He's doing pretty well. I certainly didn't know that much at the age of 15 lol. He got me on the unemployment and productivity leading to lower MS in some situations, though not for the reasons he stated.

 

Maybe...maybe not.

Of course, it could be relying on the 'donations' to fund most of its work...after all, we do see THAT in canon.

The point is, with relying solely on what JKR has given us, the economy cannot work. She has left too many things out.

Yes, we have to assume there are taxes and if there are taxes there should at least be some level of government monetary policy/control.

Also, prices don't really work out all that well. The base value of the goods changes dramatically depending upon which item you choose to 'translate' into Muggle currency...

A daily newspaper in the early to mid 1990s ran about fifty cents. So, if fifty cents is equal to 5 Knuts, 1 Knut is about 10 cents. There are 493 Knuts to the Galleon...so that makes a Galleon worth about $50 or around £25, not the £5 for the 'official' conversion factor (at least the one commonly used). It then makes a wand worth about $350...and a Hit Wizard makes $3500/month or about $ 42,000/year.

The most commonly used conversion factor for Galleons in to 'Muggle' currency is based on the prices listed on the books JKR did for charity, "Quidditch Through the Ages" and "Fantastic Beasts".

 

You know, I've learned more about economics reading this thread than I have in the past 20 years of my life >_>. Still, from what I've understood you're both basically saying that the Wizarding World's (or at least Britain's) GDP is static and that it's a potential communist utopia.

The only things that can really be sold in the Wizarding World are food, labour and knowledge, and even the first one doesn't have that much of a demand on it, considering that you can make more if you have some in the first place. Knowledge on the other hand is much more valuable than even in the real world, because knowledge has infinitely more power than in real life.

You may be able to add clothing to that list, though that's only because JKR is inconsistent, but I think knowledge would tie in with that as well, given the importance of intent in transfiguration. These would all serve to keep the Wizarding market at a pretty static level, if my basic understanding is correct.

 

The Wizarding World is definitely not a communist utopia. In communism, the entire economy is regulated by the government, yet from what I've seen, the economy is largely regulated by the people - a simple market (or mixed) economy.

 

Taure, money is neutral--it only affects nominal values, not the real economy. Hence, if Y rises, P will fall to compensate for it, thus giving you an equal nominal GDP. However, real GDP will have risen, because according to the Walrasian equilibrium, Income=Product=Consumption. Because of the neutrality of money, we have no way to derive the state of the GDP through monetary policy alone. However, if we can figure how prices changed during the 7 years the story covers, and we assume a relatively constant money supply, we can probably figure out whether real product rose or fell.