Star Wars: The economics are with you

Not surprisingly, some of my fellow geeks have already examined the economics of the fictional Star Wars galaxy. I found four posts, with varying levels of detail, scope, and focus (1, 2, 3, 4). That said, I couldn’t resist adding my own perspective on the topic as we celebrate May the 4th Be With You 2017.

5-5-17 Han Solo smuggling.jpg

Smuggling

It is no wonder that the most popular Star Wars protagonist is a law-breaking, self-employed, tough guy who takes orders from only one person: himself. I should point out that the laws Han Solo breaks are all perversions of law outside a classical liberalism understanding of The Law. For smuggling to exist, there must also exist tariffs and/or illegal products that the smugglers try to get past the governing authority.

Tariffs mean protectionism, which means some planetary body conspiring to aid an industry on that planet by making it harder to get a cheaper product from another planet. For instance, the fact that people have to farm moisture on Tatooine either means that the cost of transporting water from water-rich planets is prohibitive, or the moisture farmers have won government protection of their product by a tariff placed on imported water. Neither is likely, but this is fiction after all. In reality, all the sand on Tatooine would be a valuable commodity to certain other planets, the solar energy from twin suns would be harnessed and sold to planets with insufficient energy, and the resulting profits would transport plenty of water in return.

Illegal products mean that the Empire or Republic is violating personal liberties by telling its citizens what they can and can’t use. There is a possible exception if Han smuggles slaves, since being enslaved is a violation of the personal liberty. However, per Adam Smith, slavery cannot compete in a free market, and therefore, only existed in Star Wars because governments on certain outer rim planets prevented free laborers from holding types of jobs that slaves performed, or because George Lucas didn’t know any better.

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Taxes and Regulations on Mining

One can assume that Lando Calrissian tried so hard to avoid Imperial oversight due to added costs he would incur. The Galactic Empire was not a completely socialist or fascist economy, since there was no threat by Vader to nationalize…err…galacticize(?) Bespin, only a threat to leave a garrison there. Still, Lando must have been evading various corporate income taxes, galactic tibanna gas regulations, and maybe even a galactic labor minimum wage. Otherwise, he would have had every incentive to INCLUDE the Empire as a potential customer instead of shying away from it.

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Space Stations the Size of Small Moons

The second article I linked to above references a thesis by Zachary Feinstein in which he speculates the destruction of two death stars in four years would lead to a galactic depression of “astronomical proportions”. The 10-page paper is fun in a geeky way and demonstrates his command of economic models, but I think it misses a couple factors.

Feinstein uses a modern aircraft carrier (materials) and the Manhattan Project (R & D) as the basis for his cost predictions. He is then very generous in assuming the R & D costs have been paid off at the time of destruction, but only 50% of DS1 and none of DS2 materials have been paid for. The rest remains outstanding as government bonds. Now, imagine, in a horrible tragedy, two United States aircraft carriers run into each other tomorrow. One sinks to the bottom of the Pacific, and the other is so badly damaged, it will cost 50% of the cost of a new one to repair it. Does our economy go into a depression requiring a 15% GDP bailout? Does the stock market even lose more than a couple percentage points? Do more than a handful of people put up special Facebook profile pictures?

Any of the discussion about the New Republic having to cover depositor’s insurance claims as the Galactic Empire defaults on governments bonds fails to account for the New Republic’s option to guarantee all former Galactic Empire debt. Furthermore, the Empire was not destroyed at Endor, only its leader, one fleet, and a major weapon. No means of production were destroyed. No valuable resources were seized. Of course, the rebellion would have been raiding the Empire throughout the war, but without any apparent crippling effect. There is certainly massive economic destabilization to follow the “terrorist attack” and assassination (Feinstein theorizes a 20% stock market crash), but two major conflicts (the battles of Yavin and Endor), both far from industrial centers, are nowhere near the drain on an economy that the total wars of the 20th century were. Germany and Japan had to essentially start from scratch in rebuilding their cities, industries, and fighting-age male populations after World War II. Honestly, one can imagine the destruction of the thriving and populous economy on Alderaan was much worse for the Star Wars economy than losing two death stars.

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Paying for a Rebellion

An interesting fact about rebellions is that (pretty much) everyone fighting in one has chosen to be a part of it, but the desire to win rights supersedes the free market demand for their labor. Theoretically, it is possible the small groups of rebels on Yavin and Hoth were functioning as temporary communes. As long as the Alliance continued plundering resources from the Empire, their secret base economies could internally function with division of spoils and a barter system, if members suppressed any desire for improved standards of living until after the war.

Still, historical examples suggest that a rebellion lasting for more than a few years probably had some pay structure and capitalist economy. The continental army was paid during the American Revolution. Martin Luther King Jr. had income from books, speeches, his job as a minister, and a Nobel Prize award during his fight for civil rights. Maybe Mon Mothma would publish a book or two about the struggle for liberty from an oppressive empire. I have no idea if ISIS/ISIL pays its members, but we do know that its government-controlled economy is in ruins. It is doubtful Fidel Castro and his revolutionaries were drawing salaries, but they were supported by donations of food, shelter, and materials from the locals. This is another possibility for the Rebel Alliance: a socially supported military force and leadership council, backed by capitalist economies on friendly worlds.

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That’s all for this year. Lock s-foils in attack position and beware the revenge of the 5th!

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About Chris Fountain

Start small, but think BIG.
This entry was posted in Finances & Economics, Movies and tagged , , , . Bookmark the permalink.

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