By admin 
Economists sometimes sound like they are speaking a language that is not of this world. But perhaps there are lessons about economics from a galaxy far, far away.
The Star Wars saga – the science fiction trilogy of trilogies that emerged from the original 1977 film – tells the story of a small group of rebels, led by the brave and wise Jedi Knights, who battle against a corrupt empire.
The movies deserve it more than 10 billion dollars at the cash register. Then there were the profits from cartoons, comics, books and even more from toys.
Legal scholar Cass Sunsteinbest known as co-author of Nudge: improving decisions about health, wealth and happiness, estimated that since 1977, the Star Wars franchise has generated as much revenue as the gross domestic product of entire countries like Iceland and Jamaica.
This amazing achievement is based on stories that themselves contain some economic lessons, on topics such as trade, money, automation, forecasting, cost-benefit studies and behavioral economics.
As the Jedi elder Yoda would say, “economics can be learned.”
Galactic Trade Wars
It is estimated that the Galactic Federation in Star Wars has a gross galactic product of in between five trillion And 200 octillion US dollars. Much of this wealth is generated by interplanetary trade.
The Star Wars did indeed start from an interplanetary trade conflict. Interplanetary trade seems to be based on the resources that each planet has in abundance, such as minerals or cheap labor.
Galactic trade is carried out by corporations, but also by smugglers like Han and Chewbacca.
As smugglers, Chewbacca (left) and Han were part of the galactic trade network.
Twentieth Century Fox/AP
There is a lesson here, both about the profits from trading and the risks of starting trade warswhich comes in US President Donald Trump must respond. If other countries retaliate against the high tariffs he is proposing, global trade could shrink significantly. This will make the world poorer.
Digital currency vs precious metals
However, the federation suffered from the lack of a common currency. Galactic credits, a digital currency, are the most commonly used and there are also planetary credits and dataries (Republic credits). But the credits were not credible. Han only accepted payment in precious metals.
Some planets, like the homeworld of young Jedi Rey Yakkuuse barter instead of any currency. These are mainly poorer planets.
Another barrier to trade is trust, in the absence of respected legal systems. Han offered to bring the heroes Luke Skywalker and his Jedi Master Obi-Wan Kenobi to the planet Alderaan for 10,000 credits. The deal instead was immediately 2,000 plus 15,000 on arrival. Obi-Wan wanted to better coordinate Han’s incentives.
These examples illustrate the conclusions from economic studies that have done so shown having a common trusted currency encourages trade. It is the economic motive for the euro projectwhich introduced a common currency in the European Union.
The automated workplace
The Federation relies on droids for much of its work. The droids take the place of humanoids in an example of capital and labor substitution. And the droids specialize in different taskswhich shows the division of “labor”.
As soon as the relatively peaceful federation splits into an empire and a republic, military expenditure becomes very large. The massive planetary destruction Death star shows the empire dedicating vast amounts of resources to it.
This could explain the apparent paradox of an economy with both highly advanced technology and high levels of apparent poverty. While there are droids, there are also manual workers in boring jobs.
The impact of automation, even though we already have it not yet to the point where humanoid droids like C-3PO are commonplace, this is also a problem in our world. Economists wonder what impact will this have on employment and incomes?.
Cost-benefit analysis
The characters are sometimes confronted with decisions that… cost-benefit analysis in uncertain times. A cost-benefit analysis generally involves comparing future benefits with direct costs.
The droid robot C-3PO has to do that decide whether he wants to risk losing his memory translate an important message. His droid friend R2D2 wants to beat the ape-like Wookie Chewbacca at a kind of chess. But when Han warns of Wookies’ temper, C-3PO’s sage advice to his fellow droid is: “Let the Wookie win.”
Luke calculates that the short-term costs of further education will be outweighed by the longer-term benefits. He hopes to increase his human capital by attending the flight academy. But his uncle prioritizes helping with the harvest. Later, he seeks training in the “force,” from the initially reluctant Jedi master Yoda.
Cost-benefit analyzes are used by economists who advise a company on whether to build a factory, or by a government on whether to build a railroad.
The concept of opportunity cost is illustrated when Luke must decide whether to go to Alderaan with Obi-Wan. At first he refuses because he doesn’t want to leave his aunt and uncle. But when he learns of their murder, the cost of going with Obi-Wan becomes much lower.
The famous bar scene illustrates search costs. Obi-Wan and Luke go there because there is a concentration of potential pilots.
Characters in a scene from the original 1977 Star Wars. From left to right: C-3PO, Luke Skywalker and Ben Obi-Wan Kenobi look at a hologram of Princess Leia.
LucasFilm Ltd/AP
The concept of search costs is used by economists to answer questions such as how long someone should stay looking for a jobor a romantic partnerbefore ‘affirming’.
Negotiate
Negotiation is illustrated when Princess Leia negotiates with Jabba for the release of Chewbacca. Neither the original offer of 25,000 credits nor the asking price of 50,000 are acceptable, but they reach an agreement on 35,000.
Another negotiation involving Leia is when the evil Governor Tarkin offers her the choice of revealing the location of the rebels or seeing her home planet Alderaan destroyed.
But since it is not repeated gameTarkin is not concerned about his credibility and breaks his word. Even after Leia (wrongly) tells him the location of the rebels, he still orders the planet’s destruction.
These aspects of game theory are widely used by economists in situations where outcomes are affected by how rivals respond. An example is a company in an industry with a small number of competitors. The impact of a price cut will depend on how rivals respond.