Part 1: An Analysis of Economic Problems Facing Westeros
by K.w. Dent
Introduction
Westeros has been economically stagnant for thousands of years. Since the Age of Heroes the infrastructure, finances, and prosperity of the realm have crawled along with only incremental advances that benefit the populous. So, what disease is Westeros suffering from?
In this essay, I will define the economic problems facing Westeros and provide policy proposals that will lead to a more optimal steady state for the Westerosi economy. In Part 1 of this essay series, I will begin by using Keynesian Demand Economics to explore the more systemic issues facing the economy of the Seven Kingdoms.
To achieve that end, in Part 2, I will build on Keynesian Economics by using the 3-equations model to provide context for economic implications on policy. Both of these models will portray why and how certain policies will move the economy of Westeros to a more optimal steady state.
But before we get to the problems facing Westeros, let’s take a brief look at the history of the methodology.
Wars and Politics of Ice and Fire 
Brill! Thank you, K.W.D
Thank you! Glad you enjoyed it!
This made my econ major heart very happy! I greatly enjoyed the read and look forward to the next installments.
Thank you! I was also en economics major myself so I’m happy people are enjoying at and also providing constructive feedback where they see it! Next installment will have some 3-equations stuff in it so it should be really fun!
I’m a post-marxist myself but this is an absolutely AMAZING write up I’ll have to share around. Props to you
Thank you friend! I really appreciate that!
While Keynes claimed he had a “General” theory, it was tailored for early twentieth century western economies with central banks. As Tyler Cowen has said, the vast majority of business cycles throughout human history, particularly centuries ago, have been real business cycles, because “real” factors like the weather were far more important than monetary or financial fluctuations.
Keynesian stimulus is supposed to provide “pump-priming” during the contractionary phase of such a cycle. Alternatively, when the economy is expanding fiscal policy should reverse to prevent overheating and an unmanageable deficit. It is not a theory intended to solve “thousands of years” of poor growth, because it was invented after the industrial revolution and for industrial economies. The growth side of macro is different from the business cycle side, with the Solow model being the starting point rather than anyone’s formalization of Keynes. Although the economic historian Greg Clark thinks most contemporary economic theory isn’t helpful in explaining how we finally left the Malthusian trap via the industrial revolution.
These are great points! In the original version of this paper, I address some of those concerns that “modern models” don’t necessarily “perfectly equate” to medieval systems. For brevity, I cut those sections to be more succinct. Certainly, there is general infrastructure that modern economic models build their variables off of, so that concern is valid. However, I think viewing Westeros ‘through the lens’ of modern models still presents a relatively accurate view of what the problems are facing the realm and what solutions can address those problems. That being said, I appreciate your notes and thorough analysis!
Looking forward to the next essay!
I didn’t actually notice you had a second page when I commented earlier.
I strenuously disagree. The Bank of France caused a worldwide downturn by hoarding gold in an infeasible attempt to get back to their pre-war gold ratio. The death of Benjamin Strong of the NY Fed led to adherents of the “real bills doctrine” in the rest of the Federal Reserve to take charge and attempt to pop what they believed was a stock bubble. This is known as the “Great Contraction”. Hoover exacerbated things from a Keynesian perspective by hiking taxes and particularly with the Smoot-Hawley tariff. Government spending did not plummet under his term, although he had a harder time paying for it given the cyclical nature of government revenues. This monetary “Great Contraction” meant that prices were going down, and the phenomena of “sticky wages” combined with that to produce deadweight loss in the form of unemployment. This is not the case in Westeros. Instead we see that prices are going up due to the war, so demand is outstripping supply. In traditional agricultural economy “unemployment” is less common than modern economies, as instead you have lots of people employed in a low-productivity traditional sector.
Well-done, interesting take on Westeros from an economic lens. Do you think Westeros suffer the same hyper-inflation problem as some of our real-world economies do?
Thank you so much! In a way, Westeros suffers (at times) from massively inflated prices due to uncertainty surrounding Supply. This is technically an example of inflation (to prices) but it’s not inflation in regards to the actual purchasing power of coin. It’s more an example of extremely “un-sticky” prices that are typical within feudal society. However, to your point, hyper-inflation would become a subject of concern if a Central Bank was implemented in Westeros (which is actually a point I address in Part 2… coming soon(ish))!
Looking forward to Part 2, I would be interested to hear if you think hyper-inflation is a logical by-product of Central Bank in Westeros (possibly due to Robert printing money to fund his extravaganza), or if you think hyper-inflation would have occurred naturally due to:
1. monarchs debasing their coins
2. uncertainty surrounding supply of goods as it tend to happen in a feudal economy.
Than you very much! I’ve never read the books nor watched the series, but i needed to prepare for a game and that was just what i wanted to know. Great work!
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