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Bill Stone Column: December 01, 2003

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  • William Stone, III
    The Economics of Pokemon by William Stone, III [Bill Stone is taking a break this week and is eating turkey with his family. The following is
    Message 1 of 1 , Dec 1, 2003
      The Economics of Pokemon
      by William Stone, III <wrs@...>

      [Bill Stone is taking a break this week and is eating turkey with his
      family. The following is from the "Best of William Stone" archives.]

      Like many similarly-aged children, my nine-year-old daughter is heavily
      into Pokemon. Being an engaged parent constantly on the lookout for pop
      culture that undermines my attempt to turn my children into gun-toting
      individualists, I've watched a number of episodes and three of the four
      movies that have been released to date.

      For the uninitiated, "Pokemon" are "Pocket Monsters," the marketing
      creation of Japanese animation or "Anime." They are single super-powered
      life forms and nominal pet/companions of the "Pokemon Trainers." The lead
      human characters of the program are pre-teens who spend their time
      collecting Pokemon in the hopes of ultimately becoming the greatest Pokemon
      Masters in the world.

      I admit it: I don't really get it. The animation of the shows is
      uniformly lousy (though in this respect it differs little from any modern
      animation). The cultural differences between what constitutes Japanese
      and American entertainment are wide enough that pacing and
      characterization is generally hard for me to follow. The dubbing is such
      that all the characters seem to be speaking at a breakneck pace,
      communicating complex thoughts and ideas almost too fast to follow.

      My daughter spends an enormous amount of her thankfully ample spare
      computing capacity memorizing the names and vital statistics of literally
      hundreds of individual Pokemon. I am consistently amazed at the sheer
      amount of detail she manages to keep straight. She collects Pokemon
      cards, games, action figures, DVDs, and other memorabilia at a rate that
      makes me glad I'm in the computer science field.

      In her particular case, it's not just a marketing success: she's the
      moderator of an online Pokemon message forum, and spends time role-playing
      Pokemon on AOL Instant Messenger.

      Thank goodness for broadband Internet.

      Again, I don't really get the show at all. I understand her zeal: when I
      was her age, my parents must have been equally mystified by my ability to
      memorize Star Trek trivia. The frightening thing is that I can recognize
      that if I'd have the Internet at age nine, no doubt I'd be doing exactly
      what she is.

      Yesterday, we were making a run to the video store to pick up Episodes IV
      through VI of Star Wars and the DVD of the second Pokemon movie. It seems
      my daughter recently discovered the audio commentary on the DVDs, and was
      so engrossed that she needed to rent the movies again to listen to it. On
      the way, she was reiterating some Pokemon trivia, and I was listening
      politely -- not entirely understanding, but happy that she's happy.

      At some point, we got onto the subject of comic books, and how, when I was
      her age, comic books were only a dime. This confused her, as it often
      does, since it doesn't make any sense that they could cost so little forty
      years ago. Indeed, given advances in manufacturing and production
      technology, a comic book should cost significantly LESS than a dime, yet
      today's average price is at least $2.50.

      "Well," I told her, "it's inflation. Over time, government makes paper
      money worth less and less, and when this happens, it looks like things
      cost more and more."

      Being the inquisitive, intelligent child she is, my daughter naturally
      wanted to know how government inflates money.

      "Well, first of all, you have to understand about supply and demand. Do
      you know what that is?" She didn't, and for a moment, I wondered how I
      would put this in terms she'd understand. Then a flash of inspiration hit
      me:

      "Well, think about your Pokemon cards. Some of them are very rare and
      some of them are common, right? Give me the name of a rare one."

      "The Zapdos Holographic card," my daughter answered instantly. "You can
      NEVER find one of those."

      "All right, how about a common one? Something you get almost every time
      you open a pack of cards?"

      "A Staryu."

      "Okay, now suppose you have a Zapdos Holographic card and I said to you,
      'I'll trade you a Staryu card for your Zapdos Holographic.' What would
      you say?"

      "I'd say, 'No way, are you crazy??'"

      "Suppose I offered you fifty Staryus. Would you trade me then?"

      "No way! I can get a Staryu in any pack. Zapdos Holos are really rare."

      "Exactly," I explained. "That's supply and demand. There are very few
      Zapdos Holo cards, and lots of kids who want them. The fewer there are of
      something and the more people who want them, the more valuable they
      become. The supply of Zapdos Holos is small, and the demand for them is
      high, so they're valuable. The supply of Staryus is high and the demand
      is low, so they aren't valuable."

      That clicked, and she understood, but didn't get how this related to
      inflation.

      "Ok, you know gold is valuable because it's rare -- supply and demand
      again: there isn't much of it, and lots of people want it. You can't
      really make more of it, because it has to be found, so its value doesn't
      really change.

      "Now, is there anything at all rare about pieces of paper?"

      "No, that's everywhere."

      "Right -- paper isn't valuable at all because there's lots of it and not
      that many people want paper. Now, here's where it gets complicated:

      "Way back when the government first started printing money, the money was
      a certificate. If you had a dollar bill, you could take it to a
      government bank and exchange it for gold."

      This suitably impressed her. She was not, of course, aware that paper
      money ever had any intrinsic value.

      "Ok, now we know the amount of gold in existence doesn't change very much,
      so imagine you had a big bank vault with five hundred pounds of gold in
      it. You start issuing certificates for that gold: every certificate is
      worth a pound of gold. How many certificates could you print?"

      "Five hundred."

      "Exactly," I said. "And what happens if you print five hundred and one?"

      "You don't have enough gold. People could start asking for gold, and
      you'd run out."

      "Right! Now, as long as the government's paper money was actually a
      certificate, they couldn't print any more of it than there was gold.
      Because people in America might start asking for the gold, the government
      might run out if there were too many certificates, and people would get
      angry. Does that make sense? So when paper money is a certificate for
      gold, it's stable. It will be exactly as valuable as the gold it can be
      redeemed for."

      Again, that made perfect sense to her.

      "All right, so here's how government screwed it up and caused inflation:

      "Back in the beginning of the 20th century, the people in government said,
      'You know what, this whole gold thing is inconvenient. Let's just use the
      paper money and forget about the gold.'"

      This puzzled my daughter. "Why would they do that? The paper wouldn't be
      worth anything, by itself."

      "You're right about that -- the paper is only worth something if people
      BELIEVE it is and act like it is. It's not like gold, which is worth
      something because of supply and demand.

      "As to why they did it, well, it was basically because they thought they
      could control what people did with the money easier with paper than they
      could with gold. What really happened was they made a huge mess of
      things.

      "See, as soon as it didn't matter any more how much paper the government
      printed, they started printing tons of it. When the paper was a
      certificate for gold, they had to worry that people who show up and want
      their gold. When the paper was just paper, they didn't have any reason
      not to print money.

      "What they basically did was take a Zapdos Holographic card and turn it
      into a Staryu by printing up lots and lots of them."

      "But ... that's STUPID! Why would the government do that to its money?
      It doesn't make sense!"

      At this, I had to smile. "They did it over a long period of time, and at
      first very slowly. As an example, comic books were a dime for at least
      the first ten years of my life. Then, as government printed more money,
      it became a quarter. Then fifty cents. In the last ten years, it's gone
      from a dollar to over two-and-a-half dollars.

      "And the reason they did it, honey, is because the people in government
      don't understand what you do about supply and demand. All they want is
      power, and they see controlling the money supply as a way to get it.
      They're not interested in what makes sense or what's best for people,
      they're just interested in having something they can control for its own
      sake.

      "There's not a government in existence that, when given the power to print
      money, hasn't printed it until it was worthless. Government should never
      have the power to print money, because it can't be trusted with that
      power."

      Now my daughter was truly mystified. "Why don't people stop them? Like
      vote for people who won't inflate money?"

      "Most people don't know about supply and demand."

      "Wait -- they don't know about supply and demand?! But I know about it,
      it's not that hard!"

      "Well," I admitted, "you now know more about supply and demand than the
      average high school graduate. Remember that the same people who want to
      control how people spend money also want to control what they learn. If
      they don't tell you about supply and demand in school, that means no one
      will have the knowledge to try and stop them from inflating money. So I
      guess you can imagine why they don't want people to learn about supply and
      demand."

      "But that's not nice!"

      "Well, unfortunately, honey, 'nice' isn't something that government is."

      At which point, we arrived at the video store, prompting my daughter to
      observe, "Wow, Daddy, that was good timing! You finished that up just as
      we got here!"


      -----

      William Stone, III is a South Dakota-based computer nerd (RHCE, CCNP),
      security consultant (CISSP), and Executive Director of the Zero Aggression
      Institute (http://www.0ap.org). He seeks the Libertarian Party's
      nomination in 2004 for United States Senate.
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