Ladies and gentlemen,
Welcome to entertainment with economics. In these posts I consider fictional places and discuss the economics behind them, meaning you are educated and entertained. Today, I will be discussing the economy of Panem and the Hunger Games and how well President Snow manages it. With major inequality, districts producing their own goods and children volunteering to murder one another, there is certainly plenty to analyse.
Unsuprisingly there may be some slight spoilers…
What is this economy?
Today, I will start by discussing the economy as a whole. In case you haven’t read the hunger games, there are twelve districts (named district one, two, three etc…). Each of these produce a good and are in poverty while the capitol live a life of luxury. 24 kids from the district go into the hunger games and have to kill each other. Sounds charming?
Anyway, all of the districts produce goods for the capitol, whose workers don’t work but have lots of money and luxury. The districts workers get paid poorly. The government in the capitol own all of the companies and resources in the districts. This means that Panem is a controlled communist economy. The government forces people to work and gives out money as it feels that people need it. But instead of equality, people close to the government live a life of riches, while those outside live in poorness. If you have a problem, you get shot or have your tongue cut out. These factors all point towards a dystopian communist economy.
Specialisation & Division of Labour
Panem is is efficient in one respect. No workers rights is one thing, but large scale specialisation… wow. It is almost Darwinian: If you are good you survive, if not you don’t get work and you die leaving the districts with perfect beings to output their goods. Each district only producing one good means that people only learn about that good, therefore become better and more efficient at producing it than otherwise.
Through this large amount of specialisation, President Snow is also helping himself politically. By doing this one task, people become stupid and afraid according to Adam Smith (A big deal in the economics world). He believes this specialisation makes workers incapable of conversation, sentiment and courage. This could therefore nullify a revoloution. Good job President Snow!
Inequality and Political Unrest
However, President Snow, you didn’t consider the large levels of inequality in your society. Inequality to such a large extent is frowned upon by many economists. However, almost all will frown on this as it is imposed deliberately by the government. Now I can’t give a Gini coefficient (measure of inequality), but as you can imagine, the incomes in Panem are very polarised. This leads to a greater political unrest and a resultant snapping and revolution as has been seen in many communist states throughout the 20th Century. If Snow wanted to keep his system together, he should’ve pushed for greater equality, but we have seen the flaw that happens all too often in communism.
Panem has a thriving black market. The one in the hunger games is known as the Hob. Here many people trade goods. There are many bad aspects, but the people of Panem do benefit. Here they can get medicines and livestock (Such as Prim’s goat) which they couldn’t get in the controlled market. While it can lead to unethical trading, I doubt that a group who send 24 children to murder one another in an arena care too much for ethics.
The problem with a black market means that as it is illegal, there will be a fall in willing suppliers and demanders, but there will most likely be an increase in priceas demand for most of these goods in inelastic. Therefore people will have less purchasing power.
However, this effect is likely negated as the Hob is generally a barter economy. This is the most simple form of economic trading. People exchange goods with one another. For example, Katniss would trade a squirrel for bread.
If Panem’s Chancellor of the Exchequer is worried about GDP, the large black market presence does mean that they would rather underestimate GDP as it doesn’t count black market trading.
A monopoly with no competition will lead to no innovation and no more efficiency. They lead to wasted resources which makes economists cry. A government monopoly would suffer this even greater as there is no incentive to come up with better production methods in order to increase profits. This is particularly evident as people still go down to the mines with axes.
Volunteering in the Games
The Hunger Games are insane. Your chances of surviving are minimal (or are they?). However, the winner is given a big house and unlimited food until they die. This is quite a reward for people living in abject poverty, so can go some way towards explaining why people volunteer for the games rationally.
Cato, of District Two, was one of the people who volunteered for the games in the first film. He prepared for his whole life, before finally volunteering. He is what can be described as risk inclined. Career tributes such as himself win most years, so he saw the probability of his survival and knew that if he survived he could have riches. If his gamble went against him, well he was dead. This willingness to take a risk, means that as an individual Cato is very risk inclined, although it didn’t work out for him this time. In our economic world today, Cato would unlikely buy insurance, as he believes he would be fine and would be happy to take the risk. Part of Cato’s risk inclination was probably that he had very little to lose.
There is also one other volunteer to speak of. Mags, of District Eleven, was the old lady who volunteered in Hunger Games Catching Fire. She volunteered ahead of the young Annie, a mentally instable woman who had her whole life to live. So why would Mags do this? Well we can ask our main man Adam Smith again.
Adam Smith believed that in a civil society, benevolence is derived from sympathy, therefore Mags would sacrifice herself for Annie. She may do this as well, partially in order to avoid blame, but mainly because human nature dictate so. We are also benevolent out of self interest because we judge ourselves. So Mags was acting in her own self interest.
Essentially, while we see some economic decision making, The Hunger Games shows the limitations of a Communist society as much as Animal Farm does, but also shows the downfall. It shows political turmoil, poverty and inefficiency.
We can also explain why people volunteer for the games whether doing so in self-interest or as part of a lottery.