A Phuulish Fellow

This is one of those subjects that, on paper, I should have got to sooner. After all, I like Tolkien, and I like economics, so why not mix them? Sure, Tolkien himself was a philologist, not an economist, and it shows, but one can still draw inferences about the economic framework of Middle-earth, right?

Easier said than done, dear reader. A look at the economics of Middle-earth is less about filling in the gaps, and more about revelling in the glories of unfounded speculation. We really have very, very little to go on. On the other hand, that hasn’t stopped a couple of recent commentators from trying: Youtuber Elfonomics and right-winger Jethro Elsden. So before jumping into my own guesswork interpretation of Tolkienian economics, which for length reasons I shall look at in a subsequent post, let me first look at the efforts of these gentlemen…

(i) A Reply to Elfonomics

There is a disappointing lack of meat to this one. Yes, it may be excused for being the first of what appears to be a series, but it gets side-tracked by Silmarillion backstory, rather than treating it as a given. With that criticism out the way, Elfonomics makes the following points:

• Ents versus Saruman is a critique of industrialisation.
• Orcs understand money.
• Valinor – during the time of the Two Trees – is a post-scarcity economy, with the Elves facing scarcity after Melkor and Ungoliant mess with things.

Elfonomics is correct in seeing the Ents/Saruman story as a comment on industrialisation, but it is handled way too briefly in economic terms. Specifically, the video fails to note the concept of externalities – there are negative “side-effects” associated with Saruman’s industrialised production process, namely environmental destruction and pollution. This process – which does cost Isengard, even if only in the expense of feeding and housing slaves – does not factor in these side-effects, so Saruman gets away with an artificially low cost of production. He is passing the “true cost” onto his neighbours, the Ents.

There are, of course, multiple solutions to this. Standard economics would envisage Saruman compensating the Ents for the damage, perhaps via the planting of trees, or, if one were to go off the free-market deep-end, have Saruman buy Fangorn Forest itself, with the Ents quietly retiring on the proceeds to Lothlorien or Mirkwood. That Tolkien suggests a different solution, one where the victims of the externalities literally bust-up the offending production process, shows that he isn’t one for standard solutions to market failure…

On the second point, yes, Orcs understand money. Fighting over the hoard of Erebor, or over Frodo’s mithril coat literally makes no sense, except insofar as Orcs understand precious metals as stores of value (yes, Frodo’s mithril coat is treated as a store of value. It’s not as if Shagrat, complete with monocle, dressing gown, and pipe, aspires to add the item to his drawing room for its aesthetic value). The biggest fault on the part of Elfonomics is to omit the evidence from The Hobbit – which makes it clear that Orcs are not mindless savages. Orcs are talented miners, and their armour and weapons do not come out of nowhere, which implies that Orkish manufacturing may be less classy and renowned than dwarvish, but it is still clearly a thing. Orcs even invent sophisticated technology (wheels, machinery, explosions…), though where they get their food is trickier. Sauron (and probably Saruman) have some degree of agricultural slavery, but the Orcs of the Misty Mountains? Do they all subsist on fish and moss, or do they grudgingly trade their manufactured produce with other peoples, in exchange for food? Quite the mystery (don’t get me started on Angband, but that is for another time).

Elfonomics’ third point, I think, is debatable, primarily because the notion of post-scarcity itself is fuzzy. Valinor is an extremely luxurious place, and is, in a very real sense, Heaven on Earth. No-one starves, and everything is plentiful. Elves are immortal, so they have less of a dreaded opportunity cost to their actions than we do. The problem is that we know vanishingly little about the Elven economic framework – the most detailed depiction is the Wood Elves of The Hobbit. For all we know, there is an entire servant class of Elves (again, much like our friends from The Hobbit) whose labour sustains the aristocrats at the top. Who mines coal, cuts down trees, and transports the result to keep Feanor’s forge lit? Celegorm hunts for sport and food, but I have a difficult time seeing him cook his own dinner. Et cetera. Elfonomics assumes that the Elven leisure class is representative of Valinorian society, rather than a potential outlier – and if there is a servant class, such Elves would need to be paid, either in currency or in kind. That in itself opens questions about whether Feanor and Sons have bona fide feudal estates, which they use to fund their lifestyles. Or maybe Feanor is just the Noldorin William Morris, and does everything himself. We have no idea.

(Elfonomics also errs by treating the Trees as a source of perpetual power. The Trees light up Valinor, but they don’t power it, and if their demise does create a scarcity-of-light problem, that problem is solved via the Sun and Moon. As it is, the Noldor presumably burn wood and coal, with perhaps local waterwheels and windmills. Where the coal comes from originally, Eru can handwave).

In summary then, I feel the video could have been better, and more in-depth, but we shall see how Elfonomics’ series progresses – I see the next target is the Dwarves, which should offer rich material for analysis. Also, to Elfonomics’ credit, he at least avoids using Tolkien’s work to push a particular ideology. Which is more than can be said for Jethro Elsden.

(ii) A Reply to Jethro Elsden

Elsden’s piece is a very blatant and very sad attempt to hijack Tolkien’s work in the name of a particular ideology. My distaste isn’t simply because I disagree with his right-wing worldview (though I do), it’s because The Lord of the Rings is such an idiosyncratic work that fitting it within any modern ideological framework requires taking extraordinary liberties with the text. Sure, by all means, find stuff in there that appeals to you – there’s something in there for everyone – but that’s a very different thing from using the book to whack people you don’t like. Elsden isn’t trying to shed light on The Lord of the Rings – he’s virtue-signalling to his fellows.

Anyway…

Take, for instance, the kingdom of Gondor, once so resplendent, now slowly waning. For hundreds of years there has been constant war with the forces of Sauron. This has drained the resources of Gondor, not only in terms of money and capital, but more importantly in sheer numbers of fighting men. By the time Sauron’s war reaches its climax, when his forces besiege Minas Tirith, there are barely enough soldiers to defend the city.   

No. Gondor has not been in constant war with Sauron, largely because Sauron was moonlighting in Mirkwood until comparatively recently. Gondor was a decaying Empire long before Sauron resumed normal service in the Dark Tower – sure, they were fighting his proxies for a long time, but Gondor’s decline (in both population and power) came from within. But such complex (and dare I say, Spenglerian) questions of civilisational decline are beyond the present discussion.

Meanwhile the areas of Gondor that Sauron conquers are left enveloped in a dark cloud of deprivation, slavery, and the sort of centralised planning of the hard left’s wildest dreams. It’s clear from the dialogue of the Orcs that their every action is centrally directed and there is a clear dearth of decentralised decision making: It’s the orcs on the ground that have the local knowledge, but without the approval of the Politburo (or in this case, Sauron and his lieutenants, such as the Nazgul) no one can use their initiative, and make independent decisions. 

Elsden is confusing leftism with centralised control. Yes, Sauron is a control freak dictator (more specifically, an immortal God-King), and he’s like that because he literally wants to run the world, but there is nothing remotely leftist about him. Sauron’s message is, at heart, a spiritual one, based off rejecting Eru and embracing himself as a replacement (by the Third Age, he was claiming to be Morgoth returned). He does not engage in materialist political arguments about economic systems, and certainly does not talk of “liberating the downtrodden,” after the manner of the political Left.

I’d also point out that the Soviet Union borrowed central planning from Imperial Germany. Does Elsden consider Kaiser Bill a red?

The War of the Ring might have gone very differently if Sauron had only got his hands on the works of FA Hayek and learnt how much information centrally planned systems miss out on compared to the decentralised free market.

Except that modern market economies are planned economies. The number of shoes in Dunedin (and their prices) are not set by on-the-ground actors. Such decisions are made in an office in Wellington, Auckland, or Sydney.

This is only one of the clear similarities that Mordor shares with the Soviet Union. In a sense this is unsurprising – after all, Tolkien was strongly opposed to both socialism and central planning in general and was writing the Lord of the Rings in the 1930’s and 40’s, the same time as Communism was near the height of its power. The Soviet authorities’ fear of the anti-socialist ‘hidden allegory’ meant that it wasn’t until the fall of the USSR that a full translation could officially be made

To quote the man himself, to ask whether Orcs are Communists is as meaningless as asking whether Communists are Orcs. The Soviet hostility to The Lord of the Rings (only relaxed in 1988) was actually less about Mordor, and more about the Scouring of the Shire – and speaking of the Scouring, it was also interpreted as a potshot at the socialist policies of Britain’s 1945-1951 Labour Government. Tolkien rejected such a reading at the time, and I believe him.

As for the Mordor/Soviet analogy, let’s ignore the ideology for a moment, and look at the mechanics of the state. The Stalinist regime (in modified form) outlived its creator by decades, whereas Sauron’s regime literally collapsed with him… does that not alone suggest a point of difference worth investigating?

Sauron’s Soviet-style kingdom is in direct contrast to the free peoples of the West. While kingdoms such as Gondor, Rohan, or Lothlorien, couldn’t be described as paragons of liberty, there is nonetheless a large degree of freedom. People have duties to fulfil, and must ride to the aid of their king or chief if they are called (as the Rohirrim are by King Theoden). But apart from that people seem to mostly follow a ‘live and let live’ philosophy, at least with regard to their own communities. 

I’ll give Elsden credit for noticing that classical liberalism is a poor fit for Middle-earth, but there’s a gap in the spectrum between totalitarianism and ‘live and let live’. Denethor, for one, is as much a control freak as Gondor’s technological level will let him, which ties back to the general idea that applying modern political ideologies to this archaic and fictional world is facile.

While the Shire does have a Mayor and a Thain, it has little other forms of official authority, and is mostly a voluntarily ordered society. In many ways it epitomises the minarchist fantasy state, with the only government services being a post office, the Bounders (a sort of unofficial border control), and 12 ‘Shirrifs’ who act as a quasi-police force (but mostly spend their time rounding up stray livestock rather than chasing hardened crims). Not so much a Night-watchman state then, as a heavily sedated, emasculated, can’t-really-be-bothered Night-watchman state.

If The Shire is such an amazing example of libertarian minarchy, why does Tolkien take such a dim view of such capitalist go-getters as Lotho Sackville-Baggins? It is almost as if there are various unwritten social conventions (many of them class-based) that govern The Shire, rather than a commitment to free-market liberalism.

It’s not just in the direct cost of constant war that the free peoples are harmed. There are also indirect costs, such as Sauron’s forces disrupting the lucrative trade networks across Middle-earth. From the giant spiders and forces of Dol Guldur making travel on the Old Forest road through Mirkwood hazardous. To the Great East Road, and the Greenway near Bree falling into disrepair. Traders no longer travel in the numbers or regularity that they once did.

A valid point, were it not for the problem that Eriador does not really have sufficient population to justify the maintenance of such roads. Eriador (with the exception of the Shire, Bree, and Rivendell) is basically empty. One would expect most trade in the setting to take place along waterways (Lake Town), or seaborne (Pelargir).

Kingdoms like the Shire rarely interact or trade with those outside. This is despite the fact, that the Shire produces pipe weed (and appears to be a monopoly supplier), a clearly valuable and desirable commodity. In a more interconnected ‘globalised’ economy, where the roads were safe and secure, pipe weed could be sold by hobbits in the Shire, and the money used to purchase commodities that they lacked. For example, an enterprising hobbit could travel to the Iron Hills, or to Erebor, and trade pipe weed with the dwarves for gold. Or get the dwarves to use their estimable skill to craft bejewelled gold buttons, to go on his waistcoat.

Or how about an enterprising hobbit decides to sell pipe weed to Isengard. What could possibly go wrong with that…?

(Elsden is bright enough to spot that the underlying assumptions of economic liberalism don’t hold in Middle-earth, and points out areas for economic enterprise. It’s fair enough, but ignores the elephant in the room, namely that Tolkien’s world is not the world of the free-market precisely because Tolkien wasn’t an economic liberal. If he was, Lotho Sackville-Baggins would have been the hero).

Property plays a key role in the works of Tolkien, not only in terms of the epic fight for ownership of the ring, but also in terms of Aragorn’s claim to the throne, and the tension this creates with the Steward of Gondor. Property rights are pretty well developed, and legal contracts exist to protect the rights of property owners. So, despite the Shire being a mostly voluntary society, with little official authority, hobbits respect the rule of law, and the property rights of other hobbits. This is why Bilbo can safely transfer his property to Frodo, and the only way the Sackville-Bagginses can get their hands on Bag End is to buy it.

Elsden is again ignoring the role of unwritten social conventions. Libertarian “it’s my property, I can do with it as I please” philosophy is a poor fit here, precisely because (with the exception of Lotho) no-one in Middle-earth actually acts with regard to profit maximisation.

However, we can still draw inferences from some of the events in Tolkien’s works. For example, in The Hobbit, Smaug’s attack on Dale and Erebor and seizure of its vast treasure hoard would have had a devastating economic impact. The destruction of property and people in the attack would severely depress demand, as people cut back expenditure to replace lost necessities such as housing and food. Many businesses would have been destroyed, as well as a vast amount of accumulated capital. This hit to supply would take years to recover from. 

Well, Smaug’s attack on Dale and Erebor would suppress demand via the simple fact that no-one (bar Smaug) lived there any more. Dead people don’t have demand – including for food and housing. I am not sure what Elsden is talking about here.

(As for what happened elsewhere, presumably Lake Town went into steep recession as it lost its best customer literally overnight. It’s why the Lakemen get quite excited about the prospect of Thorin’s return).

However, perhaps the most damaging impact of Smaug’s attack would be the severe monetary tightening that would occur. 

Elsden needs to elaborate on this point. As it is, he makes it sound like Dale was still a thing after the dragon attack, rather than a burnt-out shell.

It wouldn’t be quite so bad if Smaug was willing to buy stuff with the gold, since this would be a monetary injection and would provide coinage to lubricate trade. But sadly, as a rational ‘draco economicus’, Smaug maximises his utility by hoarding the gold and going to sleep. While they have nothing to sell, and no money to buy goods, trade with the woodland elves would dry up. The Elves would thus have to switch to alternative providers, who presumably would supply goods that are lower quality, or more expensive, or both. While these suppliers would obviously be better off, the Elves and the people of Dale would definitely not be. And it would be a big hit to the overall welfare of Middle-earth.

Again, confusion: is Elsden confusing Dale (no longer there) with Lake Town (just lost its best customer, but otherwise still standing?). Until this situation is clarified, it becomes impossible to address this point. I would note though that in the next paragraph, Elsden has an irrelevant little rant about central banking – as though that, rather than wider systematic breakdowns, were somehow the inherent cause of hyperinflation.

 Tolkien’s story is fundamentally an anti-socialist tale, criticising greed yes, but not property or the Bourgeoisie.

Tolkien’s story examines misuse of property (Lotho) and makes the bourgeoisie out to be broadly ridiculous (hobbits generally, and the respectable, boring Bagginses in particular). Tolkien’s no socialist, but he’s no free-marketeer either.

It’s a tale which says that what the world needs is not to be remade in violent revolution, as Wagner implies, but for each of us as individuals and communities to build incrementally on what we already have. It’s a tale which argues that societies will only flourish when power is limited not arbitrary, when each individual can be secure in their property, and when even the humblest of hobbits, like Sam, has the freedom to build a life for themselves free from tyranny and coercion. So, if you’re in favour of freedom, property and against untrammelled government power and looking for a story that embodies these values, put down that copy of the Fountainhead, or Atlas Shrugged and pick up some Tolkien instead. 

Elsden knows very well that Tolkien is a poor fit for the values of economic liberalism – he spends half his essay pointing out that Tolkien’s world and characters do not fit the framework, to the point where he invents enterprising hobbits and globalised trade by way of improvement. Sam’s world – an extremely humble one – is not centred around being enterprising, or maximising his return from pipe-weed futures. It’s about, well, pottering around in the garden, raising a family, and having the occasional beer down at the Ivy Bush.

Or as Thorin Oakenshield once put it, “if more of us valued food and cheer and song over hoarded gold, it would be a merrier world.”

**

Phew. Another long one. With this couple of replies out the way, I will hopefully take a look at my own interpretation of Tolkienian economics in a subsequent post.