Economics of Harry Potter

What did wizards in Harry Potter need money for? As I understand it, they only necessity they couldn’t conjure up is food, and couldn’t they take something marginally edible and transform it into a turkey dinner? Also, was there real finance in Harry Potter, or was it just a bunch of vaults at Gringott’s? I noticed that Harry financed the Weasley twin’s shop with a mere 1000 galleons, their own life savings having been stolen in a wager. On the other hand, perhaps salaries in the wizarding world are quite paltry.

It has been a while since I read the books; but IIRC the children were not allowed to perform magic. Harry needed money for books and other school supplies. Also again IIRC the ethics of using magic for personal gain.

Maybe I missed something, but didn’t Hogwarts conjure up food on a regular basis? I seem to remember scenes in the HP movies where scads of food would suddenly appear on the tables in the dining hall.

Remember, the house elves work in the kitchens. Cook the food and magic it up to the tables.

Someone awhile ago linked to a bit of fanfic called something like “The Rational Harry Potter,” in which Harry is an obnoxious little brainiac raised by scientists; as he goes through the story, he approaches everything via a scientific rationalist mindset. It was pretty funny. One bit of it remarked on the fluctuating price of gold in the Wizarding world and the mortal world, and how Harry planned to become obscenely rich just by differential buying and selling on the two unconnected markets.

Edit: Here we go–the relevant chapter!

This was a while ago, so I might be misremembering, but I feel as though in the last book (when they were on the run), Hermione mentioned how it was a shame they couldn’t just conjure up money to replace their dwindling funds, but one of the laws of magic was [blahblahblah], and it’s clear you never payed attention in Transfiguration, Harry!

Anyway, I love the series, but it’s got more plotholes than wands; the later books tried to make more sense, but the fact remains that nothing is going to be very logical in a world where wizards look down their noses at those stupid muggles, yet die in circumstances that could have been quickly solved with a couple cellphones. It’s all about the aesthetic!

It gets less humorous as it progresses, though. One part even had people crying and wondering how the author could have that happen.

I thought of HPMOR, too, but I’m not sure it answers the question of what the Wizards use it for in the real universe. In the HPMOR universe, there is no permanent transfiguration, so nothing can be conjured up permanently. Anything that looks like conjuring is actually bringing it from elsewhere.

But, while I’m not as familiar with the original universe, I do believe that’s not the case in Rowling’s work. Heck, there are accidents that involve permanent transfiguration.

So that we can show that rich people are evil and poor people are the good guys
The real economics of Harry Potter and Star Trek and other fictional worlds don’t make sense if you try to examine them

Aside from limits to transfiguration (food, gold and three more items) there is noticeable trade in goods and services primarily caused by 1) rarity of certain items, 2) difference in magical skill, and 3) just like muggles, wizards can be really stupid when it comes to gold and other items of value.

Economics of Harry Potter:
step 1: Write a fantasy series.
step 2: sell millions of books
step 3: make movies of books
step 4: sell millions of tickets
step 5: Live life in luxury.

It’s very true that the Wizard economy doesn’t make much sense–their idea of “Banking” seems to be “a big pile of gold in a vault,” for goodness sake. I’ve often wondered if Gringott’s does the other sort of stuff we associate with the word “bank.” Things like making investments, extending loans, providing credit, and that sort of thing. Clearly they don’t have deposit accounts–wizards don’t seem to have anything akin to checks (or should I say cheques, since it’s a British series :)) or debit cards. Harry seems to have to physically go to London if he needs to withdraw more money. Whereas I can get cash when I need it from any of about a dozen places around town–like magic!

But some things are clear. Despite magic, there are still things that you have to purchase. Broomsticks, for example, have to be bought, and good ones are apparently quite expensive. They seem to buy their school textbooks every year. And clearly some people have more money than others. The Weasleys are portrayed as, if not outright poor, at least on a very tight budget, and the implication is that this is because they have a lot of children to provide for. Ron wears hand-me-down robes, and they worry about the cost of school books for all those kids. Their house, while large, is rather ramshackle and possibly in need of some repair. By contrast, the Malfoys are clearly wealthy. Harry seems to be pretty well-off as well, for that matter.

So apparently either wizards can’t, or don’t, just conjure their every need out of thin air. It seems to be the case that just like muggles, they buy a good portion of their everyday goods from stores, which costs money. We never learn what the average wage is for a typical wizard, so it’s hard to say just how much purchasing power a galleon has, but it seems clear that wizards do require money for their everyday needs and wants.

He inherited his money from his parents.

I’m not a fan, haven’t read any of the books and only remember watching two of the films. How old are the spells and can they invent new spells? I’m guessing, probably incorrectly, that the spells are really old and so none of the ‘modern’ inventions such as books or Xboxes have spells for them. Or maybe a wizard creating money would be as attractive to them as us pushing someone under a train, ethically abhorrent and also a criminal act?

The age of spells is only partly discussed. We know at the very least that Severus Snape came up with some new spells and potions (discovered by Harry Potter in the textbook signed by “the Half-Blood Prince”). The creation of new and useful spells has not entirely stopped, we know that much.

Going back to the bigger question from the OP:
Some of this is me personally filling in details never fully established by the books, but my take is this: transfigured gold is still distinguishable from real gold for people who care. Thus, it’s like the modern market for diamonds, which remains strong despite cheap substitutes.

Gringott’s functions as a bank like the old gold smiths did in Europe - they issued paper notes payable from gold deposits. You could bring back a note and pull out your gold if you really wanted to, but many transactions happen purely on paper (or the magical equivalent thereof). As long as everyone knew Gringott’s had actual gold in actual vaults, confidence in the largely paper system remained strong.

I don’t remember any paper money, it was all coins-Galleons, Sickles and Knuts.
The contents of Harry’s vault was described as mounds and piles of coins.

Money is also needed for renting living or working space, which cannot be conjured out of nowhere (although there do seem to be spells that can make objects larger on the inside than on the outside). The Weasley twins indicated that renting a place for their joke shop was something they had “to work on” even after getting Harry’s seed money. The 1000 Galleons was enough to buy supplies for them to experiment and to operate as an owl-order business, but not enough to fully set up their shop.

Also, Hogwarts collects tuition. Wizarding families need money for that (teaching being like other forms of skilled labor), though there is a scholarship fund to help the indigent.

Hermione and the Weasley twins have also developed new spells, and Voldemort created at least a few, too.

Going back to those original gold smiths, the paper notes never replaced regular currency (coins) for everyday use. They were used for loans and for large transfers. For buying wands and books, you’d stick with with coins, but when the Malfoys need a new castle they probably wouldn’t bring a thousand pounds of gold coins.

But, again, I readily admit that this is my explanation, not canon from the novels.

They interacted with the Muggle world a lot more than shown in the books. Hermoine and the other Muggle borns for one, lived in the Muggle world and needed cash for the same reasons you and I do.

The Malfoys were extremely rich. Do you think that was only Wizard money? No, you don’t have large estates and all that without having serious Muggle money. The Malfoys therefore interacted daily with the Muggle world.

The Leaky Cauldron has a public opening in Muggle London.

The real Hippy Shut-in is Arthur Weasley. Clearly completely unfamiliar with the Muggle World, which most of his peers interact with every day. Lives with his Hippy wife on a small farm hidden from the Muggles. Even then, working in the Misuse of Muggle Artifacts department, you’d think he too would have almost daily interaction with the Muggle World. But he’s an innocent in the books.

But I doubt new spells could create books from nothing, since where would the information come from? Now, maybe they could copy an existing book, but then I’d bet there would be magical copyright protection–if not something like HPMOR’s edict of Merlin which keeps people from even reading spells they aren’t ready for.

Don’t they buy their wands, BTW? Seeing as wands are needed for most magic–especially controlled magic–it would seem to be a chicken/egg issue. But wands are apparently handcrafted, and only a few can do it well. There’s your scarcity, and thus the need for money.

Other magical items probably have to be created, too. And people will want compensation for their work. So there’s more. Throw in the apparently cost of property, and just the effort of doing magic to create things, and money makes sense.