As a serial maniac of the Star Wars saga I am fascinated by the complex economic and social structure of the Republic first, and of the Galactic Empire after. It is a world of pure fantasy, but with strong traits of realism: analyzing it between the serious and the facetious can be instructive even for those of us who live in the economy of the real world. There is no shortage of sinister analogies, at least for me.
At the conclusion of Episode VI "Return of the Jedi" we left the rebel troops celebrating their victory over the Galactic Empire, brought to the ground by the destruction of the Death Star II during the battle of Endor, as well as the death of Jeynes /Anakin Skywalker and Palpatine/Darth Sidious.
It can therefore leave a little perplexing to observe that – from what we have seen in the trailers of Episode VII: The awakening of the Force” – several planets are not doing very well. The point is that, having fallen into ruin the Galactic Empire, the entire Galaxy has paid the consequences. Including the victorious Rebel Alliance. Typical of complex systems.
BUT HOW DID IT ALL GET TO THIS?
The fault, as often happens, lies with the economists who support governments and their poor ability to handle the risks and probabilities of extreme events… Let's see why.
The heart of the galactic economy is given by interplanetary exchanges, leveraged by the technology that allows hyperspace travel. In the world of Star Wars the credit system is highly developed (the "Galactic Credit Standard" of the Republican era, renamed "Imperial Credit" after the advent of the Empire). The bureaucracy is also enormous, as can be understood from the size of the Senate, and so is the military machine.
The system is vast and complex not only geographically, but also socially. This can be inferred from the following graph, which represents the network of characters from the Star Wars saga (up to Episode VI) using the network analysis technique.
Alongside the bureaucrats and the military, there are droids, essential for the economy and defense, some residual pockets of slavery, as well as merchant corporations - without forgetting the fundamental role for a long time exercised by the military-monastic order of the Jedi Knights.
The taxes necessary to support the administrative and bureaucratic machinery of the Empire are high, and few resources are directed towards the development of the planets.
This causes poor diffusion of well-being and growth of discontent among the population. This, in turn, fosters social revolt. For example, Luke Skywalker joins the Rebellion (editor's note: fact that leads to the destruction of the Empire) because he is tired of dealing with agriculture in an arid, rural planet with a stagnant life, which could have been made fertile and economically sparkling thanks to the powerful available technology.
A Keynesian economist would have understood the need to invest in infrastructure and public goods in a widespread way, with effects on large portions of the Galaxy, stimulating the GGP (i.e. the Gross Galactic Product) and well-being, thus making taxation more sustainable both economically and psychologically necessary to keep the bureaucratic and military apparatus alive. (The opposite of what is seen in Greece with the application of the Troika-philosophy).
Instead the autocratic Empire prefers to invest large sums of money in a concentrated manner in two military projects of enormous proportions, the Death Star I and II, and in the production of clones. The logic of pure intimidation in order to maintain power. In fact, the idea is to terrorize the population, at the cost of destroying entire planets with their resources and their economic potential, instead of creating consensus with long-term well-being.
The construction of the Death Star I and II, as well as the production of clones, thus absorbs enormous resources from the banking and financial system of the Galactic Empire, as highlighted by a very amusing study by Prof. Feinstein of Washington University of St. Louis (one even crazier to SciFi than yours truly), creating a huge systemic risk. It is the typical logic of the dictator badly advised by economists who are not accustomed to dealing with chance and who therefore do not weigh the effects of the improbable.
Basing everything on the Death Star turns out to be the typical statistically non-robust strategy, which exposes the entire economy to the risk of highly improbable, but devastating events. And indeed, the destruction of both battle stations is highly improbable. Two tail events, two "Black Swans", as Nassim Taleb would say, occurred to a marvelously fragile system, when the Empire should have aimed for an anti-fragile system.
Unfortunately, as Feinstein points out in his study, the destruction of the Death Star II and the Empire bring the entire galactic banking and financial system to its knees: it is a default of stellar proportions. The ensuing systemic crisis devastates the financial and economic system. An enormous bail-out would be needed (15%÷20% of the GGP, according to Feinstein). But the Rebel Alliance is pretty battered financially, so theirs is a pyrrhic victory.
So, ultimately, the Galactic Empire was destroyed not so much by the return of the Jedi, but rather by Emperor Palpatine and his team of economic consultants with inflexible macroeconomic doctrine, with little statistical sensitivity. And the consequences are also reflected decades later, as felt in Episode VII: “The Force Awakens”.
Attachments: Source: AdviseOnly.com
