How Magic Changes Your World's Economy

[Lady Sabine]

Here are seven simplified rules of economics.

Rule Number One: Resources have value.
Rule Number Two: Labor has value.
Rule Number Three: Value of an item is dependent on the value of materials and labor required to produce it.
Rule Number Four: An item is only worth what people willing to pay for it. Demand!
Rule Number Five: All resources & items are limited. Supply!
Rule Number Six: The price of an item is dependent on both supply & demand.
Rule Number Seven: The price an item is sold for must be greater than the value it was obtained for in order to achieve a profit. Without profit, businesses will find it very difficult to stay in business.

In the world as we know it, there are very few exceptions to this rule. However, in a world with magic, these rules can be bent and even broken!
For example, in Eragon (the second book, I believe) magic is used to create lace. Because so little energy and labor is used, a mage can create hundreds of times more lace than traditional means, inundating the economy with a sudden supply and lowering the price drastically. In a world where magic is common, lace might have never been expensive in the first place because of just how easy it is to make using supernatural means.

Today, you will address the role of magic in your world's economy in no fewer than two paragraphs of information.
Some resources and items you may wish to consider are:
-labor costs (is using magic cheaper or more expensive than hiring a normal laborer for some tasks?)
-food production (can magic be used to make food faster or using fewer resources, or reduce the labor involved?)
-shipping (the cost of moving goods from one place to another can be considerable!)
-rarity of luxury goods (if goods can be replicated or faked, the value can plummet. Unlimited supply of gold would devalue the metal overnight)
-resources needed to perform magic (if you need wands, the demand will rise, and the price will as well. If you need potion ingredients... you get the picture. If poison ivy was an important potion ingredient, it could go from a weed to a valuable resource overnight)

 

[gamer5]

I will explain how magic works with economy for the steam age of my setting of Aerethia.

labor costs (is using magic cheaper or more expensive than hiring a normal laborer for some tasks?)
Depends. The advent of a simplified way of inscribing magical commands in enchantments, scrolls and the much large availability of magical stones which can be used to create magical items or provide magical energy for spells allows many jobs to be simplified. On the other hand early machines can also be used to the same with steam power so it is dependent on the availability of mages and magical stones.

-food production (can magic be used to make food faster or using fewer resources, or reduce the labor involved?)
For centuries the rarity of Aerethian mages makes using them for farming not desirable and so it remains today. Instead the studies of new methods of using Aerethian flora, many of which have unique and useful properties as well as the introduction of enchanted steel tools and new agricultural methods leads to higher yields per land unit.

-shipping (the cost of moving goods from one place to another can be considerable!)
Steam trains and ships are much cheaper then magic for transportation due to the pure cost in magical energy that a magically power train would require. Trough magically power trams are the usually transportation for passengers inside the largest cities.

-rarity of luxury goods (if goods can be replicated or faked, the value can plummet. Unlimited supply of gold would devalue the metal overnight)
Luxury goods still remain as pricy as they are due to the first law of transmutation magic in Aerethia - the further the magical nature of the two materials the harder is it to transmute one into the other and the other into the first.

-resources needed to perform magic (if you need wands, the demand will rise, and the price will as well. If you need potion ingredients... you get the picture. If poison ivy was an important potion ingredient, it could go from a weed to a valuable resource overnight)
Except for the mages which requite no resources at all, alchemist which use plants of various magical abilities or potentials the main magical resource of Aerethia are the magical stones. This natural containers of magical power are used as a fuel for direct spell chanting, powerful magical items or magical furnaces. Some are crushed into dust and made into ink for creating magical scrolls while others are engraved and used for a variety of uses. The appearance of steam-powered transportation and industrial mining allowed the abundance of magical stones that Aerethia has to be actively used.

But probably the biggest effect that Aerethia felt from magic is the use of engraved magical stones to develop magical counter parts of many modern utilities from speakers to a magically powered internet. Naturally this is best seen in the 20 to 40 levels high skyscrapers which are starting to reach towards the skies of the great cities of Aerethia, everyday life and how the magically powered lights of those cities shine trough the darkness of the night. The number of the changes in the everyday life of humans is numerous and listing every last of them would take time.

The flora and fauna of Aerethia has also been affected with magic with many plants which don't exist on Earth being useful for example as stain removals, cold medicine or energy drinks. Many creatures roam the wild areas of Aerethia which posses magical characteristics or have meat which tastes better then anything that Earth can provide.

To summarize the world, animals, plants and people of Aerethia are deeply connected to magic and trough they can live without magic makes Aerethia unique amongst other steam aged settings. From the mages which can shield whole cities, to the Assassins which use enchanted items and scrolls to aid themselves while approaching their targets to the thousands of small changes which magic give to Aerethia it is a setting that I hope will astonish you in its complexity and unique magical system.