With the latest chapter in the Star Wars saga, “Star Wars: The Force Awakens,” fans lined up to watch nail-biting lightsaber duels and catch up with beloved characters and meet a new generation.
Economists, who can render the most exciting of material dull, were eager to learn about the state of the galactic economy. Did the destruction of the Death Star at the end of the sixth film in the series trigger a massive financial crisis, as a recent paper by Zachary Feinstein, a professor of financial engineering at Washington University in St. Louis, speculates?
While awaiting answers to these and other questions, the Economist undertook an examination of the first six episodes of the saga, in search of broad economic lessons.
The Star Wars galaxy is both technologically advanced and economically stagnant, plagued by inequality and ossified political institutions. It is not entirely alien, in other words. Though far, far away, it offers three important lessons for residents of the Milky Way.
The first is the value of trade: the freer the better. Fans moaned in dismay when the opening blurb of the first prequel (Episode I, released in 1999) dwelt on the details of a trade dispute. Yet in the distant galaxy, as in this one, trade conflicts are a rich source of dramatic tension. Among the most important technologies in the Star Wars universe is the hyperdrive, which allows travelers to evade the constraints of relativity and travel fantastic distances in a jiffy.
Hyperdriven trade, in turn, enables a higher level of income per person than would be possible in a galaxy of planetary autarky. Some planets — those with a diversity of species and resources — would do well enough in a tradeless galaxy. But those like the desert planet Tatooine or the ice planet Hoth would be barren without the possibility of imports from other worlds.
Trade allows desolate planets to specialize in the production of valuable commodities — minerals in Tatooine’s case. Others can turn their entire surface over to farming or to urbanization.
The gains from galactic trade are reduced, however, by the monopolies granted to powerful industry groups, such as the Trade Federation, which invades the peaceful planet Naboo in Episode I. Trade franchises are troubling for a number of reasons. They allow the monopolist to charge a premium, capturing benefits that would otherwise flow to producers or consumers. They encourage criminality by those seeking to circumvent the monopoly (like the smuggling of spice, a narcotic, by Han Solo, on behalf of the gangster Jabba the Hutt). And they encourage monopolists to devote valuable resources to rent-seeking. The Republic’s bureaucrats, we learn from Naboo’s then-senator, Sheev Palpatine, are “on the payroll of the Trade Federation.”
Although globalization, or rather galacticisation, is an economic boon, it presents all sorts of political challenges that are not easily managed. This is the second lesson. Dani Rodrik, an economist at Harvard University, argues that globalization prevents countries from achieving more than two of three desirable goals: economic integration, national sovereignty and democracy. The inhabitants of the Star Wars universe face similar problems: The price of participation in the galactic economy is the acceptance of rules that irk planetary governments. In Episode II, a “Confederacy of Independent Systems” moves to secede from the Republic in response to regulations seen as placing an undue economic burden on poorer planets.
The droids we’re looking for
The third lesson is for those pondering their career options in an era of machine intelligence. The humans in the saga still labor at dangerous and unpleasant tasks — flying the galactic equivalent of fighter jets, for example, and toiling in dangerous spice mines — despite the crowds of clever robots that populate the galaxy. Indeed, the robots of Star Wars, for all their technological wizardry, do not seem to replicate all human activity.
Yet humans also work because of the inequities of the galactic political system. Anakin Skywalker, the emotionally scarred Jedi who later becomes Darth Vader, first appears in the series as a slave on Tatooine. Anakin’s son Luke, though not a slave, harvests atmospheric moisture in relative poverty while those at the heart of the galaxy live in luxury.
Humans will work for a pittance, if necessary, to scrape by. This may lead them to the dark side. Worse, it might prompt inquisitive souls to ask what forces drive such an uneven distribution of wealth, turning them into those most dreaded of creatures: economists.
Copyright 2013 The Economist Newspaper Limited, London. All Rights Reserved. Reprinted with permission.