Sneak Peak at "Economy & Currency in SFF" Script

One of the most requested topics I've been getting is worldbuilding economy and currency in sci-fi and fantasy. Which is unfortunate because I know absolutely nothing about economies; I fell asleep in high school econ class! (No joke.)

Luckily, my dad has a Harvard master's on the subject, worked for the MN Department of Economics and Employment for 10+ years, and has published a handful of YA fantasy books. And he was awesome enough to answer some of my questions for this video. 

I've decided to copy-and-paste his email here and share it with you lovely patrons. Not all of it is making it into the video, and the parts that will make it in will end up switched around to be a little more cohesive, but it's still very interesting. If more econ teachers were like him, they'd have fewer students falling asleep. Or maybe I've just become more mature.

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-What is an economy? How does one get started?

There are lots of official definitions of an economy; you can Webster it up any time. In plain language and for purposes of world-building, an economy is how your characters and those around them trade goods and services. Put another way, it’s how the characters and those around them decide who and what adds value…and who doesn’t.

How does one start an economy? Well, one doesn’t really. Economies tend to start on their own. Certainly key elements do. Left to their own devices, with no banks or currency or billionaires or stimulus checks, people will try to exchange goods and services to get what they want. “Barter economy” is the most commonly accepted self-evolving economy: you have chickens, I want eggs. I have grain, you want bread. I give you this many loaves for that many eggs. Boom, economy started. Of course, it’s incredibly inefficient and wildly problematic for more than a few dozen or hundred people. But it works on small scale, which is good enough for most stories.

A question an author might ask is: WHY do I need an economy in this book? If I’m world-building, sure an economy is part of a world: but does it *really* matter? Do I need an economy like Bladerunner needs an economy (the use of robot slave labor which ties directly to the themes of humanity that pervade the story), or do I need an economy like Harry Potter needs an economy (goblin banks and Diagon Alley are just “cute” mirrors of the real world), or do I need an economy to just sit down and shut up while I tell a story that has nothing to do with that sort of thing?

-What is money? Who typically has it? (re: does everyone get paid in money, or in some other form of payment? How does that affect their living conditions?)

In economic terms, money is currency: a unit of some sort that holds value that everyone accepts at some level. Instead of trying to figure out how many loaves are worth how many eggs (and maybe I want clothes instead of eggs, and the person who makes clothes is gluten-sensitive), we all agree to use this shiny rock that there’s some supply of nearby, and that “holds value”. A rock that fits in your palm neatly can buy a week’s supply of bread, or a day’s supply of eggs, or a decent shirt. Now all we need is rocks, and to decide not to hit each other over the head with them to get what we want.

This is all artificial of course, and all in our heads. A dollar bill holds value to us because…we all agree it does. There are laws built on top of that faith framework, but money works only as long as everyone believes it does. (That episode of Rick and Morty where Rick crashes the economy by setting unit of value to zero of itself is, as most of Rick and Morty, deep and distilled truth wrapped in fast-moving absurdity.)

If you think about it, money depends a *lot* on faith. It’s why churches/religion and money operate closely together in many stories. It’s also one of the reasons churches used to (and sometimes still do) amass ridiculous amounts of wealth. If you can get people to believe in your version of the afterlife, you can probably also get them to believe that this shiny rock is worth three times of what that other shiny rock is worth.

So this gets to who typically has money: it starts with who sits on top of all the rocks. Royalty is the land-owner, you say? All the rocks are theirs, then. They can buy whatever they like - maybe even enough military or police to set the rules of the economy (e.g., people may or may not own other people, people have to pay taxes/tithes on top of what they already pay for the stuff they want, etc.). These land-owners set the initial rules for an economy that may last for hundreds or even thousands of years.

It doesn’t have to be land/rocks. It could be ocean/fish, or telepathic brain waves/thoughts, or volcano/magic fire lava sparks, or whatever. Put crudely, the money is the WHAT, and WHERE you find the money is the key resource to own, and WHO owns that resource is who has the money (or at least an advantage).

Which gets us to living conditions. The powerful live near the resource (but not too close if mining operations are messy and involve slave labor…no one wants to look out the bedroom window at the consequences of their actions). The powerless live either too far away (irrelevant) or right on top of it against their will (slave labor). In more modern and more complex economies, this will be harder to see because money is not the only thing going on, and there are tons of different industries and resources that one can serve as paths to money/fame/power/self-actualization. (Think about how pandemic/telework have created MORE opportunities for some who already “live on rock mountain” and have Internet connections and the skills to use them; we can live anywhere and do our jobs. Others don’t live close enough to the mountain; they still have to commute to work and/or may have part of their industry shut down; and/or may find themselves beholden to an employer with very few other options.)

-How does trade happen?

You and I each have something the other wants, and neither of us is prepared (or able) to use force to just take it from the other. That’s really…it. Everything else is legal and logistical fireworks.

Usually, a class of people arises who are specialists in getting goods and money from A to B and back to A. Traders are often the first “middle class” (or approximation of such) to show up in an economy: they move around too much to be super-powerful (if they lived on shiny rock mountain, what incentive do they have to move goods around?), but they have to know and do things that most slaves, serfs, and servants would never be allowed to know and do (“take this big bag of money a hundred miles away and bring back the textiles I ordered from that other kingdom…don’t get robbed or skim anything…etc”).

Traders means roads (or some sort of path from A to B). Roads means some sort of infrastructure - who builds a bridge over that river, or a port to handle the boats that go up/down the river? Who’s paying for that - the queen, or the traders’ union, or some landowner that takes a fee to pay for it all? This reinforces the need for currency, as well as for contracts (what if the bridge builder doesn’t get paid…to whom do they appeal to get their money?), laws, and…the ultimate expression of civilization…the bureaucrat! Someone’s gotta write that shit down. Also, lawyers, judges, etc. generally come out of this deal. A monarchy can try to hold power and make all the decisions on every bridge-builder case, but eventually they have to delegate…to magistrates, governors, and others who may evolve ideas of, oh, say, independence and NEW laws and currencies that benefit them.

And then the cycle repeats itself: where there was once one kingdom, now there are two; and they have to negotiate trade agreements as to who can cross the border when, how much they have to pay to use the other’s port/roads, and so on.

-How and why does trade stop, and what are some potential repercussions?

Trade stops for one of several reasons:

* I decide I can just take what I want from you (invasion/war/robbery/cybercrime);

* What you have is no longer of as much value to me (agreement expiration/renegotation, find new goods/services, etc.)

* Politics/cultural values demands that we slow shit down (you employ slave labor, we need to protect our car industry jobs, etc.), which generally results in tariffs (taxes on trade).

If trade slows, becomes more expensive, or stops - some people will not get what they want, which is irritating, Others may not get what they need, which can ruin a business or an entire family. The more globalized the trade (we’re pretty globalized nowadays), the more destructive stopping trade is. Everyone (in America) likes to say “buy American”, which is almost literally impossible for most goods now (cars, clothes, etc.). Stop trade, then the supply of cars and clothes will thin out; if the supply chokes for more than a few months, domestic suppliers MIGHT re-emerge but it will take $$$ and time. To go back to our bread and eggs example: if our government tells the two of us we cannot trade anymore, I will have to make my own eggs and you will have to make your own bread. I will have to find/raise my own chickens and make another kid to watch them and collect the eggs, you will have to grow your grain and harvest it…and grind it...and buy an oven. We both lose efficiency, spend time doing shit we aren’t good at, and spend more money (which we might not have) trying to make it all work.

Same with cars, clothes, and iPhones.

Don’t forget that anyone who makes a living off of trade (and these are generally more powerful/educated than your average citizen) will NOT like having their livelihood made more difficult, or impossible. And they know the secret river passages, tend to be super creative, and know how to negotiate. They make excellent protagonists, support for protagonists…or antagonists. Fun fact: the Star Wars prequel Phantom Menace tries to introduce trade unions as a key player in the plot (they’re the faintly racist Asian stereotypes that own the droid army). George Lucas is a fabulous example of overthinking economy in science fiction. It should not have been this boring.

-Is it possible to have an isolated superpower, or do you need external trade to grow socially, economically, and/or technologically? (put another way: does Wakanda make sense?)

Wakanda is awesome, and I want it to exist, and it mostly doesn’t make sense. (See also: Lothlorien.) But the point HERE is that it doesn’t have to. Wakanda is an excellent example of storytellers understanding the ultimate purpose of a story, and of world-building. Where a detail would get in the way of a good story, and ditching it doesn’t cause a massive problem for character or plot development…they ditch it.

But okay, to parse it, since it’s important to understand the kind of details an author might want to ignore consciously…let’s walk through this. First, Wakanda isn’t a super-power. Super-powers are super-powers because they…have and exercise power over other powers. America, Russia, and China have been super-power because virtually every other country (with the possible exception of Europe, which is an intriguing coalition of second-tier powers unifying to balance military/economic weight) has to consider whether the next argument may result in getting overrun, in some fashion. America is arguably a “hyper-power” among the super-powers given its cultural, financial, and political weight…at least until 2017. Anyway...Wakanda and Lothlorien aren’t super-powers; they’re isolated communities with very high resource advantages (vibranium, elven magic) and some method to separate themselves from others. Unlike America or Russia or China, they don’t WANT power over others and don’t really have a use for it. Like Greta Garbo (look her up), they “want to be alone”.

Because they’re isolated, they can’t really trade effectively. Both kingdoms do some light trade (e.g., Wakanda’s "goat-herders”), but they don’t bring in dollars or goods or services from the rest of the world/Middle-Earth. This may be sustainable depending on how many people are within their own country (about 100,000 in Wakanda feels better than the few thousand elves in Lorien), since the population has to have/support a baker, chicken farmer, tailor, etc. and they’re only circulating money internally. They’re denying themselves the TRILLIONS of dollars that come from trading with America or Smaug. Their traders’ unions must be going nuts. Black markets are likely. (Fun fan fiction idea for LotR: a group of Lorien elves find an agent of Dol Guldur they feel they can bargain with. Locks of Galadriel’s hair for Mirkwood spider poison to tip their arrows. Hilarity and adventure ensue. Starring Andy Serkis in a Gollum cameo, spread out over three movies again since that’s just what Middle Earth movies have become.)

There’s a line in Black Panther from the chief traitor, when they’re in the first council meeting after Killmonger takes over, when he’s trying to convince the General that she should go along with it all: “the rest of the world is catching up” (I’m paraphrasing; look up the exact quote if you’re going to use this). The implication is that Wakanda’s natural resource advantage cannot last forever, because they’re so isolated. Once the world economy catches up and has vibranium-equivalent weaponry…what happens? That’s what’s compelling about Killmonger’s take: he’s not fucking crazy, he KNOWS what happens. And it’s also part of the reason why T’Challa, when he regains power, opens up Wakanda. Yes, most of the reason is social/ethical: they can and must help others, including descendants of Africa around the world. But it ALSO keeps them a major player on the stage financially and politically, so it’s shrewd.

A Wakanda or Lorien without a surrounding world they’re isolated from is…well, not very interesting, since either (a) the super-power will exercise its power and overrun the tiny fiefdoms around them or (b) represents the entire world, in which case the point is moot; they represent the entire economy that matters. An isolated country is only interested if it’s isolated from SOMETHING relevant. And something relevant, is probably worth considering trading/interacting with. Thus, dramatic tension, and characters and plot.

-How does poverty happen?

They, or their ancestors, did not live on Shiny Rock Mountain; and/or they did not have the weapons to take it by force; and/or they did not have the education or means to negotiate with those who do live there or have the guns.

Poverty generally persists for as long as those who have power can keep the good times rolling for themselves.

I’m over-simplifying, but not by much.

For an author’s purpose, a compelling question might be: how can one pull oneself OUT of poverty, in my economy? Is there hope for an individual? For a family? For a community? For an entire race? And the answer is usually: yes, if you can define another resource that everyone will gradually or suddenly desire, and if that individual/group lives on that new Shiny Rock Mountain.

-How do economic crashes happen?

“Crash” has lots of meanings. Markets can (and do) crash all the time. Usually, that means the price of something tanks - people suddenly value something a lot less than what they used to. Housing, gold, spices, oil, all of these markets have crashed. It all depends on how much people want, and how high the price has risen. Markets tend to “bubble” before a crash; if a commodity is valued very highly, and then even more highly, and then even MORE highly, the risk keeps going up that at some point, enough someones will say: “holy hell why are we paying so much for this shit…is there some sort of alternative to oil, like I dunno solar or coal or just using less of it?” And then everyone watches the price start to drop and then tries to sell as much as possible while the price is still high…and all that selling convinces buyers that they don’t NEED to pay as much, so in a somewhat self-fulfilling prophecy, the whole market suddenly tanks. Supply/demand is a bitch. Higher education, take note.

Currencies can also crash, once you have a world big enough for more than one. The Shiny Rock Mountain equivalent: an explorer comes back with news (and evidence) of an entire mountain range of shiny rocks. Soon, everyone has a shiny rock, and each individual shiny rock is worth less and less. If another kingdom (especially one that occasionally trades with the first) uses a currency that’s somewhat available and more stable (say, purple seashells), the first kingdom’s residents may want to start using seashells instead. The value of the seashell rockets; the value of shiny rocks plummets. Supply/demand.

A “crash” at a wider, economic level suggests that LOTS of people can’t get money, goods, and services to each other. People cannot buy food/clothing/housing/essentials, for any one of a number of reasons. Maybe trade routes got squeezed. Maybe a war drained resources (though wars can also serve as fabulous stimuli - see WWII America). Maybe a pandemic wiped out the trader class. Maybe a nuclear device took out the only chicken farm. In any case, the system probably suffered a shock and a critical piece is now missing. It will likely recover…in the long run. In the short run, people will suffer. Probably the protagonist’s family, right? And the protagonist will have to help find a way to manage that. Maybe they’ll be a hero and help the kingdom define a new aspect of their economy, unlock the potential of many new workers, etc.

-In the event of an economic crash, what might the ruler(s) do to recover? How would those actions affect their subjects?

The rulers will protect themselves first and foremost. This doesn’t have to be evil; it is human nature. A benevolent ruler may still make some “tough choices”; I doubt any of those tough choices will mean giving up their castle and starving so someone else can eat.

The rulers will also have to pay attention to the institutions that help them stay in power. Recall the notes above about faith and religion. And also those all-important traders. Maybe a few lawyers and bureaucrats. But above all: whatever military exists, must be paid. The threat of force (and/or defense against the threat of force) is utterly essential when things get tough.

Assuming the military is content and there’s a religion to get behind, most rulers will then point their subjects at some “other” that can be plausibly blamed for all the trouble. Think of all that “economic anxiety” in the white working class, which somehow resulted in brown families getting torn apart at the border. Fucking brilliant. Or fucking stupid, depending on your world view.

-Do economic crashes and/or rulers' responses to them lead to political uprisings, or even civil war?

Sure, if the causes are obvious enough, and/or the rulers fragile enough, and/or the military volatile enough, and/or the population big or well-informed enough.

-Are there any other ways that writers can use economics to write a better story?

Economics is called the “dismal science” for a reason, If you’re writing about economics in your scifi/fantasy novel, you are almost certainly writing about a dystopia. If you’re not, think long and hard about why you’re spending so much time writing about who has money and power, and who doesn’t, and why. Are you really telling the story you think you are?

-Are there any SFF stories you’ve read or seen where economics has a significant role? I've got Game of Thrones and, to a certain extent, The Stormlight Archive. That's it.

Dune. (Spice.) And honestly, I still mostly remember the big sand wurms. A world’s economic system, like a good computer, should be running smoothly in the background. The moment you notice it, something might be broken.

Dad