Category: Economics

Hermione Granger, Capitalist?

J. K. Rowling has revealed in interviews what some of her characters went on to do after the close of the Harry Potter series. Unfortunately, they all became bureaucrats! Here is what she revealed about Hermione Granger’s future:

Hermione Granger

Hermione began her post-Hogwarts career at the Department for the Regulation and Control of Magical Creatures where she was instrumental in greatly improving life for house-elves and their ilk. She then moved (despite her jibe to Scrimgeour) to the Department of Magical Law Enforcement where she was a progressive voice who ensured the eradication of oppressive, pro-pureblood laws.

I think a lot of people see politics as the noblest and most altruistic career path. The world would be a better place if the misplaced respect for politicians was instead directed at entrepreneurs. A better epilogue for Hermione would go something like this:

Hermione began her post-Hogwarts career working in potion development. Her greatest creation was an elixir for the enhancement of non-pureblood wizards’ magical abilities. She used the wealth from this popular elixir to start a financial firm that specialized in extending loans to house elves and their ilk, allowing them to buy their freedom from servitude. Despite an extended legal battle with the Department for the Regulation and Control of Magical Creatures, Hermione’s firm became large and successful. She retired wealthy and comfortable, and when the history of house-elf servitude was written, the wizarding world remembered that over 60 per cent of freed house elves had bought their freedom with a Granger Capital loan.

There, now isn’t that better?

The post Hermione Granger, Capitalist? appeared first on The Economics Detective.

Hermione Granger, Capitalist?

J. K. Rowling has revealed in interviews what some of her characters went on to do after the close of the Harry Potter series. Unfortunately, they all became bureaucrats! Here is what she revealed about Hermione Granger’s future:

Hermione Granger

Hermione began her post-Hogwarts career at the Department for the Regulation and Control of Magical Creatures where she was instrumental in greatly improving life for house-elves and their ilk. She then moved (despite her jibe to Scrimgeour) to the Department of Magical Law Enforcement where she was a progressive voice who ensured the eradication of oppressive, pro-pureblood laws.

I think a lot of people see politics as the noblest and most altruistic career path. The world would be a better place if the misplaced respect for politicians was instead directed at entrepreneurs. A better epilogue for Hermione would go something like this:

Hermione began her post-Hogwarts career working in potion development. Her greatest creation was an elixir for the enhancement of non-pureblood wizards’ magical abilities. She used the wealth from this popular elixir to start a financial firm that specialized in extending loans to house elves and their ilk, allowing them to buy their freedom from servitude. Despite an extended legal battle with the Department for the Regulation and Control of Magical Creatures, Hermione’s firm became large and successful. She retired wealthy and comfortable, and when the history of house-elf servitude was written, the wizarding world remembered that over 60 per cent of freed house elves had bought their freedom with a Granger Capital loan.

There, now isn’t that better?

The post Hermione Granger, Capitalist? appeared first on The Economics Detective.

American Apparel Demonstrates a Fundamental Principle of Capitalism

The American Apparel board of directors has ousted the company’s founder. The company stock jumped up nearly 20% on the announcement. Contrary to what we see in the movies, being a successful founder of a big company does not entitle one to kick back, smoke cigars, and let the profits roll in. Dov Charney had some innovative ideas about clothing and about turning a small enterprise into a global chain, but his personal failings became damaging, so he had to go.

An interesting question to ask is “who works for whom?” A week ago we might have thought that American Apparel worked for Charney, and not the other way around, but we would have been wrong. The board that fired him is itself beholden to the shareholders; the old share price (before the 20% jump) was the result of investors restricting their investments in the company because its bad CEO made it less appealing than some alternative investments. And who are the shareholders beholden to?

They are beholden to the consumers. Ultimately, any return on an investment in American Apparel can only come from satisfying consumer wants. If consumers decided tomorrow that they would never buy another pair of neon green skinny jeans, American Apparel’s stockholders would take a massive loss as they tried to sell off their now-worthless shares.

Ludwig von Mises said it best:

“The market economy — capitalism — is based on private ownership of the material means of production and private entrepreneurship. The consumers, by their buying or abstention from buying, ultimately determine what should be produced and in what quantity and quality. They render profitable the affairs of those businessmen who best comply with their wishes and unprofitable the affairs of those who do not produce what they are asking for most urgently. Profits convey control of the factors of production into the hands of those who are employing them for the best possible satisfaction of the most urgent needs of the consumers, and losses withdraw them from the control of the inefficient businessmen. In a market economy not sabotaged by the government the owners of property are mandataries of the consumers as it were. On the market a daily repeated plebiscite determines who should own what and how much. It is the consumers who make some people rich and other people penniless.” Mises, Inequality of Wealth and Incomes, 1955

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