2.  The Economics of Pokemon
    by William Stone, III
    mailto:wrs{at}0ap.org

Exclusive to TLE

Like many similarly-aged children, my nine-year-old daughter is heavily
into Pokemon.  Being an engaged parent constantly on the lookout for pop
culture that undermines my attempt to turn my children into gun-toting
individualists, I've watched a number of episodes and three of the four
movies that have been released to date.

For the uninitiated, "Pokemon" are "Pocket Monsters,"
the marketing creation of Japanese animation or "Anime."  They
are single super-powered life forms and nominal pet/companions of the
"Pokemon Trainers." The lead human characters of the program are
pre-teens who spend their time collecting Pokemon in the hopes of
ultimately becoming the greatest Pokemon Masters in the world.

I admit it:  I don't really get it.  The animation of the shows is
uniformly lousy (though in this respect it differs little from any modern
animation).  The cultural differences between what constitutes Japanese and
American entertainment is different enough that pacing and characterization
is generally hard for me to follow.  The dubbing is such that all the
characters seem to be speaking at a breakneck pace, communicating complex
thoughts and ideas almost too fast to follow.

My daughter spends an enormous amount of her thankfully ample spare
computing capacity memorizing the names and vital statistics of literally
hundreds of individual Pokemon.  I am consistently amazed at the sheer
amount of detail she manages to keep straight.  She collects Pokemon cards,
games, action figures, DVDs, and other memorabilia at a rate that makes me
glad I'm in the computer science field.

In her particular case, it's not just a marketing success:  she's the
moderator of an online Pokemon forum, and spends time role-playing Pokemon
on AOL Instant Messenger.

Thank goodness for broadband Internet.

Again, I don't really get the show at all.  I understand her zeal: when I
was her age, my parents must have been equally mystified by my ability to
memorize Star Trek trivia.  The frightening thing is that I can recognize
that if I'd have the Internet at age nine, no doubt I'd be doing exactly
what she is.

Yesterday, we were making a run to the video store to pick up Episodes IV
through VI of Star Wars and the DVD of the second Pokemon movie.  It seems
my daughter recently discovered the audio commentary on the DVDs, and was
so engrossed that she needed to rent the movies again to listen to it.  On
the way, she was reiterating some Pokemon trivia, and I was listening
politely -- not entirely understanding, but happy that she's happy.

At some point, we got onto the subject of comic books, and how, when I was
her age, comic books were only a dime.  This confused her, as it often
does, as it doesn't make any sense that they could cost so little forty
years ago:  today, the average comic book is at least $2.50.

"Well," I told her, "it's inflation.  Over time, government
makes paper money worth less and less, and when this happens, it looks like
things cost more and more."

Being the inquisitive, intelligent child she is, my daughter naturally
wanted to know how government inflates money.

"Well, first of all, you have to understand about supply and demand.
Do you know what that is?"  She didn't, and for a moment, I wondered
how I would put this in terms she'd understand.  Then a flash of
inspiration hit me:

"Well, think about your Pokemon cards.  Some of them are very rare and
some of them are common, right?  Give me the name of a rare one."

"The Zapdos Holographic card," my daughter answered instantly. 
"You can NEVER find one of those."

"All right, how about a common one?  Something you get almost every
time you open a pack of cards?"

"A Staryu."

"Okay, now suppose you have a Zapdos Holographic card and I said to
you, 'I'll trade you a Staryu card for your Zapdos Holographic.'  What
would you say?"

"I'd say, 'No way, are you crazy??'"

"Suppose I offered you fifty Staryus.  Would you trade me then?"

"No way!  I can get a Staryu in any pack.  Zapdos Holos are really rare."

"Exactly," I explained.  "That's supply and demand.  There
are very few Zapdos Holo cards, and lots of kids who want them.  The fewer
there are of something and the more people who want them, the more valuable
they become.  The supply of Zapdos Holos is small, and the demand for them
is high, so they're valuable.  The supply of Staryus is high and the demand
is low, so they aren't valuable."

That clicked, and she understood, but didn't get how this related to inflation.

"Ok, you know gold is valuable because it's rare -- supply and demand
again:  there isn't much of it, and lots of people want it.  You can't
really make more of it, because it has to be found, so its value doesn't
really change.

"Now, is there anything at all rare about pieces of paper?"

"No, that's everywhere."

"Right -- paper isn't valuable at all because there's lots of it and
not that many people want paper.  Now, here's where it gets complicated:

"Way back when the government first started printing money, the money
was a certificate.  If you had a dollar bill, you could take it to a
government bank and exchange it for gold."

This suitably impressed her.  She was not, of course, aware that paper
money ever had any intrinsic value.

"Ok, now we know the amount of gold in existence doesn't change very
much, so imagine you had a big bank vault with five hundred pounds of gold
in it.  You start issuing certificates for that gold:  every certificate is
worth a pound of gold.  How many certificates could you print?"

"Five hundred."

"Exactly," I said.  "And what happens if you print five
hundred and one?"

"You don't have enough gold.  People could start asking for gold, and
you'd run out."

"Right!  Now, as long as the government's paper money was actually a
certificate, they couldn't print any more of it than there was gold.
Because people in America might start asking for the gold, the government
might run out if there were too many certificates, and people would get
angry.  Does that make sense?  So when paper money is a certificate for
gold, it's stable.  It will be exactly as valuable as the gold it can be
redeemed for."

Again, that made perfect sense to her.

"All right, so here's how government screwed it up and caused inflation:
 
"Back in the beginning of the 20th century, the people in government
said, 'You know what, this whole gold thing is inconvenient.  Let's just
use the paper money and forget about the gold.'"

This puzzled my daughter.  "Why would they do that?  The paper
wouldn't be worth anything, by itself."

"You're right about that -- the paper is only worth something if
people BELIEVE it is and act like it is.  It's not like gold, which is
worth something because of supply and demand.

"As to why they did it, well, it was basically because they thought
they could control what people did with the money easier with paper than
they could with gold.  What really happened was they made a huge mess of
things.

"See, as soon as it didn't matter any more how much paper the
government printed, they started printing tons of it.  When the paper was a
certificate for gold, they had to worry that people who show up and want
their gold.  When the paper was just paper, they didn't have any reason not
to print money.

"What they basically did was take a Zapdos Holographic card and turn
it into a Staryu by printing up lots and lots of them."

"But ... that's STUPID!  Why would the government do that to its
money? It doesn't make sense!"

At this, I had to smile.  "They did it over a long period of time, and
at first very slowly.  As an example, comic books were a dime for at least
the first ten years of my life.  Then, as government printed more money, it
became a quarter.  Then fifty cents.  In the last ten years, it's gone from
a dollar to over two-and-a-half dollars.

"And the reason they did it, honey, is because the people in
government don't understand what you do about supply and demand.  All they
want is power, and they see controlling the money supply as a way to get
it. They're not interested in what makes sense or what's best for people,
they're just interested in having something they can control for its own
sake.

"There's not a government in existence that, when given the power to
print money, hasn't printed it until it was worthless.  Government should
never have the power to print money, because it can't be trusted with that
power."

Now my daughter was truly mystified.  "Why don't people stop them? 
Like vote for people who won't inflate money?"

"Most people don't know about supply and demand."

"Wait -- they don't know about supply and demand?!  But I know about
it, it's not that hard!"

"Well," I admitted, "you now know more about supply and
demand than the average high school graduate.  Remember that the same
people who want to control how people spend money also want to control what
they learn.  If they don't tell you about supply and demand in school, that
means no one will have the knowledge to try and stop them from inflating
money.  So I guess you can imagine why they don't want people to learn
about supply and demand."

"But that's not nice!"

"Well, unfortunately, honey, 'nice' isn't something government is."

At which point, we arrived at the video store, prompting my daughter to
observe, "Wow, Daddy, that was good timing!  You finished that up just
as we got here!"

--
William Stone, III is a computer nerd (RHCE, CCNP, CISSP) and Executive
Director of the Zero Aggression Institute (http://www.0ap.org).  He seeks
the Libertarian Party's nomination for the 2004 Senate race in South
Dakota.

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