Economics of Ice and Fire, Part 4: The Link Between Bad Weather and Economic Equality

Ned Stark’s subjects enjoy high living standards when they aren’t freezing to death.

Courtesy of HBO

This is part of a series of posts about the fictional economy of George R.R. Martin’s Song of Ice and Fire, so nonfans may wish to ignore it, but the principles are applicable to the real world. Post 1 argues that House Tyrell is in fact richer than House Lannister, while Post 2 considers the Lannisters’ investments in sovereign debt. Post 3 concerns the market for dragons.

Residents of the contemporary United States are no strangers to income inequality, but the dynamics surrounding inequality in Westeros are quite different. Here in the present day, we see quite a lot of inequality in what amounts to labor compensation. If you work at the Olive Garden, you don’t get paid very much. But if you work as CEO of Darden Restaurants, you get paid millions. Because a lot of executives are “incentivized” with stock options and because a lot of hedge fund types have found a way to exploit a tax loophole by pretending their compensation is capital gains, a lot of this income ends up coming in the form of asset prices. But it’s still basically a difference between people who earn princely sums doing their jobs and people who earn small ones. In Westeros, things are quite different. In Westeros, to be rich means to be a land owner. To work for a living means you’re poor and low status. There are few opportunities for upward mobility, and those that do exist essentially involve persuading large landowners to give you gifts (Ser Davos) or exploiting their trust through corruption (Lord Baelish).

This is because Westeros is essentially a Malthusian economy. But combine the Malthusian nature of the Westeroi economy with the unusual climate patterns and you get the interesting consequence that the level of income inequality is systematically correlated with the weather. The further north you go, the more egalitarian the economy.

The way a Malthusian economy works is as follows: When a laborer combines his efforts with the natural potential of land, some economic surplus results. The surplus is divided between the worker and the rentier. As population grows, bargaining power shifts away from labor and toward land owners. What’s more, high labor incomes directly lead to rapid population growth. Consequently, absent a plague what you swiftly get is a large population of impoverished peasants living at the level of bare subsistence while landowners live it up. Strong social norms that limit reproduction can boost living standards by checking population growth, but beyond that there’s simply not much that can be done. This is why the industrial revolution was such an epochal event in human history—it was the first time living standards could rise on a sustained basis without simply being eaten up by population growth.

In Westeros, however, the sporadic recurrence of years-long winters means that northern latitudes are getting hit by plague a few times in every generation. When winter arrives, living standards are going to plummet below subsistence levels and lots of people will die. That means that come springtime, the diminished population of workers is in a position to earn high wages compared to their Southron brethren. Over the course of a years-long summer, the workforce will grow and wages will fall, but summers don’t last long enough for the population to grow all the way back up to the levels where landowners are expropriating all the surplus. The upshot is that the sustainable level of population density in the North is relatively low, and thus living standards for those who don’t freeze to death are high compared to what you see further south. The converse of this is that northern landowners—from the Starks on down—won’t be as wealthy as their counterparts on the other side of the Neck. It’s no coincidence that House Stark is more populist and less aristocratic than the Southron houses. They like to attribute this to the greater ethnic and cultural influence of the First Men, but that likely gets the causation backward. The chivalrous norms of the Andals simply find more fertile soil in the literally more fertile soil of the south than in the harsh terrain of the north.

Of course, north of the Wall you get an even more extreme version of this among the so-called Wildlings. The level of population density is so low here that there are no wealthy landowners, and thus no lords and no kings. That’s not to say there’s no political organization whatsoever. But political leadership in the Far North is a continuous daily referendum. There’s nothing really stopping someone from just wandering off to some other plot of land.