Monday, 1 October 2012

Mad Max economics, or why the invisible hand "run Bartertown"

After watching the Mad Max trilogy again, sadly with the American dubbed version of the first, I found myself noticing something. Bartertown is a clear example of the benefits of a market economy over a planned economy, at least when rebuilding after a nuclear apocalypse.

In order to compare the two approaches, we need a clear example of a post-apocalyptic planned economy, which we can find in the form of the oil refinery settlement (ORS) from Mad Max 2 for the planned economy and the aforementioned Bartertown from Mad Max 3 for the market economy.
From what we can tell of the ORS, they pump and refine oil which they then use to fuel their vehicles so that they can then gather the other things they want/need. While it doesn't fit exactly the notion of a planned economy as we know it, it is the closest we will find in the series.

The superiority of the market approach of Bartertown over the planned approach of the ORS comes in three key points.

First there is the fact that while setting up a town on top of a resource will give you access to that particular resource, and any resources you and your people can gather, setting up a town based on trade gives access to all feasible resources in the area. People with water will come with water, people with food will come with food etc. Your people don't need to go out looking for these things to the same extent. These people who bring food, water and other things will trade with each other and also pay either a fee to Bartertown and/or partake in the local entertainment, both of which will provide Bartertown with resources it didn't have. Indeed we see this in the film. Furthermore some traders set up permanent bases to produce and sell their goods in Bartertown, such as Master-Blaster and his “underworld”.

Secondly, when you have a resource situated economy like the ORS, anyone with greater strength can roll into town and take over and not lose much operational capacity. Indeed this was the plan of The Great Humongous. But there would be little point in invading Bartertown, aside the methane production facility “underworld”, most of Bartertown's value comes from its use as a trading site. Anyone who invaded such a place would clearly not value property rights and hence the traders that make Bartertown the location it is would be reluctant to operate under the new management. Hence there is little incentive to invade Bartertown. Also since a large number of traders would be in Bartertown, likely more than work in whatever resources the town may have, the level of defenders relative to the resource would be greater than in a resource focused town.

Finally a somewhat more cynical point, but in a post-apocalyptic society, people would be far more brutal in their outlook, benevolence would give way to survival-focused behaviour. In a trading town, people pursuing their own interests is what allows the town to function. It is in each persons interest to sell their goods to each other to get the goods they want, any short term gain from stealing or breaking a contract is immediately outweighed by the fact they cannot return to Bartertown, or if captured “the wheel”.

Granted there is the problem that in such an economy there is potential for one trader to get too powerful and control too much of a valuable resource, the obvious example being Master-Blaster, who's monopolist position allows to him to cause much embarrassment to Auntie, but at the same time he is still subject to her laws. He cannot simply kill at will in Bartertown, when he tries to he quickly finds himself surrounded by guns. He is as much bound by the laws as anyone else and for all his talk that he "run Bartertown" he is only really capable of causing annoyance, he cannot leverage his monopoly position into any tangible control. 

So in conclusion, while the free market approach is not something one should pursue with dogmatic enthusiasm, it is however useful if you need to rebuild post apocalyptic Australia. To summarise, once the bombs come down, grab a book by Milton Friedman.