Worldbuilding 102 – Economics in Fantasy Societies Part 1

Last updated on September 5, 2021

Economics sounds like a dry subject, even if it is fantasy economics. In college I wasn’t interested in microeconomics. I had little interest in supply and demand curves, prices, and opportunity costs. This article won’t cover that. Instead, we’ll look at macroeconomics. What resources does your fantasy society have, what does it need, and how does it get them?

Do we really need to get into economics to write a fantasy story? You don’t need a lot of detail, but some background helps flesh out the world. In addition, understanding the economics of your fantasy society helps provide motivation for any factions you might want to create. We’ll look at class and caste in Part 2.

Economics is About Allocation of Resources

When thinking about the economics of your fantasy society, ask what is the basis of the economy? To some extent, this depends on the resources available to your society as well as the level of technology (and magic) available. For more about resources, see my article on Landforms. Also, see my article on Magic and Technology.

At its most basic, economics is about providing the people of a society with the things they need to survive or thrive. Fantasy economics is no different. The word comes from the Greek oikonomia, meaning “household management”. All societies need food, water, and shelter. More advanced societies need metal and minerals, wood, energy sources such as coal for heat and animals (or slaves) for work, and other technology or materials.

Types of Economies

Naturally, there are multiple ways to get resources to the people that need them. Scholars have grouped them into three basic types: gift economies, barter systems, and market economies. These need not be mutually exclusive. A society with a market economy might use barter or gift economies as alternatives methods of resource distribution.

Gift Economy

A gift economy is an exchange where goods aren’t sold, but given without an explicit agreement for anything in return. There are usually rules, social norms, and customs governing how gifts are given. For example, it might be a social obligation for the wealthy to give alms or hold a potlach. Often, while there is no explicit expectation of a return gift, there might be an implied expectation of a gift at some point in the future in order to maintain a relationship. Think about birthday or Christmas gift giving.

Gift economies might become quite complex and embedded in a culture. An example is the gift-giving potlaches of the tribes of the Northwest Pacific coast. These feasts were opportunities for leaders to demonstrate their power by giving away their wealth.

Patronage and Feudalism as a Gift Economy

Another type of semi-gift economy was the patronage system in the Roman Empire. A patron would give a gift in land or position in expectation of service by the client at some unspecified point in the future. This evolved into feudalism in medieval Europe where vassals received land in return for a promise of military service in the future.

If you are looking for a good conflict to form the basis of the drama of a story, you don’t need to look much further than the conflict between the social norms and customs of a gift economy and how people actually act in such situations. Perhaps the conflict is between two leaders, each trying to outdo the other in maintaining social status. Perhaps a client balks when his patron requests he perform his promised obligation.

A system of gifts might work within a society where social norms are agreed upon, but it doesn’t work as a system of exchange with other societies that might have different customs. As such, it can’t be used for external trade, that is, for a society to trade with others to obtain resources they lack.

Barter

Barter is a more familiar form of exchange to most westerners. It works better as a system for external trade. In barter, participants directly exchange goods or services for other goods or services without money. When bartering, both sides must agree on the value of the goods traded. Barter is common even in market economies when money is scarce.

It is difficult to use barter for long distance trade due to the difficulty in carrying large amounts of goods long distances and coming to an agreement on the value of the goods you brought. There is a high risk of bringing what you think is valuable to a distant city only to discover your trading partners don’t think it is as valuable as you do.

I can think of possible story hooks where a merchant brings his goods a long distance to trade only to find they had less value than he expects. Does he bring them back and lose the cost of the travel? Does he trade them for less than he thinks they are worth? What sort of risks and dangers would such a merchant face?

Market Economies

Market economies are the most familiar to modern readers. As such, they usually work well as a default option for fantasy stories. It is an economic system in which the price of goods determine decisions regarding investment, production and distribution of resources. Markets can be highly regulated or completely unregulated (laissez-faire), depending on the level of government involvement or social custom. For a market economy to work, the society needs clearly defined property rights.

Note that a market system is not the same as a capitalist system. Capitalism is a system based on private ownership of the means of production and operated for profit. The feudal system of the middle ages had a market system, but not a capitalist one.

Fantasy Economics and Trade

In my article on mapping out the cities in your fantasy world, I discussed trade as a main driver of city growth. At that point, I was already thinking about trade routes. Now, it’s time to think about what moves along those routes.

Societies typically don’t have all the resources the need or want, so they trade. Trade happens when a society has a surplus of one commodity and a shortage of another. A society lacking certain resources might value a commodity more highly than a society with a surplus. They will trade their surplus with the surplus of another in order to fill their shortage. In this way, trade benefits both societies.

In David Ricardo’s formulation of comparative advantage states, “When an inefficient producer sends the merchandise it produces best to a country able to produce it more efficiently, both countries benefit.” At least, that’s how the theory works. Often, trade is between unequal partners and conflict arises.

People can trade through barter (see above) or through trade markets. Often, a more powerful trading partner can dictate the terms of the exchange. This will often lead to conflict if the weaker partner doesn’t feel they received full value for their products.

Trade Goods in Fantasy Economies

What goods and services can people trade in fantasy economies? Start by looking at the resources available.  Mountainous areas have metals and minerals. Forests provide wood, lumber, charcoal, herbs, spices, and medicines. Plains have grain, cattle, and horses in abundance. In dry hills one finds cattle, sheep, and wool.

You can also put economics with a fantasy element at the center of your story. Think about magical trade goods. Do your mages create magic items to trade? Would such items be considered protected technology like cutting edge electronics and software is in the computer age?

Services are also traded, though usually within a society. What services could be sold in a fantasy economy?

In my next few articles, I’ll continue discussing other aspects of fantasy economics, specifically money and class.