From goblin banks to unbreakable galleons, the wizarding world of Harry Potter reflects a form of folk economics that clashes with the realities of prosperity and growth.

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.

...read more at thedailyeconomy.org