Twenty-five years ago this fall, Harry Potter and the Sorcerer’s Stone premiered on 8,500 screens in the United States. The first movie adaptation of the Harry Potter book series, it earned more than $31 million on its opening day, enough to break the record previously held by Star Wars Episode I: The Phantom Menace.
“Harry Potter is bewitching American audiences,” said a story in the New York Post.
To be more precise, this bewitching may have been a Confundus Charm, producing befuddlement in its target. According to a 2022 academic paper by economists Daniel Levy and Avichai Snir, the Harry Potter franchise may be responsible for spreading economic illiteracy among its fans. And the problem may be even bigger than the paper contends.
Citing evidence from psychology and neuroscience, Levy and Snir begin by making the case that fictional stories have a significant influence on their audience’s opinions and worldview.
Success logically magnifies that influence. The Harry Potter novels have sold more than 600 million copies globally. They have been translated into 85 languages, including two that are dead (Latin and Ancient Greek). By comparison, the most popular economics textbook currently used in classroom settings, Principles of Economics by N. Gregory Mankiw, which was published the same year (1997) as the first Harry Potter novel, has yet to reach the five-million threshold.
Author J.K. Rowling endowed Potter’s fictional realm with a surprisingly detailed economy, which Levy and Snir dissect like a two-headed Adam Smith.
Here are the basics: Outside of the broomstick industry, the Potterian economy appears to be stagnant. The government (a British-styled Ministry of Magic) is large, inefficient, and corrupt. Private enterprise exists, but businesspeople in the wizarding world are often deceptive. The only bank, Gringotts, is a monopoly owned and staffed entirely by goblins, a race known for greed. And, strikingly, Gringotts does not seem to perform the economically critical banking function of channeling funds from savers to investors.
On a more technical level, Levy and Snir deduce that the gap between the commodity value and exchange value of gold galleons — a denomination of money in the Potterian economy — is implausibly large. But on the positive side, the infrequency of cash withdrawals (Harry withdraws cash only once a year) does seem to accurately reflect the Baumol-Tobin model of money holding in the face of transaction costs.
Overall, the Potterian economy often violates basic economic logic while perpetuating numerous biases and stereotypes. It is also not consistent with any one economic model or school of thought. Levy and Snir call it an example of “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.”
In other words, the Harry Potter stories present audiences with a view of economic life that conflicts with the reality in which the individuals who make up those audiences (hopefully) earn a living.
And there may be an even deeper level of conflict, which Levy and Snir do not address, between the Potterian economy and how the capitalist system works.
For those unfamiliar with the franchise’s premise, Harry is an orphan who learns that he is not a regular person (a muggle), but someone special (a wizard). At age 11, he is plucked from ordinary life into an enchanted realm to develop his craft.
It’s easy to see how such a mythology would appeal to a child’s imaginative vanity. But carried into adulthood, it’s problematic. It teaches that your identity — muggle or wizard — is innate rather than built. You are born with it. It’s a medieval worldview in which one’s station in life is hard-wired. Virtually everyone — with the notable exception of entrepreneurial pranksters Fred and George Weasley — ends up working for the government.
In the real world, capitalism overturned that system and democratized opportunities for advancement. In Harry’s realm, your role is revealed up front, and then the work begins. In a market-based economy, it’s the opposite. Work comes first. Feedback, failure, and adjustments follow. Eventually you do things worth celebrating. This is how true economic magic happens, and how the Western world created the highest standard of living in history.
The bad news is that finding your role in a market economy requires struggle. The good news is that it’s a realm where even muggles can become wizards. That’s a lesson young people need to hear.
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