Lessons from Nerddom: Capitalism in Skyrim

Elliot Engstrom
Oct 24, 2012 at 1:45 PM

If you don't know what Skyrim is, then we probably couldn't be friends.  For those of you who aren't as nerdy as me, I'm sorry.  Hopefully even without basic knowledge of Skyrim, some of the economics will still come through.

The Elder Scrolls V: Skyrim was released on November 11, 2011, and is objectively one of the greatest video games ever made.  To those who don't know what it is, you can basically think of Skyrim as a big medieval/fantasy themed roll playing game where you run around and fight dragons and stuff.  (Even though it's so much more than that).

One of the neatest things about Skyrim is that the player is often forced to actually manufacture weapons, armor, home materials, potions, and other items.  In this process of manufacturing goods, Skyrim reinforces one of the basic assumptions on which capitalism is based -- that being that the vast majority of human beings are capable of producing more value than they consume.  One way that inForgedividuals do this is by taking inputs and turning them into outputs.  For example, a bunch of silicon, plastic, and metal in my hands is just a bunch of fairly useless stuff, but in the right hands these things can be made into an iPod -- something very useful.

In Skyrim, one thing that a character can do is become a blacksmith.  As one specializes further and further in blacksmithing, one is able to use more and more complex inputs to produce more valuable outputs, using the same amount of overall labor as before.  Consider the following examples.

Ebony armor is totally wizard.

Skills, including the blacksmithing skill, range in level from 1-100.  A level 5 smith, being fairly low on the scale, can only forge iron armor.  We'll begin with the example of the iron shield.

The iron shield requires four pieces of iron ore and a leather strip.  These inputs, on their own, have a combined value of 11 gold.  However, in the hands of a smith who can smelt the iron ore into iron ingots and then forge the ingots and strip together, these create an output with a value of 60 gold -- an iron shield.  This is because a smith can take these inputs, which have very limited uses, and turn them into something that is more useful, and therefore more in demand.  So the level 5 smith, adding his labor to these inputs, increases their value by 49 gold.

More specialized labor can result in much greater increases in value.  Take the example of the level 80 smith, who can forge ebony armor.  Again, we will use the example of a shield -- in this case an ebony shield.  The ebony shield requires eight pieces of ebony ore and one leather strip.  These inputs, on their own, have a total value of 423 gold.  However, the level 80 smith can forge these into an ebony shield with a value of 750 gold -- an increase in value of 327 gold.

These principles hold true throughout Skyrim -- whether it be in making potions, forging armor, or creating enchanted items -- and they hold equally true in our world.  The reason that the average American today lives in more comfort than the kings of 500 years ago is because of people who have been able to take existing inputs and, by mixing in their skills and labor, create something much greater in value.

This is just one of the many lessons on free markets, liberty, and peace that can be taken from the wonderful world of nerddom.  Be on the lookout for more.

Please Stop. This Article makes it hard to take this Organization seriously, regardless of the message. Also it needs to be said that Skyrim sucks, especially when compared to Morrowind. 


Jared Howell's picture

To each his own, Jared. I don't care about video games, but that doesn't mean others don't -- and we are, after all, a student organization.

Don't let your game preferences impede your tact.

Bonnie Kristian's picture

Fantastic! being a fellow nerd :D have you looked into the Massively multiplayer markets featured in games like eve online and world of warcraft? despite the "scarcity" factor being absent, it is the picture of the free market. per example: My guild mates and i all love economics. so we bought out the entire server's auction house (the game's market) worth of copper ore. We then overpriced it all and ran a copper ore monopoly for days. we then tracked trends in other ores, to see how they reacted to our little monopoly. turns out, people just quit buying our copper ore and then began leveling up their skills, and crafting other things that required other materials. it was pretty fun. unfortunately, you can mine different ores pretty much anywhere, so we couldnt control the entire ore market. Eve Online is incredibly more vast. they have their own banking clans and corporations, security firms for people who seek out the raw material. the ponzi schemes are incredible in that game. I'm not sure where the graph came from but i believe the wealth distribution per population in the free market video games is spread more evenly among the players than our wealth distribution is here in the USA.

DjacksonVB's picture

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jimmy121's picture