The Economic System of the Harry Potter World

*Imperio! Read this text to the end!*

With the announcement of an HBO series based on all the books in the saga, we, the old-timers of the Harry Potter world, can once again discuss the intricacies of the plot without embarrassment. Perhaps the new series will reveal more details about the structure of the wizarding universe than J.K. Rowling did.

When you read a book, especially as a child without life experience and education, you don’t always think about minor details. It seems that the wizarding world, if you forget about magic for a second, is not much different from ours: there are shops, goods, services, money and a bank where they are kept. There is even a legislative body – the Ministry of Magic. But when, as an adult, you begin to think about the economic system of the wizarding world, a bunch of questions immediately appear. And the more you think, the more there are. Without claiming the laurels of Yudkowsky, we will try to figure out how the economy works in the world of Harry Potter, how it differs from the Muggle one, and fantasize a little about the details that were left behind the scenes in Rowling’s books.

Demography

To better understand the economic laws by which the wizarding world operates, we first need to understand its demography. We were curious if it was possible to somehow calculate how many wizards there are in the world. at the bottom of the ocean in Britain.

The books give very few clues on this matter. But! You can try to turn to demographic data, starting from the main constant of the wizarding world known to us – Hogwarts School. Having learned the number of students, you can roughly (well, yes, with a big stretch) estimate the share of non-muggles in Great Britain.

So. In one of her interviews, Rowling mentioned that Hogwarts could accommodate around 1,000 students. Considering that some of the data that Rowling sometimes gave in interviews was quite contradictory, this estimate seems exaggerated. The number of students in some classes (up to 20), the limited number of teachers, the size of the bedrooms, the not-so-large number of people willing to play Quidditch… speak in favor of this.

This means 20-30 students per year in each of the four faculties, which, given seven years of study, gives us approximately 560 to 840 students for the entire school. For simplicity, let's assume there are 700 of them. Now we start shaking our sticks at the calculator and yelling DEMOGRAFIKUS RASCHETUS.

Let's assume that the age structure of the wizarding community is similar to the general population of Great Britain in the 1990s (a bold assumption, given that data on the lifespan of wizards varies, but you have to rely on something). According to statistics, children aged 11 to 17 (the age of study at Hogwarts) made up about 8.97% of the total population of the country. We will use this figure.

All of them can study at a wizarding school by birth, but as we know, some can study at home either due to some problems with magical abilities (Ariana Dumbledore), or for ideological reasons (studying with Muggle-borns – ugh). Therefore, let's add here 2-3% of those who study at home. Total: 700 Hogwarts students make up approximately 97.5% of all wizards aged 11-17. So 100% = 700 / 0.975 ≈ 718 young wizards. So, the total number of wizards = 718 / 0.0897 ≈ 8,004 people. A kind of urban settlement, the Wizard urban settlement.

It's not much, but it fits in well with the general outline: the magical community in Great Britain is quite compact and rarely comes into the field of vision of Muggles. And it also convincingly explains why many wizards know each other, and some have unique skills that are rarely found in the magical community.

Here we can also be reproached that the age of some quite able-bodied wizards reached 110-130 years. Therefore, in theory, residents of the wizarding world could have children later than Muggles.

However, there are not so many very old wizards in the books. Which allows us to assume that 130 years is rather an exception to the rule. Based on this, we can make another assumption that retirement can occur somewhere around 100-105 years. Armed with demographic data, we can find out that the working population of the British wizarding world is approximately 5,000-6,000 people. Or even less.

How much is money worth?

With the demographics sorted out, it's time for money. Wizards use galleons, sickles, and knuts. Rowling wasn't content to puzzle the metric reader with the imperial system of measures; she decided to add confusion to the currency system:

Now let's try to figure out how much this is in Muggle money. Rowling once mentioned that 1 Galleon costs about 5 pounds. And she added that the rate can fluctuate. That is, some trade operations are carried out between the Muggle world and the wizarding world, and a Galleon can be exchanged for a pound and back. Which, in general, is not surprising: some wizards live in London, and no one has canceled wizards born in a Muggle family. They have to somehow buy equipment for the school in Diagon Alley.

Now let's remember examples of prices in books, convert them into pounds and find out how much things cost in 1997:

• Mr Weasley's fine for enchanting the Ford Anglia is 50 Galleons (£250).

• Harry's wand – 7 Galleons (£35).

• Omnioculars – 10 Galleons (50 pounds).

• Wands for Fred and George – 5 Galleons each (£25 each).

• Tent hire for the Quidditch World Cup costs 30 Galleons per night (£150).

• Chocolate Frog – 11 knuts (11 pence).

And here it becomes clear that Rowling did not think much about the economic component. More precisely, she did not think at all. There is no logic in the fact that some binoculars (even if magical, even during the championship) cost more than a magic wand. Which is not only the main tool of the wizard, but also made, among other things, with the inclusion of fractions of rare magical creatures such as phoenix feathers and dragon heart veins.

And in the gold galleon itself, the value of the precious metal from which it is made must be greater than the nominal value. For example, even in a modest-sized gold Nikolaev ten there is more than 5 pounds worth of gold. And the galleon, judging by the book, is a fairly large coin:

“You're not the first person to have trouble with money,” Mr. Roberts explained. “Two people here wanted to pay me ten minutes ago with gold coins the size of hubcaps.”

It's strange. But it will get even stranger.

Since currencies fluctuate, it may mean that some kind of “base” asset, which has roughly the same price in both worlds, must be used to equalize their values. This asset could serve as a universal measure of value, based on which the exchange rate between currencies is calculated. A good candidate for this role is gold, which, judging by the books, is as rare in the wizarding world as it is in the Muggle world. If we accept this as a given, we can guess how the value of a Galleon has changed since 1997.

We take historical data on the price of gold in 1997 – $331 per ounce, convert it to pounds at the then exchange rate (1.64) and get that for 5 pounds you could buy 0.0248 ounces, or approximately 0.771 grams of gold.

It remains to find out the cost of 0.0248 ounces in 2024, and we will find out how much the galleon has grown. After simple calculations, we get 43.24 GBP. That is, prices have increased by 8.6 times. And the price will now look like this:

Well, the main question: how much money did the boy who survived inherit? Is he rich? In the Philosopher's Stone, the size of the inheritance is described quite extensively: piles of gold coins, columns of silver, mountains of bronze. The only thing we can find fault with here is a frame from the film when Harry first opens his safe in Gringotts. Here, frankly speaking, we gave up and made the neural network do the calculations. Both Sonnet by Claude and ChatGPT based on frames from the film gave different results. Depending on the clarifications in the prompt, it turned out to be from 20 thousand to 60 thousand Galleons. And this is only in the pile of coins that we were shown. In general, Potter will not have to suffer.

Hidden text

Blockchain of the Wizarding World

The financial system would be incomplete without a system of contracts and guarantees. In the world of Harry Potter, this role is played by magical artifacts and spells that anticipated the concepts of blockchain and smart contracts. How did wizards get ahead of their time in the field of digital assets without even realizing it?

Hermione's Dark Marks and Galleons: Smart Contract Prototypes in the Wizarding World
Imagine a tattoo that not only looks scary, but also serves as a kind of “smart contract” with the most dangerous wizard of all time. That’s what Voldemort’s “dark marks” are. These creepy magical marks are more than just a symbol of belonging to a fan club. They function as a real communication and control system, allowing Voldemort to arrange a meetup with his team at any time. “Meet me at the graveyard at midnight. On the agenda is a discussion of the menu for Harry Potter’s execution.”

Hermione's Galleons, created for Dumbledore's Army, are also a form of contract. They provide secure communication between members of the group. However, violators risk magical punishment. They are unique, carry certain information and rights. That is, they cannot be forged or transferred without the owner's consent.

Unlike regular contracts, magical contracts do not require the court system to enforce them. The magic itself ensures that the terms are met.

Unbreakable Vows
The Unbreakable Vow is the highest form of magical contract. It is an oath that is sealed by the very lives of the participants. Breaking the Vow results in the immediate death of the violator.

Reading the description of the Unbreakable Vow today, you can see parallels between magical and digital finance. Remember how Severus Snape swore to protect Draco Malfoy? This magical oath is remarkably similar to the blockchain. Once a promise is made, there is no going back. Just like a crypto transaction cannot be reversed. Imagine if contracts worked the same way in our world – no loopholes or fine print! The vow, like the blockchain, ensures immutability and irreversibility.

How do they make money?

Now let's try to figure out how all this magical fraternity earns its living. From this point on, we are entering the territory of the unknown. Describing the industry component of the wizards' world is quite difficult, because the achievements in the field of magic completely break our usual picture of the world.

Logistics
Take the transport system, for example. In the wizarding world, roads are practically unnecessary: ​​there is Floo powder, a network of fireplaces, brooms and portals. Goods can be safely delivered using magic, without worrying (almost) about their movement. There is even no need to carry anything manually: instead of movers, there are Levi-makers (probably their union, together with the union of workers in the broom industry, lobbied for a ban on the import of flying carpets to the UK). And if we remember about transgression, even more questions arise.

It can be assumed that wizards, especially in ancient times, did not need transportation services for the most part. That is, the huge industry that generates money in the Muggle world simply did not form in the wizarding world. Why would it be needed if the manufacturer can send the goods directly to the consumer? Or you can call a wizard by owl, and he will transfer the cargo anywhere using a paired transgression, if you yourself are not so experienced.

Industry
Light industry is also a big question mark. In the books, we do not find a single mention of factories, plants, and workshops producing consumer goods. Imports from the Muggle world? Doubtful. Yes, the Ministry of Magic has a whole department for studying Muggle technology, and Hogwarts studies “Muggle Studies.” That is, on the one hand, some information is clearly coming in, but on the other hand, the general public is not particularly aware of it and, perhaps, does not really need it.

And how much need is there for any industry if everything you need can be conjured at any time? We know that food creation is limited by Gamp's Law of Transfiguration. But what about the rest? Theoretically, a wizard can take a stone or a piece of metal, conjure a fork out of it, and that's it. And given the Reparo spell, nothing breaks irreparably. Accordingly, there is no need for service support.

It is possible that since wizards have a specialization, not all of them can transfigure household items for themselves. And Diagon Alley seems to hint that trade in household items does exist. This means that not everyone can create everything they need with the help of magic. Otherwise, the business would simply collapse – you can't make enough money on students alone. But the question of “Reparo” arises again: having bought a sofa or a boiler once, there is no need to buy a new one. It's another matter if not everyone is good at “Reparo” (although even students, like Hermione, are excellent at it), and sometimes you still need to hand things in for repairs.

It seems more likely that in this ecosystem it is not so much the item of production that plays a significant role, but its additional magical processing. That is, all production is concentrated in the hands of private craftsmen (Olivander) and small cooperatives engaged in the production of enchanted consumer goods, for the creation of which an ordinary wizard may not have the necessary skills or time (Jay Pepin's potions). For example, some potions, as we know, may require rare ingredients and take quite a long time to prepare.

Development
Another industry that is turned inside out in the wizarding world is construction. With Transfiguration and Reparo, it should be easy to build houses, and even easier to fix them. However, it seems that there are no new houses at all, and all wizards live in buildings built by their predecessors. One could try to attribute this to the population, which does not grow very much. But it seems that the main reason is the Invisible Expansion Charm, which turns anything into a Tardis (which, as we know, is bigger on the inside than on the outside): Hermione's bag, the tent at the Quidditch World Cup…

However, in a note authored by Rowling on the Pottermore website reportedthat this spell is strictly controlled by the Ministry and its use is prohibited for personal purposes, and is permitted only in the production of suitcases, family tents and other items approved by the special department of the Ministry (again, a whiff of lobbyism). This, by the way, gives a hint to one of the branches of light industry on the one hand, but on the other hand, does not answer the question “why shouldn't everyone live in seven-room tents.”

Probably traditions…

Administration
Everything in the wizarding world is subject to laws issued by the Ministry of Magic. And this structure is not only the only authority, but also the largest employer. We don't know much about it. Some conclusions can only be made about the Department of Magical Law Enforcement, where about 30 Aurors work. Plus, there are quite a large number of other departments, such as the Department of Mysteries, Magical Creatures, etc. That is, it is not just a large bureaucratic administrative apparatus, the Ministry combines this role and the functions of the executive branch.

It is quite difficult to estimate its size, but it is unlikely that the structure, which deals with everything possible (from financial control and external relations to legal proceedings), and also has a bunch of contractors, employs less than 500 people. Almost 10% of the working population.

Education
Hogwarts plays a key role in the wizarding world. There are no other wizarding schools in Britain. However, there is a significant gap in the curriculum: there are no special lessons on financial literacy or economics. This explains some naivety of wizards in financial matters, especially when interacting with the Muggle world.

This situation leads to funny consequences. Many wizards may be completely unprepared for managing personal finances or running a business.

For example, the Weasley family, who, after winning a large sum in the lottery, spent almost all of the money on a trip, instead of investing it or creating a financial safety net.

Moreover, the lack of systematic economic education may explain why the wizarding world seems somewhat stagnant in its development. Schools do not teach innovation and business. Because of this, the wizarding world's economy hardly changes. The old order remains, and new ideas rarely appear.

One might reasonably object to this and recall that some students, like Fred and George Weasley, develop their entrepreneurial skills on their own, in spite of, rather than because of, the education system.

As a result, Hogwarts' role in the wizarding world's financial system is paradoxical. On the one hand, the school produces qualified wizards who are capable of taking up various positions in wizarding society. On the other hand, the lack of financial education creates generations of wizards who are ill-prepared for the economic realities of both the wizarding and Muggle worlds.

And everything else
Healthcare is represented in the books by St. Mungo's Hospital, which treats mainly magical ailments, and the school medic, Madam Pomfrey. Judging by the fact that the school infirmary has a potion for fusing and growing bones, wizards solve most of their problems with the help of “decoctions”, and they go to the hospital only in the most urgent cases, such as severed limbs and poisoning with magical extracts.

We are writing about the agricultural sector only because people will definitely ask about it in the comments. There is not much to say about it. In developed countries, the share of the population employed in this sector is 1-3%. There is no reason to classify magical farmers as “underdeveloped”: magical hoes, spells against weevils, and free labor of house elves should make the sector extremely efficient. And remembering that some characters have their own vegetable gardens (given the magical tools, this should not be a big burden for wizards), it can be quite small.

What else?

What else distinguishes Rowling's world from our usual economic system? Various magical creatures. Firstly, house elves. Their free labor is a real gift for lazy wizards. Imagine the commotion in the labor market if all the house elves suddenly demanded fair pay and an eight-hour workday? Hermione Granger would be delighted, but Lucius Malfoy would probably pick up a mop for the first time in his life. Well, or he would have to put up with a Muggle cleaner in the house.

Hidden text

From the books we know that elves are usually passed down through generations and serve one family for centuries. But what happens to an elf when its owner dies without heirs? The answer to this question is given in passing by the scriptwriters of Hogwarts Legacy (Rowling did not participate in the development of the script, so it is not canon). The elf Deek, who helps the main character, telling his story, mentions that after the death of his master, he was… distributed by the Ministry of Magic to a new family.

It's easy to imagine a line of house elves waiting for a new assignment while some wizard-bureaucrat hands out directions to their new places.

Centaurs, mermaids, goblins and trolls can influence the extraction of natural resources. Centaurs can generally control vast territories, which are a potential gold mine for enterprising wizards. But try convincing a centaur that his forest is ideal for building a new district due to the renovation of Hogsmeade!

International aspects
The wizarding world is not limited to Great Britain. There are international economic relations between the wizarding communities of different countries. The Quidditch World Cup shows that a developed industry of international tourism and sports has been created.

I wonder if the wizarding world has a version of the World Bank or the International Monetary Fund? How are currency exchanges handled between different wizarding communities? Perhaps there is a special currency exchange where wizards trade Galleons, Sickles, and Knuts like stocks on Wall Street? There might be a shouting crowd of wizards waving wands and shouting spells like “Cupitus Maximus!” or “Prodavatus Totalus!”

Total

Now let's try with all this knowledge take off To sum it up. The economy of the wizarding world of Britain can be described as a microeconomic system with minimal external influence. It is not stagnant, but the rate of development is quite slow. Low growth rates mean that wizards do not have to worry about a lack of resources (in economics this is called “low pressure on resources”), which explains the absence of an obvious economic crisis.

One of the main problems of the wizarding society is the low birth rate. Based on demographic data, age and number of Hogwarts students, we came to the conclusion that in the 0-11 age group we have approximately 640 children. Which gives us about 58 births per year. Roughly estimating the number of possible mothers, we got 1.35 children per woman.

What does this mean? The population of the wizarding world is aging. Slowly but surely. And no matter how you look at it, it needs an influx of Muggle-born wizards. At the same time, dependence on an influx to maintain the population can create additional social tension (interesting conclusion: Voldemort's success and the introduction of his “policy of magical segregation” would ultimately have an extremely negative impact on demographics). And if the population is aging, then the rate of economic development and innovation is also slowing down.

Another important part of the system is education. The unified curriculum at Hogwarts, which has remained unchanged for centuries, contributes to the conservation of knowledge and skills, which does not particularly help the emergence of innovations.

However, Hogwarts is something of an “integration center” for Muggle-borns in the wizarding community, ensuring an influx of new people and maintaining demographic balance. Thus, the educational system simultaneously acts as a stabilizing factor for the existing economy and as a potential barrier to its modernization and diversification.

In addition, the Ministry of Magic has a huge influence on the wizarding world, whose officials can force entire industries to collapse with a stroke of the pen. Who knows what could have happened if the Ministry had not controlled the enchantment of Muggle items and their import (carpets). And officials turn a blind eye to what is essentially slavery – the use of unpaid labor of house elves, which also greatly distorts the labor market and quite suppresses the development of entire sectors of the economy.

Conclusion: if all these trends continue, the economy of the wizarding world will remain stable, but stagnant, with little opportunity for growth and development. To avoid this, it is necessary to review the educational system, develop new industries, and weaken state control in terms of enchanting Muggle technology and in some other areas.

But it's possible that these changes have already happened, and right now wizards are sitting in the Spellnet sipping butterbeer and creating recipes for new potions using neural networks running on quantum levios computers.

*Imperio! You are free to come to the comments and point out our mistakes*