What Monopoly Can Teach Us About the Economy

May 22, 2014 at 8:28 am 2 comments

There have been a lot of books written over the past five years arguing that the growing inequality and economic stagflation in this country is exposing a fatal flaw in the capitalist system (One particularly well written and radical critique I am making my way through is The Great Financial Crisis:  Causes and Consequences by John Bellamy Foster and Fred Maddoff).  The argument boils down to the belief that as people get richer, and companies get larger and more efficient, they have less of a need to invest the money back into new employees and new services.  They point to the record number of long-term unemployed and the historically low workforce participation level as evidence that the linkage between capital accumulation and jobs has frayed.  It’s a reasonable argument, until you play Monopoly.

As someone who believes that capitalism, while imperfect, is the best economic system around because it comes closest to harnessing human nature for the benefit of the larger society, I actually think there is a lot you can learn about people and the economy from playing the board game Monopoly.  For instance, anyone who has played the board game knows that there is usually one participant who plays with such intensity that he has clearly confused the colored dollar bills in front of him for real currency.  Then there is the peacemaker who just wants everybody to have fun.  She makes trades that spread the wealth and make the game more competitive while infuriating the cut-throat investment banker want-to-be.  These peacemakers are your future credit union executives.  There is also, as Jerry Seinfeld has pointed out, the future lawyer, the one person who has read the instructions on the inside of the box, thereby annoying both the investment banker want-to-be and the peacemaker since he keeps them from doing perfectly logical things that are not permitted by the rules..  The game is usually decided  by the most casual of players who ultimately has to make trades with either the future investment banker or the future credit union executive.  This person ultimately wants to have as much fun as possible playing the game without wasting the entire day.  This person represents America’s middle class.  .

I am waxing philosophical about Monopoly because this week I attended one of my favorite events in credit union land, SEFCU’s Annual Fundraiser for the Center for Disability Services. The fundraiser is a Monopoly tournament.  Not only does Monopoly ultimately reflect the mix of people and personalities that make the economy go, but its history demonstrates why the theories predicting its demise ultimately fall short.  You see, according to the economic historian Niall Ferguson in his book “The Ascent of Money,” the game we know as Monopoly was first devised by Elizabeth Phillips in 1903 and called The Landlord’s Game.  Phillips was  “a devotee of the radical economist Henry George.  Her utopian dream was of a world in which the only tax would be a levy on land values.  The game’s intended purpose was to expose the inequality of a system in which a small minority of landlords profited from the rents they collected from tenants.”

The original game had a rectangular path and Go To Jail corner, but did not allow participants to build hotels on property.  It was further popularized by a couple of university professors at the Wharton School of Economics and Columbia University who apparently wanted to demonstrate to their students the follies of capitalism.  However, an unemployed plumbing engineer by the name of Charles Darrow “saw the game’s commercial potential.”  He redesigned the board so that each property square had brightly colored bands and since Darrow was good with his hands, he was able to make games that included houses and hotels with which property owners could build wealth.

Here’s the part of the story I really love.  In 1934, with the Depression still going strong, he convinced Philadelphia Department Store owner John Wanamaker and FAO Schwartz in New York City to buy his game for the 1934 Christmas Season.  The game was so successful that by 1935, Parker Bros bought him out.  In other words, human ingenuity had converted a parable about the defects of capitalism into one of capitalism’s great success stories. . .and now you know the rest of the story,

There’s a lot that is wrong with the economy, but one of the many things credit unions and banks have in common is a belief that if enough individuals are given the ability to save and build their capital and invest in their ideas, they can be successful and everyone can benefit.  We can all disagree about the role that government policy and regulators should play in the economy, but let’s not forget that capitalism still is, like Democracy, the worst economic system except when compared to all others.

On that note, your faithful blogger is not posting tomorrow and will be back on Tuesday with another fun-filled edition.  Enjoy your long weekend.

Entry filed under: Economy, General. Tags: , , , .

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2 Comments Add your own

  • 1. Marie Betti  |  May 22, 2014 at 9:11 am

    Thanks for the delightful blog
    on a game that my family holds near & dear…enjoy your long week-end also!

  • 2. prezzi pazzi trucchi  |  June 12, 2014 at 2:07 pm

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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