
officials are
driven by ego-
rents for power
“Fudge… [the current minister of magic] is frightened of
Dumbledore?” said Harry incredulousy. “Frightened of
what he is up to… Fudge thinks… Dumbledore wants to
be minister of magic… Deep down Fudge knows
Dumbledore is much cleverer than he is… but it seems
that he's become fond of power.”
“A well… said Thicknesse [the presiding minister of
magic]. "If you ask me, the blood traitors are as bad as the
mudbloods.”
Rowling,
2003, p.
89
Rowling,
2007, p.
247
Despite the
wizards’
prejudices
against any
type of
humanoids,
they are willing
to employ
elves in large
numbers, who
work hard
under terrible
“He is wanting paying for his work, sir.” “Paying?” said
Harry blankly. “Well - why shouldn’t he be paid?” Winky
looked quite horrified…“House-elves is not paid, sir!”…
“No, no, no. I says to Dobby, I says, go find yourself a
nice family and settle down, Dobby. He is getting up to all
sorts of high jinks, sir, what is unbecoming to a house-
elf… “Well, it’s about time he had a bit of fun,” said
Harry. “House-elves is not supposed to have fun, Harry
Potter,” said Winky firmly, from behind her hands.
“House-elves does what they is told. I is not liking heights
at all, Harry Potter”…“but my master sends me to the Top
Box and I comes, sir.”…“Why’s he sent you up here, if he
Rowling,
2000, p.
64

25
conditions and
almost without
pay
knows you don’t like heights?” said Harry, frowning.
“Master - master wants me to save him a seat, Harry
Potter. He is very busy,”…“Winky does what she is told.
Winky is a good house-elf.”
“You know, house-elves get a very raw deal!” said
Hermione indignantly. “It’s slavery, that’s what it is! That
Mr. Crouch made her go up to the top of the stadium, and
she was terrified, and he’s got her bewitched so she can’t
even run when they start trampling tents! Why doesn’t
anyone do something about it?” “Well, the elves are
happy, aren’t they?” Ron said. “You heard old Winky
back at the match… ‘House-elves is not supposed to have
fun’…that’s what she likes, being bossed around…”
“You may rest assured that she will be punished,” Mr.
Crouch added coldly. “M-m-master…” Winky
stammered, looking up at Mr. Crouch, her eyes brimming
with tears. “M-m-master, p-p-please…” Mr. Crouch
stared back, his face somehow sharpened, each line upon
it more deeply etched. There was no pity in his gaze.
“Winky has behaved tonight in a manner I would not have
believed possible,” he said slowly. “I told her to remain in
the tent. I told her to stay there while I went to sort out the
trouble. And I find that she disobeyed me. This means
clothes.” “No!” shrieked Winky, prostrating herself at Mr.
Crouch’s feet. “No, master! Not clothes, not clothes!”
Rowling,
2000, p.
80
Rowling,
2000, p.
89
The first signs
of danger
appear two
years earlier
but the
government
ignores them
“But he cannot now give testimony, Cornelius,” said
Dumbledore.…“He cannot give evidence about why he
killed those people.” “Why he killed them? Well, that’s
no mystery, is it?” blustered Fudge. “He was a raving
lunatic! From what Minerva and Severus have told me, he
seems to have thought he was doing it all on You Know-
Who’s instructions!” “Lord Voldemort was giving him
instructions, Cornelius,” Dumbledore said. “Those
peoples deaths were mere by-products of a plan to restore
Voldemort to full strength again. The plan succeeded.
Voldemort has been restored to his body.” Fudge…began
to sputter, still goggling at Dumbledore. “You-Know-
Who …returned? Preposterous. Come now, Dumbledore
…” “As Minerva and Severus have doubtless told you,”
said Dumbledore, “we heard Barty Crouch confess. Under
the influence of Veritaserum, he told us how he was
smuggled out of Azkaban, and how Voldemort…went to
free him from his father and used him to capture Harry.
The plan worked, I tell you. Crouch has helped Voldemort
to return.” “See here, Dumbledore…you - you can’t
seriously believe that You-Know-Who’s back? Come
Rowling,
2000, pp.
453–454

26
now, come now…certainly, Crouch may have believed
himself to be acting upon You-Know-Who’s orders - but
to take the word of a lunatic like that, Dumbledore…”
Professor
Slughorn
complains that
due to the war
prices are sky-
high
“There was a final plunk from the piano,…My last bottle,
and prices are sky-high at the moment.”
Rowling,
2005, p.
43
Cost born by
the public for
the government
inefficiency -
the price paid
for goods sold
by swindlers
that offer a
false sense of
security
“…a number of shabby-looking stalls had sprung up along
the street. The nearest one…had a cardboard sign pinned
to its front: AMULETS, Effective Against Werewolves,
Dementors, and Inferi! A seedy-looking little wizard was
rattling armfuls of silver symbols on chains at passersby.
“One for your little girl, madam?” he called at Mrs.
Weasley as they passed, leering at Ginny. “Protect her
pretty neck?” “If I were on duty…” said Mr. Weasley,
glaring angrily at the amulet seller. “Yes, but don’t go
arresting anyone now, dear, we’re in a hurry,” said Mrs.
Weasley…”
“You wouldn’t believe how many people, even people
who work at the Ministry, can’t do a decent Shield
Charm,” said George. “‘Course, they didn’t have you
teaching them, Harry.” “…the Ministry bought five
hundred for all its support staff! And we’re still getting
massive orders!” “So we’ve expanded into a range of
Shield Cloaks, Shield Gloves…” “…“And then we
thought we’d get into the whole area of Defense Against
the Dark Arts, because it’s such a money spinner,”
continued George… “This is cool. Look, Instant Darkness
Powder, we’re importing it from Peru. Handy if you want
to make a quick escape.”
Rowling,
2005, p.
73
Rowling,
2005, p.
78
The usually
crowded
“Leaky
Cauldron” bar
is empty
because even
the most loyal
consumers
seem to have
lost their
appetite
“The Leaky Cauldron was, for the first time in Harry’s
memory, completely empty. Only Tom the landlord,
wizened and toothless, remained of the old crowd.”
“The bar of the Leaky Cauldron was nearly deserted.
Tom, the stooped and toothless landlord, was polishing
glasses behind the bar counter; a couple of warlocks
having a muttered conversation in the far corner glanced
at Hermione and drew back into the shadows. “Madam
Lestrange,” murmured Tom, and as Hermione paused he
inclined his head subserviently.”
Rowling,
2005, p.
72
Rowling,
2007, p.
347
The bar owner
notices Hagrid.
From the
“The Leaky Cauldron was, for the first time in Harry’s
memory, completely empty. Only Tom the landlord,
wizened and toothless, remained of the old crowd. He
Rowling,
2005, p.
72

27
barman’s
reaction it is
clear that
Hagrid is one
of his last loyal
customers
looked up hopefully as they entered, but before he could
speak, Hagrid said importantly, “Jus’ passin’ through
today, Tom, sure yeh understand, Hogwarts business, yeh
know.”
Makes and
Models of the
broomsticks
used by the
Potterian
wizards
See Table A5 in this appendix.
Wealthy
wizards are
even willing to
give up on
some of their
income just to
become
teachers
“There was also a list of the new books he’d need for the
coming year. SECOND-YEAR STUDENTS WILL
REQUIRE:
Standard Book of Spells Grade 2 by Miranda Goshawk
Break with a Banshee by Gilderoy Lockhart
Gadding with Ghouls by Gilderoy Lockhart
Holidays with Hags by Gilderoy Lockhart
43 Travels with Trolls by Gilderoy Lockhart
Voyages with Vampires by Gilderoy Lockhart
Wanderings with Werewolves by Gilderoy Lockhart
Year with the Yeti by Gilderoy Lockhart
Fred, who had finished his own list, peered over at
Harry’s. “You’ve been told to get all Lockhart’s books,
too!” he said.”
An hour later, they headed for Flourish and Blotts…
bookshop…a large crowd jostling outside the doors,
trying to get in. The reason for this was proclaimed by a
large banner stretched across the upper windows:
GILDEROY LOCKHART will be signing copies of his
autobiography MAGICAL ME today 12:30P.M.to
4:30P.M. “We can actually meet him!” Hermione
squealed. “I mean, he’s written almost the whole
booklist!”…A harassed looking wizard stood at the door,
saying, “Calmly, please, ladies…Don’t push, there…mind
the books, now…”
“They had reached Lockhart’s classroom…When the
whole class was seated, Lockhart cleared his throat loudly
and silence fell. He reached forward, picked up Neville
Longbottom’s copy of Travels with Trolls, and held it up
to show his own, winking portrait on the front. “Me,” he
said, pointing at it and winking as well. “Gilderoy
Lockhart... “I see you’ve all bought a complete set of my
books — well done.”
Rowling,
1999a, pp.
28–29
Rowling,
1999a, p.
38
Rowling,
1999a, p.
64

28
The current
headmaster is
considered by
many to be the
greatest wizard
of his time
Harry unwrapped his Chocolate Frog and picked up the
card…Harry turned over his card and read:
ALBUS DUMBLEDORE
CURRENTLY HEADMASTER OF HOGWARTS
Considered by many the greatest wizard of modern times,
Dumbledore is particularly famous for his defeat of the
dark wizard Grindelwald in 1945, for the discovery of the
twelve uses of dragon’s blood, and his work on alchemy
with his partner, Nicolas Flamel. Professor Dumbledore
enjoys chamber music and tenpin bowling.
Rowling,
1998, p.
66
The
government
can interfere
with the school
curriculum and
governance
Daily Prophet: “In a surprise move last night the Ministry
of Magic passed new legislation giving itself an
unprecedented level of control at Hogwarts School “
“…the passing of Educational Decree Number Twenty-
three…creates the new position of Hogwarts High
Inquisitor…‘The Inquisitor will have powers to inspect
her fellow educators and make sure that they are coming
up to scratch.”
Rowling,
2003, p.
229
The Hogwarts’
graduates don’t
know more
than their
predecessors
“The time had come to choose their subjects for the third
year…“I just want to give up Potions,” said Harry. “We
can’t,” said Ron gloomily. “We keep all our old subjects,
or I’d’ve ditched Defense Against the Dark Arts.”
“Harry bent swiftly over the tattered book Slughorn had
lent him. To his annoyance he saw that the previous
owner had scribbled all over the pages, so that the margins
were as black as the printed portions. Bending low to
decipher the ingredients (even here, the previous owner
had made annotations and crossed things out)…”
“I just tried a few of the tips written in the margins,
honestly, Ginny, there’s nothing funny-”
“Harry bent low to retrieve the book, and as he did so, he
saw…scribbled along the bottom of the back cover in the
same small, cramped handwriting…This book is the
property of the Half Blood Prince.”
“It’s just that I was right about Eileen Prince once owning
the book. You see…she was Snape’s mother!”… “I was
going through the rest of the old Prophets and there was a
tiny announcement about Eileen Prince marrying a man
called Tobias Snape, and then later an announcement
saying that she’d given birth…“Snape must have been
proud of being ‘half a Prince’, you see? Tobias Snape was
a Muggle from what it said in the Prophet” “Yeah, that
fits,” said Harry. “He’d play up the pure-blood side so he
Rowling,
1999a, p.
161
Rowling,
2005, p.
123
Rowling,
2005, p.
125
Rowling,
2005, p.
126
Rowling,
2005, p.
417

29
could get in with Lucius Malfoy and the rest of hem…
Pure-blood mother, Muggle father…ashamed of his
parentage, trying to make himself feared using the Dark
Arts, gave himself an impressive new name…the Half-
Blood Prince - how could Dumbledore have missed —?”
“…that the parents he would destroy in his murderous
quest were people that Professor Snape knew, that they
were your mother and father —”
Rowling,
2005, p.
360
Potterian
students lack
creative skills
and cannot
think
originally,
which
diminishes
entrepreneurial
spirit
“It hasn’t been easy, Harry, guiding you through these
tasks without arousing suspicion. I have had to use every
ounce of cunning I possess, so that my hand would not be
detectable in your success. Dumbledore would have been
very suspicious if you had managed everything too easily.
As long as you got into that maze, preferably with a
decent head start - then, I knew, I would have a chance of
getting rid of the other champions and leaving your way
clear. But I also had to contend with your stupidity. The
second task…that was when I was most afraid we would
fail. I was keeping watch on you, Potter. I knew you
hadn’t worked out the egg’s clue, so I had to give you
another hint”
Rowling,
2000, p.
434
After
Graduation
from
Hogwarts,
wizards choose
a profession
The time had come to choose their subjects for the third
year…Percy Weasley was eager to share his experience.
“Depends where you want to go, Harry,” he said. “It’s
never too early to think about the future, so I’d
recommend Divination. People say Muggle Studies is a
soft option, but I personally think wizards should have a
thorough understanding of the non-magical community,
particularly if they’re thinking of working in close contact
with them — look at my father, he has to deal with
Muggle business all the time. My brother Charlie was
always more of an outdoor type, so he went for Care of
Magical Creatures. Play to your strengths, Harry.”
Rowling,
1999a, pp.
161–162
Goblins can
easily
distinguish
between the
fake and real
Galleons
“The long counter was manned by goblins sitting on high
stools serving the first customers of the day. Hermione,
Ron, and Travers headed toward an old goblin who was
examining a thick gold coin through an eyeglass…The
goblin tossed the coin he was holding aside, said to
nobody in particular, “Leprechaun,” and then greeted
Travers.”
Rowling,
2007, p.
351
Inflation of
home prices
“This house!” shrieked Uncle Vernon, the vein his
forehead starting to pulse. “Our house! House prices are
skyrocketing around here!
Rowling,
2007, p.
20
Inflation
“Yes, dragon,” repeated the wizard conversationally. “My
last bottle, and prices are sky-high at the moment. Still, it
might be reusable.”
Rowling,
2005, p.
43

30
Appendix B. Additional Economic Ideas2
Additional
Economic
Ideas
Quote
Reference
Rational
ignorance-
inattention
“Haven’t…you been getting the Daily Prophet!”
Hermione asked nervously. “Yeah, I have!” said Harry.
“Have you – er – been reading it thoroughly?” Hermione
asked…“Not cover to cover,” said Harry defensively.
Rowling,
2003, p.
55
Barter
exchange
“Ron had taken out a lumpy package and unwrapped it.
There were four sandwiches inside. He pulled one of them
apart and said, “She always forgets I don’t like corned
beef.” “Swap you for one of these,” said Harry, holding
up a pasty.”
“Though the goblins of Gringotts will consider it base
treachery, I have decided to help you – for payment.” …“I
want the sword. The sword of Godric Gryffindor.”… The
sword is the price of my hire, take it or leave it!”
“A large sign had been affixed to the Gryffindor
noticeboard; so large it covered everything else on it – the
lists of secondhand spellbooks for sale…the offers to
barter certain Chocolate Frog Cards for others”
Rowling,
1998, p.
66
Rowling,
2007, pp.
334–335
Rowling,
2003, p.
262
Barter
exchange – a
lack of double
coincidence of
wants
“I have decided to help you – for payment.” …“How
much do you want? I’ve got gold.” “Not gold,” said
Griphook. “I have gold.”
Rowling,
2007, pp.
334
Implicit
contract – a
handshake
“I have your word, Harry Potter, that you will give me the
sword of Gryffindor if I help you?” “Yes,” said Harry.
“Then shake,” said the goblin, holding out his hand.”
Rowling,
2007, p.
337
Secondhand,
used goods’
market
“Mrs. Weasley and Ginny were going to a secondhand
robe shop.”
“I thought they’d bring out the color of your eyes, dear,”
said Mrs. Weasley fondly. “Well, they’re okay!” said Ron
angrily, looking at Harry’s robes. “Why couldn’t I have
some like that?” “Because…well, I had to get yours
secondhand, and there wasn’t a lot of choice!” said Mrs.
Weasley”
Rowling,
1999a, p.
37
Rowling,
2000, p.
101
Diminishing
marginal utility
“The leprechaun gold I gave you…Why didn’t you tell me
it disappeared?”…“I dunno…I never noticed it had
gone...“Must be nice,” Ron said…“To have so much
Rowling,
2000, p.
351
2 The list in this appendix cites additional ideas found in Potterian economics but are not discussed explicitly in the paper because
of space limitations.

31
money you don’t notice if a pocketful of Galleons goes
missing.”
Budget
constraint
“I haven’t got any money — and you heard Uncle Vernon
last night…he won’t pay for me to go and learn magic.”
Rowling,
1998, p.
41
Non-tradable
goods
“We need them for the Skiving Snackboxes but they’re a
Class C Non-Tradable Substance so we’ve been having a
bit of trouble getting hold of them.”
Rowling,
2003, p.
128
Price
adjustment -
Haggling and
negotiating
over price
“In that case, perhaps we can return to my list,” said Mr.
Malfoy shortly. “I am in something of a hurry, Borgin, I
have important business elsewhere today —” They started
to haggle.”
“Look what Dung’s got us,” said George...“Venomous
Tentacula seeds,” said George. “Ten Galleons the lot, then
Dung?” said Fred. “Wiv all the trouble I went to get ‘em?”
said Mundungus, his saggy, bloodshot eyes stretching
even wider. “I’m sorry, lads, but I’m not taking a Knut
under twenty.”…Mundungus looked nervously over his
shoulder…he grunted. “All right, lads, ten it is, if you’ll
take ‘em quick.”
Rowling,
1999a, p.
34
Rowling,
2003, pp.
128–129
Fund raising,
donations
“All proceeds from the Fountain of Magical Brethren will
be given to St. Mungo’s Hospital for magical maladies
and injuries.”
Rowling,
2003, p.
95
Consumption
smoothing
“Once Harry had refilled his money bag with gold
Galleons, silver Sickles, and bronze Knuts from his vault
at Gringotts, he had to exercise a lot of self-control not to
spend the whole lot at once.”
Rowling,
1999b, p.
31
Black market
“Meanwhile, a flourishing black-market trade in aids to
concentration, mental agility and wakefulness had sprung
up among the fifth- and seventh-years. Harry and Ron
were much tempted by the bottle of Baruffio’s Brain
Elixir offered to them by Ravenclaw sixth-year Eddie
Carmichael, who swore it was solely responsible for the
nine ‘Outstanding’ OWLs he had gained the previous
summer and was offering a whole pint for a mere twelve
Galleons.”
Rowling,
2003, p.
527
Marketing and
market
research
“We’re going to use it to do a bit of market research, find
out exactly what the average Hogwarts student requires
from a joke shop, carefully evaluate the results of our
research, then produce products to fit the demand.”
Rowling,
2003, p.
169
Minimum
wage
“Our short-term aims," said Hermione…"are to secure
house-elves fair wages and working conditions.”
Rowling,
2000, p.
145
Representative
government
“Our long-term aims include…trying to get an elf into the
Department for the Regulation and Control of Magical
Creatures, because they're shockingly underrepresented.”
Rowling,
2000, p.
145

32
Opening the
market to
caldron
imports is
expected to
drive the prices
down
“What are you working on?” said Harry. “A report for the
Department of International Magical Cooperation,” said
Percy smugly. “We’re trying to standardize cauldron
thickness. Some of these foreign imports are just a shade
too thin - leakages have been increasing at a rate of almost
three percent a year”… “unless some sort of international
law is imposed we might well find the market flooded
with flimsy, shallow bottomed products that seriously
endanger -”
Rowling,
2000, pp.
36–37
Fine for traffic
violation
“Daily Prophet…said: Inquiry at the Ministry of Magic -
Arthur Weasley, Head of the Misuse of Muggle Artifacts
Office, was today fined fifty Galleons for bewitching a
Muggle car.”
Rowling,
1999a, p.
142
Import
restrictions-
regulations
“He wants a word with you about your embargo on flying
carpets.” Mr. Weasley heaved a deep sigh…“Carpets are
defined as a Muggle Artifact by the Registry of Proscribed
Charmable Objects”…“Well, they’ll never replace brooms
in Britain, will they?” said Bagman. “Ali thinks there’s a
niche in the market for a family vehicle,” said Mr.
Crouch. “I remember my grandfather had an Axminster
that could seat twelve - but that was before carpets were
banned, of course.”
Rowling,
2000, p.
59
Product
Standardization
“We’re trying to standardize cauldron thickness. Some of
these foreign imports are just a shade too thin - leakages
have been increasing at a rate of almost three percent a
year”
Rowling,
2000, p.
36
Gambling
market
“Now, now, Penny, no sabotage!” said Percy heartily as
she examined the Firebolt closely. “Penelope and I have
got a bet on,” he told the team. “Ten Galleons on the
outcome of the match!”
Rowling,
1999b, p.
164
Scarcity
“As Harry might have told you, the final of the Quidditch
World Cup takes place this Monday night, and my
husband, Arthur, has just managed to get prime tickets
through his connections at the Department of Magical
Games and Sports.”
Rowling,
2000, p.
20
Saving
“Boys,” said Mr. Weasley under his breath, “I don’t want
you betting…That’s all your savings”
Rowling,
2000, p.
57
Corruption
“As Harry might have told you, the final of the Quidditch
World Cup takes place this Monday night, and my
husband, Arthur, has just managed to get prime tickets
through his connections at the Department of Magical
Games and Sports.”
Rowling,
2000, p.
20

33
Appendix C. Round Prices3
Round Prices
Quote
Reference
1,500 Galleons
– cursed opal
necklace at
Borgin and
Burkes
“Is this necklace for sale?” she asked, pausing beside a
glass-fronted case. “If you’ve got one and a half thousand
Galleons,” said Mr. Borgin coldly.”
Rowling,
2005, p.
83
1,000 Galleons
– prize for
winning the
Triwizard
tournament
“An impartial judge will decide which students are most
worthy to compete for the Triwizard Cup, the glory of
their school, and a thousand Galleons personal prize
money.”
Rowling,
2000, pp.
121–122
1,000 Galleons
– A bounty on
the head of
escaped Death
Eaters
“A large poster had been stuck up in the window… and
Harry found himself staring once more at the pictures of
the ten escaped Death Eaters. The poster, By Order of the
Ministry of Magic, offered a thousand-Galleon reward to
any witch or wizard with information leading to the
recapture of any of the convicts pictured”
Rowling,
2003, p.
416
700 Galleons –
Prize from
Daily Prophet
drawing
“I couldn’t believe it when Dad won the Daily Prophet
Draw. Seven hundred galleons! Most of it’s gone on this
trip, but they’re going to buy me a new wand for next
year.”
Rowling,
1999b, p.
6
500 Galleons –
Goblin-made
armor at
Borgin and
Burkes
“Mr. Burke would like to make an improved offer for the
goblin-made armor,” said Voldemort. “Five hundred
Galleons, he feels it is a more than fair.”
Rowling,
2005, p.
286
100 Galleons –
Acromantula
Venom, per
pint
“I mean, it’s almost impossible to get venom from an
acromantula while it’s alive…” “Slughorn seemed to be
talking more to himself than Harry now. “…seems an
awful waste not to collect it…might get a hundred
Galleons a pint”
Rowling,
2005, p.
316
20 Galleons –
Deflagration
Deluxe
“Hermione, it’s…twenty [Galleons] for the Deflagration
Deluxe…”
Rowling,
2003, p.
472
10 Galleons –
Hermione’s
birthday
present
“I’ve still got ten Galleons,” she said, checking her purse.
“It’s my birthday in September, and Mum and Dad gave
me some money to get myself an early birthday present.”
Rowling,
1999b, p.
36
10 Galleons –
Omnioculars
“Omnioculars,” said the saleswizard eagerly. “You can
replay action… slow everything down…and they flash up
a play-by- play breakdown if you need it. Bargain - ten
Galleons each.”
Rowling,
2000, p.
60
10 Galleons –
“Professor Dumbledore offered Dobby ten Galleons a
Rowling,
3 This appendix offers a list of the goods and services with round prices, as discussed in the paper, in section 6.

34
Weekly pay to
house-elf
week, and weekends off,” said Dobby”
2000, p.
244
10 Galleons –
Metamorph-
Medals for
changing your
appearance,
100,000
disguises
“Some idiot’s started selling Metamorph-Medals. Just
sling them around your neck and you’ll be able to change
your appearance at will. A hundred thousand disguises, all
for ten Galleons!”
Rowling,
2005, p.
58
10 Galleons –
Bet on the
outcome of a
Quidditch
match
“Now, now, Penny, no sabotage!” said Percy heartily as
she examined the Firebolt closely. “Penelope and I have
got a bet on,” he told the team. “Ten Galleons on the
outcome of the match!”
Rowling,
1999b, p.
164
10 Galleons –
Slytherin’s
Locket
“She didn’t seem to have any idea how much it was
worth. Happy to get ten Galleons for it. Best bargain we
ever made!”
Rowling,
2005, p.
171
10 Galleons –
Unicorn hair
“Not long after this, Hagrid became tearful again and
pressed the whole unicorn tail upon Slughorn, who
pocketed it with cries of, “To friendship! To generosity!
To ten Galleons a hair!”
Rowling,
2005, p.
320
5 Galleons –
Basic Blaze
box
“Hermione, it’s five Galleons for your Basic Blaze box”
Rowling,
2003, p.
472
5 Galleons –
Rubber
chicken wand
“Bagman didn’t seem to think the wand was rubbish at
all…his boyish face shone with excitement as…the wand
gave a loud squawk and turned into a rubber chicken…
“Excellent! I haven’t seen one that convincing in years!
I’d pay five Galleons for that!”
Rowling,
2000, p.
57
5 Knuts per
scoop –
Glittery-Black
Beetle Eyes
“Harry himself examined…glittery-black beetle eyes (five
Knuts a scoop).”
Rowling,
1998, p.
52

35
Appendix D. Convenient Prices4
Convenient
Prices
Quote
Reference
21 Galleons –
Silver Unicorn
Horn
“Harry himself examined silver unicorn horns at twenty-
one Galleons each”
Rowling,
1998, p.
52
16 Galleons –
Human skull at
Borgin and
Burkes
“And…what about this lovely…um…skull?” “Sixteen
Galleons.”
Rowling,
2005, p.
83
12 Galleons –
12-week
course of
Apparition
lessons
“Apparition Lessons: If you are seventeen years of
age…you are eligible for a twelve-week course of
Apparition Lessons from a Ministry of Magic Apparition
instructor…Cost: 12 Galleons.”
Rowling,
2005, p.
233
9 Galleons –
New copy of
Advanced
Potion-Making
“He pulled the old copy of Advanced Potion-Making…
There sat the Prince’s copy, disguised as a new book, and
there sat the fresh copy from Flourish and Blotts, looking
thoroughly secondhand. “I’ll give Slughorn back the new
one, he can’t complain, it cost nine Galleons.”
Rowling,
2005, p.
144
7 Galleons –
New wand
from
Ollivanders
“Harry shivered. He wasn’t sure he liked Mr. Ollivander
too much. He paid seven gold Galleons for his wand, and
Mr. Ollivander bowed them from his shop.”
Rowling,
1998, p.
55
2 Galleons –
Headless hat
Fred and George were demonstrating their latest bit of
joke shop merchandise. “Headless Hats!” shouted George,
as Fred waved a pointed hat decorated with a fluffy pink
feather at the watching students. “Two Galleons each”
Rowling,
2003, p.
403
16 Sickles –
Dragon Liver,
per ounce
“A plump woman outside an Apothecary was shaking her
head as they passed, saying, “Dragon liver, sixteen Sickles
an ounce, they’re mad…”
Rowling,
1998, p.
46
11 Sickles –
Night bus to
London
“Listen, how much would it be to get to London?”
“Eleven Sickles,” said Stan.”
Rowling,
1999b, p.
22
7 Sickles –
Canary Cream
“Canary Creams!” Fred shouted to the excitable crowd.
“George and I invented them – seven Sickles each, a
bargain!”
Rowling,
2000, p.
236
4 Sickles – Hot
water and
toothbrush in
the color of
your choice
“Listen, how much would it be to get to London?”
“Eleven Sickles,” said Stan, “but…for fifteen you get an
’ot-water bottle an’ a toofbrush in the color of your
choice.”
Rowling,
1999b, p.
22
2 Sickles –
Hot chocolate
“Listen, how much would it be to get to London?”
“Eleven Sickles,” said Stan, “…but for firteen you get ’ot
Rowling,
1999b, p.
4 This appendix offers a list of the goods and services with convenient prices, as discussed in the paper, in section 6.

36
on the night
bus
chocolate”
22
2 Sickles –
Membership in
S.P.E.W
“It’s S-P-E-W. Stands for the Society for the Promotion of
Elfish Welfare.”…“We start by recruiting members,” said
Hermione happily. “I thought two Sickles to join”
Rowling,
2000, pp.
144–145

37
Appendix E. Broomstick Makes and Models – Technological Innovations in the Potterian
Economy5
Broomstick
makes and
models
Quote
Reference
Cleansweep-
5
“As for the old Cleansweeps” — he smiled nastily at Fred
and George, who were both clutching Cleansweep Fives
—“sweeps the board with them.”
Rowling,
1999a, p.
71
Cleansweep-
6
“Pausing every few pages [of The Quibbler magazine:],
he read…“an interview with a wizard who claimed to
have flown to the moon on a Cleansweep Six and brought
back a bag of moon frogs to prove it.”
Rowling,
2003, p.
143
Cleansweep-
7
“He’s just the build for a Seeker, too,” said Wood…
“Light —speedy—we’ll have to get him a decent broom,
Professor — a Nimbus Two Thousand or a Cleansweep
Seven, I’d say.”
Rowling,
1998, p.
98
Cleansweep-11
“He…almost walked into Ron, who was…clutching his
broomstick. He gave a great leap of surprise when he saw
Harry and attempted to hide his new Cleansweep Eleven
behind his back.”
Rowling,
2003, p.
202
Nimbus-
2000
“Even Harry, who knew nothing about the different
brooms, thought it looked wonderful. Sleek and shiny,
with a mahogany handle, it had a long tail of neat, straight
twigs and Nimbus Two Thousand written in gold near the
top.”
“They took turns riding Harry’s Numbus-2000, which was
easily the best broom”
Rowling,
1998, p.
108
Rowling,
1999a, p.
30
Nimbus-
2001
“Let me show you the generous gift he’s made to the
Slytherin team.” All seven of them held out their
broomsticks. Seven highly polished, brand-new handles
and seven sets of fine gold lettering spelling the words
Nimbus Two Thousand and One… “Very latest model.
Only came out last month,” said Flint…“I believe it
outstrips the old Two Thousand series by a considerable
amount.”
Rowling,
1999a, p.
71
Comet-260
“What did you say you’ve got at home, Malfoy, a Comet
Two Sixty?” Ron grinned at Harry. “Comets look flashy,
but they’re not in the same league as the Nimbus.”
Rowling,
1998, p.
107
Comet-290
“Ron was rhapsodizing about his new broom…“…nought
to seventy in ten seconds, not bad, is it? When you think
the Comet Two Ninety’s only nought to sixty and that’s
with a decent tailwind according to Which Broomstick?”
Rowling,
2003, p.
128
Shooting Star
“They took turns riding Harry’s Nimbus Two Thousand,
Rowling,
5 Broomstick models and makes are discussed in the paper in the context of technological progress, in section 14.

38
which was easily the best broom; Ron’s old Shooting Star
was often outstripped by passing butterflies.”
“Harry borrowed a copy of Which Broomstick from
Wood, and decided to spend the day reading up on the
different makes. He had been riding one of the school
brooms at team practice, an ancient Shooting Star, which
was very slow and jerky.”
1999a, p.
30
Rowling,
1999b, p.
121
Bluebottle
“At…the field…was a gigantic blackboard…watching it,
Harry saw that it was flashing advertisements across the
field. The Bluebottle: A Broom for All the Family - safe,
reliable, and with Built-in Anti-Burglar Buzzer.”
Rowling,
2000, pp.
62–63
Silver Arrow
“Look at the balance on it! If the Nimbus series has a
fault, it’s a slight list to the tail end — you often find they
develop a drag after a few years. They’ve updated the
handle too, a bit slimmer than the Cleansweeps, reminds
me of the old Silver Arrows — a pity they’ve stopped
making them. I learned to fly on one, and a very fine old
broom it was too…”
Rowling,
1999b, p.
162
Firebolt
“Harry…was able to read the sign next to the broom:
“THE FIREBOLT: This state-of-the-art racing broom
sports a stream-lined, superfine handle of ash, treated with
a diamond-hard polish and hand-numbered with its own
registration number. Each individually selected birch twig
in the broomtail has been honed to aerodynamic
perfection, giving the Firebolt unsurpassable balance and
pinpoint precision. The Firebolt has an acceleration of 150
miles an hour in ten seconds and incorporates an
unbreakable braking charm. Price on request.” Harry
didn’t like to think how much gold the Firebolt would
cost.”
“He had never wanted anything as much in his whole life
— but he had never lost a Quidditch match on his
Nimbus Two Thousand, and what was the point in
emptying his Gringotts vault for the Firebolt, when he had
a very good broom already? Harry didn’t ask for the price,
but he returned, almost every day after that, just to look at
the Firebolt.”
“On the other hand, she rides a Comet-260, which is going
to look like a joke next to the Firebolt.”
Rowling,
1999b, p.
32
Rowling,
1999b, p.
32
Rowling,
1999b, p.
162

39
References
Rowling, J.K., 1998. Harry Potter and the Philosopher’s Stone. Bloomsbury, London, UK.
Rowling, J.K., 1999a. Harry Potter and the Chamber of Secrets. Bloomsbury, London, UK.
Rowling, J.K., 1999b. Harry Potter and the Prisoner of Azkaban. Bloomsbury, London, UK.
Rowling, J.K., 2000. Harry Potter and the Goblet of Fire. Bloomsbury, London, UK.
Rowling, J.K. - under the pseudonym - Newt Scamander, 2001a. Fantastic Beasts and Where to
Find Them. Arthur A. Levine, New York, NY.
Rowling, J.K. - under the pseudonym - Kennilworthy Whisp, 2001b. Quidditch through the Ages.
Arthur A. Levine, New York, NY.
Rowling, J.K., 2003. Harry Potter and the Order of the Phoenix. Bloomsbury, London, UK.
Rowling J.K., 2005. Harry Potter and the Half-Blood Prince. Arthur A. Levine, New York, NY.
Rowling J.K., 2007. Harry Potter and the Deathly Hallows. Arthur A. Levine, New York, NY.