Back in the 1990s, the debut of Magic: The Gathering marked a new form of gaming: collectible card games. While many may remember it similarly to Pogs, for example, Magic survived where Pogs did not. In fact, Magic is more popular now than ever.
In 2018, I co-wrote and presented a paper on the topic for the Association of Private Enterprise Education that detailed its popularity:
Magic: The Gathering … is played by millions of people around the world, with over one million players registered for officially-sanctioned events and over 65,000 who play at high-level competitive events as of 2016. As for total players, Wizards of the Coast (henceforth: Wizards), the company that makes Magic, has estimated that there are over 20 million worldwide (Stein 2016). To give a sense of its scope, consider that as of 2016 there were 15.2 million members of the Southern Baptist Convention (Allen 2017), the third-largest religious institution in the United States … which represents, inter alia, a significant voting bloc in American politics. As of 2014, Magic brought in an estimated annual revenue of $250 million (second only to Star Wars merchandise) for Hasbro, the parent company of Wizards (Greaux 2015).
Second to Star Wars is nothing to shake a stick at. What my coauthor, Ian Maupin, and I argued was that Magic should be seen as a sort of natural experiment for all sorts of economic and other social scientific research questions. And recently something happened that made me think I could convey that here on this blog as well.
You don’t need to know anything about how to play the game to see how it demonstrates how economic forces are always at work in human behavior. Look at this graph:
This graph charts the price of the card pictured here, Paradox Engine. As you can see, around the start of April, the price more than doubled in about a day, going from roughly $20 to $50. Then, right around July 19, the price tanked. It is now, as of August 5, valued at $11.49.
Lets see how many basic economic principles are at work.
First of all, many readers may be thinking to themselves, “I wouldn’t pay even $11.49 for a cardboard trading card!” Players of the game, on the other hand, were willing to pay up to $50 for this card until recently. The point: economic value is subjective. In particular, it is a function of supply and demand.
Which brings me to my second point: supply and demand. The price of Paradox Engine went up in April because of a YouTube video that talked about how good it was for Magic’s Commander format. The price had already been slowly rising for years, but this video brought it to the attention of players who hadn’t heard of it before. So demand for the card increased and the price increased to reflect that. No one sets these prices other than individual sellers — game stores, ebayers, and whatnot. So prices for Magic cards convey information precisely how Hayek said they do.
Next, the price dropped. The story behind this is very interesting. The Commander format was fan-created, and it’s ban list — the list of cards that aren’t legal in the format — is maintained by some of its original creators. They — the Commander Rules Committee — banned Paradox Engine right around July 19. While anyone can play with any cards at home with friends, if you want your deck to be standardized with everyone else’s when you go to play at a local games store or an event, you need to keep to the ban list. So now that the card couldn’t be played in its most popular format, demand for it plummeted and so did the price.
Third, the reason for the banning is interesting as well: the Rules Committee argued that the format is for fun and Paradox Engine was not fun (for the other people at the table). In particular, they invoked the idea of a social contract: that in order to form a healthy society, its members must give up some privileges. This led to videos of people discussing the format philosophy, including interesting forays into Hobbes, Locke, Rousseau, and even a discussion of natural law (albeit Rousseau’s ahistorical version, but still).
At least two points seem notable here:
1) This demonstrates how non-economically motivated interventions into a market will still have economic consequences. It teaches about how regulations distort markets. The Rules Committee likely knew that the price of Paradox Engine would drop, but often regulators of other markets don’t consider such consequences or even deny that they will happen (see, e.g., the minimum wage).
2) This also demonstrates that markets can be regulated through non-state means. This is not always a good thing — and many people were divided about Paradox Engine — but this still demonstrates that even when regulation might be needed, that doesn’t necessarily mean the state should be the regulator. In this case, no one risks being arrested for playing a deck with Paradox Engine in it, nor should it ever come to that. Often, people can handle things like this just fine on their own.
Where this all has outside application, to me, is when presidential candidates and other politicians make wild claims about what they can accomplish for the economy. What they can do are things like banning Paradox Engine. Doing so definitely effects markets, but notice that the intention of the Rules Committee was just to preserve the fun, not to meddle with the market. Nevertheless, their regulation had a large effect due to the market forces that are at work whether we want them to exist or not.
As the economist and first winner of the Nobel Peace prize Frédéric Passy wrote,
Gentlemen, the government can suppress commerce but it cannot replace it. The law of supply and demand, which is for prices what the tendency for a liquid is to reach an equilibrium level, cannot be suppressed on a whim, and when one tries to bend it to one’s will one only makes it harder and more inflexible. We complain that scarcity raises prices, and yet we increase scarcity by preventing these high prices from bringing back food supplies in greater abundance. You may call it a cruel law, and the science that recognizes this a disastrous and heartless science; but it’s the same as calling gravity cruel, and accusing the person of inhumanity who warns you that the falling rock will crack your skull.
If only more of our lawmakers acknowledged that inconvenient science of economics. In the meantime, researchers in economics and other social sciences would do well not to reject the treasure trove of data from Magic: The Gathering and other collectible card games.
Image source: Scryfall