Economics in a Fantasy World

One of the often-neglected areas of fantasy world building is economics. I would imagine that most people find it boring to read dusty economic textbooks to apply to fantasy settings. If that’s your take on economics, allow me to share my knowledge on the subject with you, along with speculation on what impact magic will have on a given economic system.

A word to the wise, your economic system does not define your political. You can have a free-market economy and an authoritarian system. You can have a democracy that runs a planned economy.

But what are those economic systems? In this blog, I’m going to discuss the three big ones, traditional, free-market and command economies.

Traditional Economy

A traditional economy is often mistaken for a free-market economy, but in fact a free-market economy takes work and a traditional economy is the laziest of the three.

In a traditional economy, the government does more or less nothing about the economy. It is typically characterized by very small government and an extremely unregulated economy. This was the state of medieval Europe.

Traditional economies typically give rise to monopolies, oligopolies, guilds and other protectionist practices. The Hanseatic League (https://youtu.be/z-TytIFw8BY) is a good example of trade monopoly that can arise under a traditional economy.

This type of economy is a staple of fantasy writing, it requires the least amount of work by the author and allows the greatest scope for economic politics. Guild politics is a particularly interesting angle for plat in the case a traditional economy.

If you add magic to a system like this and consider it purely from an economic perspective (so the government or church has no interest in regulating magic), it is likely that a guild or equivalent organization will arise that will trade in such magical resources as are available.

This guild will probably be extremely protectionist in nature and might well engage in criminal activity to preserve the knowledge of the guild.

Free-market Economy

This is one of the most misused terms in the current day political dialogue. A free-market is one in which the supply and demand of a product determine its price on any given day. So the price of the product shifts as there is more or less of it and as the demand is higher or lower.

However, there are two massive assumptions tied to this economic model:

1. Perfect competition: No oligopolies, no monopolies, no price fixing. Everyone in the market is competing fairly.

2. Perfect knowledge: Everyone in the market, buyer or seller, knows how much of a product is available at any given time and what the demand for that product is.

Neither of these conditions exist in the “wild” as it were. The role of government in a free-market economy is to ensure that the market is as close as possible to meeting these conditions.

This is why governments in a free-market economy need to continuously intervene. Left to their own devices, companies would naturally gravitate towards monopolistic practices. It is not done out of malice, but out of the very natural desire to ensure maximum profits. However, it leads to non-free-market compliant actions that destroys the virtues of this system.

If you apply this system to a fantasy world, you will require a well built bureaucracy and judicial system to drive anti-trust type laws and deal with monopolistic practices.

Adding magic to this system, given no control by other bodies, should result in magic being sold like any other tradable resource. This is the economic system most likely to give rise to the mage-as-a-business model. Mages might need to be service industry specialist.

This could be a fascinating approach is often used in Urban fantasy of course. Mages as business people provide all kinds of scope for creating economic tension. Can you pay the bills? What if a client defaults on an invoice and your cashflow is screwed? This can put your character into a world of hurt, on top of what’s going on your main plot.

It’s also an interesting approach as preventing monopolistic practices could be a main driving force of a plot. The need to find evidence, the actual court case and other activities around breaking up a giant company can make for a fascinating story or premise for a roleplaying game.

Command Economy

A command economy is one where a central authority of some kind decide on the distribution of resources and the economic products that are to be produced.

This kind of system makes the most sense in an environment where you have limited resources for whatever reason. It is often seen in post-apocalyptic settings.

This kind of system requires the most bureaucracy to make it work.

Magic in a system like this would definitely be controlled by the central authority. This is a great system if you want to have magic and mages to be tightly controlled which of course gives rise to a lot of tension and conflict which in turns gives rise to great stories and plot.

And those are the three big economic systems in a nutshell! Good luck with your world building and don’t forget about economics.

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From the WU Team: Thanks so to Marie for brining an economist’s perspective to worldbuilding with this guest post! For more like this, check out and follow her YouTube channel and other social media below!