Category Archives: modern economics

What do people do when they are free from need? Reflecting on St James’s Way, John Maynard Keynes and science fiction

I have just returned from walking St James’s Way. It is perhaps the most famous of the medieval pilgrimage routes: for twelve centuries pilgrims have walked it to reach the cathedral of Santiago de Compostela, in northwestern Spain, and they still do. According to tradition, the apostle James is buried there; since the early Middle Ages, the church has granted an indulgence to pilgrims that make it to Santiago. The flow of pilgrims towards Santiago is believed to never have stopped since the Middle Ages. In modern times, it shrank to a trickle, but has been growing at double-digit since the 1990s. It is estimated that over 500,000 pilgrims walked 100 kilometers or more in 2024.

To walk the Way is to participate in a subculture in which it makes complete sense to set aside a month of your life so that you can walk six-seven hours a day, sleep in crummy hostels, deal with foot blisters and minor (and sometimes not so minor) injuries. It may sound counterintuitive, but people take to this kind of stuff so easily that I suspect it may be hardwired. Maybe we are evolved for the collective nomadism we practiced before agriculture? I have no idea. Certainly the same ease of adoption applies to endurance sports like long-distance running and its even more extreme cousins, triathlon and iron man competitions: they seem weird from the outside, but their popularity speaks for itself. You will be hard pressed to find extrinsic rewards that justifies these huge investments of time and effort. The simplest explanation for why so many people walk St James’s Way or run marathons is that they enjoy doing so. And that takes me to Keynes.

In 1930, John Maynard Keynes wrote a landmark essay, Economic Possibilities for our Grandchildren (full text). The Great Depression was raging on, but he refused to despair. Yes, the rate of technological change had temporarily outpaced the rate with which “we can find new uses for labour”. But the Depression was just a sideshow. Based on a conservative estimate of a 2% yearly increase in the stock of capital, and a 1% yearly increase in efficiency due to technical progress, Keynes concluded that “mankind is solving its economic problem”.

I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not—if we look into the future—the permanent problem of the human race.
John Maynard Keynes, “Economic Possibilities for our Grandchildren”

He then went on to argue that abundance is likely to cause disorientment and anxiety to “the old Adam” as the fifteen-hours working week rolls in. Our species has toiled for so long to scrape together a living that, when it finds itself in an age of abundance, it will simply not know what to do with itself. This problem was, to him, not overly concerning. It would surely solve itself as new mores evolve; meanwhile, “there will be no harm in making mild preparations for our destiny, in encouraging, and experimenting in, the arts of life as well as the activities of purpose”. Keynes walked the talk: though he was by then the world’s most renowned economist and the architect of Bretton Woods, he found the time to be the first Chairman of the Arts Council of Great Britain.

Keynes had his numbers right. His back-of-the envelope calculation of the prevailing rate of capital accumulation was not far off the mark. The “economic problem” – defined as the problem of producing enough to provide everyone with what was considered an adequate living standard in 1930 – is indeed solved. Most criticisms of Economic Possibilities focus on his failure to account for the role of positional goods, and to predict that capitalist enterprises would invent advertising as machinery to create more wants, so that workers in advanced countries would need to keep working long hours to satisfy them. His take on “the old Adam”’s psychological need to toil in order to feel useful is not usually challenged.

The reality of St. James’s Way, though, does challenge it. Many are the people like me, who have the privilege of taking substantial time off work and decide to use it on a 800 kilometers pilgrimage, despite (or because of) the discomforts associated with it. Maybe most people would walk the Way, or spend time and energy of some other idiosyncratic endeavour, if they had the same privilege. Economists think of this situation as a backward-bending labour supply curve: the higher the salary, the less time people devote to working.

The Black Death (1346-1353) is thought to constitute a natural experiment on the shape of the labour supply curve. A terrible plague wiped out about half the population in Western Europe. As the continent emerged from the plague, labourers found themselves in high demand: the number of available hands had dwindled, whereas the extension of land to be farmed had stayed the same. This engendered a period of high labourer salaries, known by historians as “the Golden Age of Labour”.

Confronted with greatly increased salaries and a general decrease in agricultural rents, medieval farmhands do not appear to have reacted pocketing the extra money. In many cases, they exploited their newfound market power to work less – in Koyama’s formulation, “they consumed their income increase in the form of leisure”. In England the number of official holidays that did not fall on a Sunday rose from the 20-27 pre-Black Death to the 38-43 of the 1450s. Contemporary writers from Mandeville to Petty agreed that workers had a strong preference for leisure and would work until their needs were me, and no more.

So what did medieval peasants do with the extra time? They participated in religious festivals, processions, carnivals, merrymaking. Some, I suppose, must have decided to walk St. James’s Way or other pilgrimage routes. Far from complaining, “old Adam” seems to have kicked back and enjoyed the ride.

Interestingly, this is an economic problem where science fiction authors have weighed in. Two in particular: Iain Banks and Kim Stanley Robinson. Banks is best known for his much-loved Culture Series. The eponymous Culture is a pangalactic civilization which wields such advanced technology that scarcity has been completely eliminated. Culture citizens spend their time engaging in arts, extreme sports (like something called “lava rafting”, which is exactly what you imagine it is), partying, flirting and developing highly specific interests (for example fanbases of individual starships).

Robinson’s Mars Trilogy depicts the first 200 years or so of colonisation of Mars. The first years are very hard as the colonist struggle to get a foothold; then political strife with Earth and revolution absorb everyone’s attention and time. But, by the third book in the series, people are getting serious at having fun. You guessed it: traveling, partying, making art, extreme sports. Robinson goes to the length of imagining a race that is a cross between an ultra-ultra-marathon and orienteering, and runs all around Mars’s equator.

It was coming time for the Round-the-Worlder, which began every other perihelion. Starting from Sheffield the contestants could run east or west around the world, without wristpad or any other navigational aid, shorn of everything but the information of their senses, and small bags of food and drink and gear. They were allowed to choose any route that stayed within twenty degrees of the equator (they were tracked by satellite, and disqualified if they left the equatorial zone), and all bridges were allowed, including the Ganges Strait Bridge, which made routes both north and south of Marineris competitive, and created almost as many viable routes as contestants.

– Kim Stanley Robinson, Blue Mars

It may be that Keynes, free spirit though he was, was inadvertently making a normative moral statement, rather than a descriptive psychological one. Not “the common people are going to be uncomfortable and rudderless if they do not work a full time job”, but rather “society cannot be stable unless the common people are occupied selling their labour so that they do not go hungry”. Certainly the latter position reflects the prevalent view of 19th century English élites (I am also re-reading Karl Polanyi’s The Great Transformation, which has a lot to say on the matter).

Whatever Keynes’s reasoning, the people I met on St. James’s Way agree with Iain Banks, Kim Stanley Robinson and medieval peasants, and disagree with him. When (relatively) free from need, people do not face the loss of meaning Keynes attributes to “old Adam”. Instead, they embrace (or invent) deliciously whimsical endeavours such as walking 800 kilometres to visit the shrine of an Apostle. I have no doubt that, should technology allow it, running around Mars’s equator and rafting on lava would find their own crowds of enthusiasts. Through these activities people meet new people, brag about their achievements, flirt and fall in love, and are at their happiest and most human, most of them far more so than when they are working a job. For what is worth, I agree with them too, and wish to dedicate my own work to bringing about a sustainable, time-rich society where we can stop inventing fake needs for each other, provide for the needs (not the artificial “wants”) of everyone, step down from the daily grind, and walk, or run, or raft, to our hearts’ content.

Photo credit: Bjørn Christian Tørrissen – http://bjornfree.com/galleries.html CC BY-SA 3.0

A Matter of Choice: reflecting on alternative economic models after the Istanbul Innovation Days 2025

Spring has arrived for economic alternatives

As I stood on the stage of the Istanbul Innovation Days 2025, I experienced a feeling like the beginning of spring, when you throw the windows wide open and let warm air fill the room. The economics winter was over, for good. It was March 26 – the beginning of spring indeed – and I had the honour of facilitating the plenary session on “Alternative Economic and Financial Models”. Our panel had come together to claim that bold, comprehensive economic transformation was both urgent and possible – in fact, it was already under way in many parts of the world.

For economists such as myself, this is an extraordinary claim. Since the 1980s, the economics profession has been all but dominated by a paradigm known as neoclassical economics, vigorously promoted by many prestigious scholars associated with the University of Chicago. The Chicago school’s success was not limited to academia: it persuaded political leaders the world over that its brand of economics was the only sound, reasonable one, not only in existence, but possible. British Prime Minister Margaret Thatcher summarized it brilliantly in 1980: “there is no alternative”, no point looking for other ways. Two full generations of economists and policy makers complied, defining a half-a-century long winter of economics.

Progress everywhere

And yet, there we were, in Istanbul, and spring had come. We were seeing robust policy innovation to equip economic decisions makers with new tools – job guarantees, universal basic income and services, carbon coins, community land trusts, local energy communities, tailor-made financial instruments, twenty minute cities, missions and moonshots, and more. We were seeing ambitious redesign of economic institutions to deploy these new tools effectively. And we were seeing rapid progress in devising indicators of economic performance to guide those deployments, indicators that move beyond GDP – with UNDP and the UN as a whole taking a leading role.

The best part? None of this is only theoretical, and none of this is limited to a narrow club of best-in-class from affluent countries. Our panel was itself composed of doers, practitioners, with solid experience, hailing from all over the world. In Costa Rica, Eduard Müller and Costa Rica Regenerativa turned a previously extractive economic system into one that rewards the regeneration of soil and nature. In Indonesia, Natalia Arjomand and Second Muse Capital devised a highly successful financial instrument to deliver interest-free loans to small enterprises in the waste management and recycling sector. In South Africa, Miles Kubheka and Wakanda Food Accelerator build economic inclusivity around food, an economic good which also encodes conviviality and care. And in Sicily, Giacomo Pinaffo and the Messina Community Foundation have built a rich and diverse local economy in solidarity, with hundreds of businesses coordinating under a single strategic umbrella in sectors like landscaping services, bioplastics, energy production, social housing, beverages, and the arts. The anti-colonial movement played a large role in opening our eyes, letting us see these contributions (which started well ahead of, and independent from, progress in academia) not as “lagging economies”, but as viable alternatives in their own right.

The power of local (and of science fiction)

There is much to be learned from their stories, and the stories of practitioners like them. I, for one, am determined to continue learning for years to come. But three learnings in particular stood out for me.

The first one is that economic transformation works, not always, obviously, but more often and better than conventional economic wisdom gives it credit for. And it stands to reason: thanks to the progress I mentioned above, reformers in this generation simply have more tools in their armory than the conservative thinkers that oppose them. Exaggerating a bit for the sake of clarity, the latter have spent half a century developing one single option, that of free markets that, once correctly liberalized, will automatically deliver the best possible outcome. If that option fails, they have nothing else to offer.

The second one is that economic transformation tends to happen fastest and deepest at the local level. Economists invariably point out that this is non-optimal, because critical levers for economic policies are only available to states, not to regions or districts or cities. They are right: and yet this oddity tells us that collective institutions closest to the people feel the demand for economic transformation strongest. I predict that regions and cities will continue to lead in institutional and policy innovation when it comes to the economy – and also that small states might have large impacts if they get on board with the economic transformation agenda.

The third one is that we can only build economies we can imagine. Fifty years of “there is no alternative” have weakened our ability to imagine economies more humane and egalitarian than the ones we inhabit now. We need to re-develop our economic imagination muscle if we are to design successful economic transformation. Economists are not of much help there, so Kate Beecroft and Özgür Can Özüdoğru – with remote support from complexity economist Joffa Applegate – demonstrated how science fiction (especially in its more economically inclined variants, like cli-fi, solarpunk and afrofuturism) can help us travel with our minds to alien economic systems, and try them on for size. They made this point by delivering a brilliant workshop they designed with the Science Fiction Economics Lab, that took us to a fictional future Istanbul that had seriously tackled some of the very real economic problems it is facing now, such as housing and water scarcity.

Stories are, as ever, a potent catalyst of human transformation. People don’t abandon broken systems because they have seen graphs on inequality graphs or read critiques of GDP. They change when they see new models come to life. When Costa Rican farmers heal their lands, and see the butterflies return. When Indonesian small businesspeople are entrusted with the capital to build their vision of a circular economy. When South African “foodpreneurs” gain access to platforms where food becomes power, pride, and possibility. When Sicilian researchers, businesses and workers find ways to build a social economy from the ground up, for themselves and others.

As we traded war stories with one another and the audience of the Istanbul Innovation Days, I believe it became clear to everyone that Margaret Thatcher was wrong. She was wrong in 1980; she is even more wrong now, in the face of all this progress and creativity. Let’s leave “there is no alternative” behind, and embrace, instead, the message of UNDP’s Human Development Report 2025: “it’s a matter of choice”. The report refers to Artificial Intelligence, but I believe it applies to economic institutions as well. Those we have, we chose. And we could, and should, choose others, if they serve us better.

I look forward to a future where we do so, with everybody’s contribution. In fact, I am working on a draft concept note to develop a portfolio on economic transformation. Please reach out if you want to contribute, or simply know more.

Heartfelt thanks to all panel- and workshop- participants for their suggestions in writing this blog post.

Of production, extraction, degrowth and doing magic: theories of value in Naomi Novik’s Scholomance Trilogy

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The Scholomance is a school for wizard children, set in the eponymous world created by fantasy author Naomi Novik. In this world, magical predators called maleficaria feed on mana, a substance that allows wizards to do magic. Both children and adult wizards have it, but the adults are more dangerous than most of the maleficaria themselves, so the latter need to feed on children. This is a major threat to wizardkind: in the wild, nineteen out of twenty wizard children are eaten before maturity. The solution to this is the Scholomance: a semi-sentient, heavily warded magical building where children are better protected while they learn to defend themselves against the maleficaria. However, this solution is far from perfect: some predators still get in, and kill three out of four students before graduation.

Novik’s Scholomance Trilogy is a hugely enjoyable read. Cory Doctorow wrote a raving review of it; he’s not wrong, and I am glad he put me onto it. Even more so because, as I went through the three novels, I discovered the literary equivalent of a secret door to… a political economy based on a particular value theory called the labour theory of value (LVT). And look, maybe I am seeing ghosts here (no pun intended). I am like into analyses of science fiction novels, so maybe I am a guy with a hammer and all I see is nails. But still… humour me here, and see if it makes sense

Let’s start with mana. Wizards can do magic, but only if they have mana to spend. A powerful wizard is like a powerful car; its power is only theoretical until you put fuel into the equation. How do you get mana? A wizard can produce mana directly by engaging in a tiring or tedious activity, like doing pushups or crochet. He or she can also receive it from another wizard who gives it willingly: in fact, this how wizards purchase from each other things that they value. Finally, a wizard can get mana from his or her own storage: besides their own bodies, wizards have access to magical artifacts that hold mana and can be drawn from as needed.

To an economist this means that mana is currency in the Scholomance world. It serves as mean of exchange, numeraire, storage of value; it is fungible. It also means that magic is derived from human labour: every act of magic requires mana, hence somebody’s effort or drudgery. In LVT terms, the socially necessary labour or absolute value (not to be confused with the exchange value) of an act of magic is equal to the amount of labour gone into producing the necessary mana. The analogy is quite strict, to the point that, as a wizard gets fitter and doing pushups becomes easier, he or she needs to do more of them to produce the same quantity of mana. (Novik: “The physical labor isn’t what counts. What turns it into mana is how much effort it costs me.”).

So far, so good. Here’s the curveball: it turns out there is another way to do magic after all. It’s called malia, and consists in pulling mana from your surroundings. Novik:

Everyone—almost everyone—uses a bit of malia here and there, stuff they don’t even think of as wicked. Magic a slice of bread into cake without gathering the mana for it first, that sort of thing, which everyone thinks is just harmless cheating. Well, the power’s got to come from somewhere, and if you haven’t gathered it yourself, then it’s probably coming from something living, because it’s easier to get power out of something that’s already alive and moving around. So you get your cake and meanwhile a colony of ants in your back garden stiffen and die and disintegrate.

So, in the Scholomance world there are two paths to doing magic: mana and malia. If you use the LVT analogy to translate this sentence in terms of our world, it reads like this: there are two paths to value production: labour and extraction. “The power’s got to come from somewhere” is Novik’s equivalent of “there is no free lunch”. If you have power and have not created it with the sweat of your brow, you have appropriated it from something or someone else.

This is a rather elegant formulation, because it puts under the same analytical umbrella two phenomena that most economists would consider distinct: negative externalities and exploitation. Negative externalities appear when an economic actor manages to shift some of the costs associated to their production onto the environment, for example through pollution. A company might be doing well, like, say, Dupont at the end of the 1990s, its profit tidy and its markets bullish – meanwhile, though, they are discharging poisonous chemicals into rivers, and people are dying of kidney and testicular cancer. Malia. Or take the example of high-octane fashion brand Armani, who was caught by Italian police subcontracting its 1,800 EUR bags, by way of a contractor, to sweatshops were workers were paid 2-3 EUR an hour to works 10 hours a day so that the sweatshops in question could sell the bags to Armani’s contractors for 93 EUR. Malia.

Some wizards go all in, only finance their magic with malia, and end up being responsible for a lot of suffering and death. Some do not want any part of this malia business, and go “strict mana”. Most are somewhere in between; they produce mana of their own, but also “cheat a little”. In the Scholomance world there are two problems with cheating a little. The first is that cheating adds up to create a negative balance on the other side of the ledger, compensating the positive balance of the additional magic that the cheater can do. Novik:

Whenever somebody needs a little more mana than they’ve got, they steal it from somewhere, seems like no big deal – but you end up with a negative flow [sic] of mana. When that negative flow gets big enough, a maleficaria will generate around it. It’s not a secret, but people do it anyway […] All the psychopatic wizards in the world put together aren’t the real problem. The problem is that everyone cheats. And the we get more maleficaria, and our kids die, and still everyone cheats, because the two things are too far apart. You can live your whole life without cheating once […] and still your kid’s just as likely to get eaten, and meanwhile someone else cheats every day and their kid sails through.

That, ladies and gents, is a textbook prisoner’s dilemma, with maleficaria in the role of negative externalities. And now to the second problem with cheating a little: by being so obviously beneficial, it makes it easier to cheat a lot more. In the Scholomance world, the highest-reputed wizards have figured out way to create magical fortresses called enclaves, that will keep maleficaria out, making their lives a lot safer and more comfortable, and give them the opportunity to acquire a lot of cheap labour by less fortunate wizards, dangling in front of them the possibility of a place in the safety of the enclave.

In the Scholomance world, safety is the main scarce resource around which the wizarding economy turns – the quantity on the left side of its production function, as it were. From an economic perspective, therefore, book three of the trilogy comes with the main plot twist: the scarcity of safety is, at least in part, manufactured.

Here’s how this happens. The protagonist, a powerful witch, discovers that making one of these fortresses requires hideous human sacrifices, and releases deadly maleficaria into the world. So, enclaves as a magical technology make the world safer for the privileged few, but less safe for everyone else. She then digs up a set of spells (a magical technology) to build enclaves without human sacrifices. “The power has to come from somewhere”, so the resources that do not come from those sacrifices must come from honestly earned mana; and the process cannot build shiny, gigantic fortresses, but only smaller ones, that would reduce the space available for each wizard.

Still, no human sacrifices and no extra terrifying wizard-eating monsters released into the wild sounds like a great value proposition. And yet, the witch has no takers at all: no wizarding community would replace their grisly foundations with something cleaner and more durable, though more modest. The idea of renouncing to their advantages is, for enclaves-dwelling wizards, simply unthinkable. As Novik is not shy to point out, the system works poorly for wizardkind as a whole, but it works brilliantly for the more privileged wizards in the enclaves, who have safety and substantial leverage on everybody else. Producing monsters is perversely useful for enclavers, because it makes wizards on the outside even more desperate to sacrifice their lives and abilities to serving the enclaves in the hope of being allowed in: in other words, it enables exploitation. Enclavers are basically in the protection business: they create a threat for other wizards, then extract services from them for partially protecting them against those threats. Creating externalities and exploiting independent wizards is how enclavers procure the mana that powers their dominance.

Something similar happens in our own real-world economy. Countries that got wealthy on the back of colonial extraction and fossil-fuels burning are not only refusing to provide proper loss and damage compensation to the countries that suffered for the very real “maleficaria” brought into existence by those behaviors. They are taking advantage of the dire conditions created by climate change in vulnerable countries to extract even more resources, like critical raw materials, in return for desperately needed capital. Like in the Scholomance world, our safety needs are, at least in part, manufactured: recent research suggests that we could meet everyone’s energy needs while remaining within planetary boundaries. But we don’t, because, like those wizards in the enclaves, we do not want to share.

I don’t know if Novik is familiar with the economic notions of sufficiency and degrowth. I suspect she does. If not, she has reinvented them, alongside the social and moral dilemmas that stand in the way of their widespread adoption. That is at the same time depressing and great: depressing, as she mercilessly rubs in our face the cruelty and injustice of the economic systems both we and the wizards live in, and great because the Scholomance trilogy makes for a great metaphor to explain capitalism to young adults. And, yes, to economists such as myself.

Photo: Public domain, from https://www.needpix.com/photo/download/1017235/witch-sorcerer-woman-female-young-medieval-magic-gothic-dark