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This question is tangent of this one. While reading about the world-building that went into the Mistborn series I began to reassess my own world-building, specifically the effects of magic on the economy. I realized that the magical material in my setting would be more valuable than gold and oil combined, because it is the only way to produce items endowed with magic, which—unlike the talent for being a mage—can be mass produced.

The magic material is a living material that appears crystalline. grows slowly by leeching nutrients the ground. In addition to being magical this material is a desirable additive in both metal work and ceramics. Because of its light weight, strength and flexibility.

My question is this: The nations in my world base their economies on a rare but renewable commodity. What are some of the effects that it has on their cultures and policies?

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My question is this: The nations in my world base their economies on a rare but renewable commodity. What are some of the effects that it has on their cultures and policies?

This is not in fact so very different from what we have today. In the end all economies are based on commodities. Note that is plural. An economy cannot function (for long anyway) if it is based solely on a single commodity. Diversification is very important to domestic long term stability.

It all comes down to wealth and good 'ol supply and demand. An economy based on a single export...oil for example, which makes a good modern example. Nations that rely on a single commodity are in significant trouble should that commodity fall. Oil and the 1980's

If this is the single most valuable thing on the planet and it is always in demand (consider that someone will try to come up with an alternative) then you have to ask some questions:

  • How much is there?
  • How fast does it grow?
  • Can it be harvested to extinction?
  • How evenly distributed are the crystals globally? (and locally within nations for example)
  • Can anyone effectively use it or does it require specialists?

Depending on your answers to these questions it can impact many things. Mainly you need to think about how it impacts the following:

  • Wealth distribution, concentration will determine who has how much. Notions of land ownership could be interestingly affected with something this valuable.
  • Quantity. If this is a very limited resource then wealth will be consolidated. That happens to be true in our world as well but if this item is more rare it will be an even smaller group of wealthy folks.
  • Power. Arguably whoever has this stuff can manipulate world politics. This happens today with fuels and some other natural resources. Wealth = Power in many situations, if what gives you wealth also grants you personal magical power you are rich and powerful...and probably evil...probably.

A system like this can lead to a whole host of differences in the world. Perhaps it has led to the development of an all powerful magocracy (I made that word up) that rules the world with an iron fist. Perhaps the crystals are strictly controlled and used only for public works...I think the sky is the limit for how something like this alters culture and social policies but the impacts to the global marketplace are probably not a big change from how the world developed in reality. People will still need other stuff...you can't eat these crystals...or can you?!

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So. Currency. I think I may have skimmed over the currency aspect as the question in your OP and the title differ slightly in context (economy versus currency).

I am going to use sugar as an example of a renewable commodity. This is a chart from 1950 to 2015 prices from Trading Economics

enter image description here

You notice that there are many rapid swings in the value of sugar. This would wreak utter havoc on an economy mainly because it makes gauging the value of things very difficult. I will not claim that the value of gold does not change, it certainly does (see for yourself on the site). But gold is not impacted by weather. Sure it's value changes BUT it is not as susceptible to rapid changes in value.

The impacts would mainly be a greater potential for rapid shifts in the value of your currency. This makes the currency unreliable, meaning many may not even be willing to use it rather going with bartering or unofficial currencies...gold coins maybe ;)

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  • $\begingroup$ No the crystal can't be eaten. The crystals do the job of Lyrium(Dragon Age) but grows similar to Tiberium(Command&Conquer). It's good know that i was on the right path development wise. Because magocracies monopolizing the crystals for use in state approved projects, is exactly what occurred to me. Would it make since for the nations to back their currencies with the crystal. It's to precious as a utility to use as common currency. $\endgroup$ – Trismegistus Mar 3 '15 at 14:23
  • $\begingroup$ @Trismegistus It wouldn't likely make a good currency backer. Yes the item needs to be rare, valuable and stable but if it is too rare that would end up leading to instability from time to time (most likely). $\endgroup$ – James Mar 3 '15 at 14:35
  • $\begingroup$ Then the growth rate and abundance are going to need to be adjusted so that's it's rare enough to be precious but not so rare as to be unreliable. $\endgroup$ – Trismegistus Mar 3 '15 at 19:59
  • $\begingroup$ @Trismegistus then keep in mind that if the rate of growth, or the "crop" volume varies in quantity or quality from harvest to harvest that will impact your currency. $\endgroup$ – James Mar 3 '15 at 20:18
  • $\begingroup$ Yeah, quality and quantity of the crop do very. You said this crystal would make a poor currency;how and why is that. And how do i demonstrate it intrinsic value,it's indispensability to the economy. My initial idea was a crystal-standard economy. $\endgroup$ – Trismegistus Mar 3 '15 at 21:27
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It would probably be closer to an oil based economy than a gold based one. This is because most of it's 'value' is in it's use. if you don't use oil to make things with it, it isn't very valuable. So this magic would be 'collected' for use and trade, but even though it is'renewing' it is also being used (disappearing).

Kind of like the cocoa bean as currency someone else recently mentioned. It is something that would have to be common enough to warrant being used as currency but no so much as to be commonplace. You don't want it as common as sand, but more common than uranium deposits.

It would probably be a fairly reasonable economy, more like a barter system, since the thing being used for currency is the value, it's more 'real' than gold, since gold's primary 'value' is in it's rarity and 'prettiness'.

EDT: One large consideration would be how 'evenly' spread the crystals are. if one providence has a lot and some or most don't then a small minority could be filthy rich and control a lot of the power. It would also likely be the 'power-base' or capital of the country.

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There'd be no effect - the government would create fiat money and not "back" it with anything. Much like today's money, which gains its value from the government and its use as a medium of exchange.

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  • $\begingroup$ Or, for an easier to understand answer: the effect that the resource had on the economy would be the same as the effect that oil has on ours (minus the idea of 'peak oil'). As supply and demand fluctuated it would affect the economy, but no more than you would expect with any other important commodity. $\endgroup$ – David Rice Mar 3 '15 at 23:17
  • $\begingroup$ My initial idea was that the governments use the crystal to back their actual currency. Creating a crystal standard. $\endgroup$ – Trismegistus Mar 4 '15 at 17:55
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    $\begingroup$ And if they did, the effects wouldn't be significantly different from having a precious-metal backed standard. Look at the US's economy through the gold rush(es), and the late 1800's and you'll get a sense of it. It's not significantly different from fiat money unless there's a big change in the world-wide supply or demand of it. $\endgroup$ – David Rice Mar 4 '15 at 19:26
  • $\begingroup$ The thing that made me curious, is the fact that the crystal isn't just pretty. It's indispensable in this world, so I'm wondering left. Could the currency really be backed by a substance that you are actively using industry! If so would a percentage of a nations crystal be held in reserve to back the currency. $\endgroup$ – Trismegistus Mar 4 '15 at 19:31
  • $\begingroup$ @Trismegistus - As far as I know, it's generally accepted that a currency based on a commodity which has utility is in trouble: specifically deflation. Examples include post WWII use of cigarettes and nylons. If the commodity (crystals in this case) have a fixed rate of production, then the use rate is limited to the production rate. Otherwise, prices begin to fall (since there's less currency to buy with) and any sort of financially sophisticated economy starts to suffer. Finding a way to increase crystal production is analogous to New World gold production (1500s) - inflationary. $\endgroup$ – WhatRoughBeast Mar 17 '15 at 20:42

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