ECONOMIC CONCEPTS IN MONOPOLY

Recently my economics classes took a journey down Boardwalk and took the sights in at Park Place. In other words, we played Monopoly. You know, the game? Not just for fun, mind you. Rather, we played in order to apply our vast economic knowledge in a way that was a bit different.

What is economics? Most would say that it deals with money, which isn’t wrong, but it also isn’t right. Economics really is about incentives: unlimited wants satisfied by limited resources. Why you got out of bed this morning, why you brushed your teeth, why you ate a Pop-tart or didn’t eat at all—that is what economics is about. The old age, the more you have, the more you want rings true. Seriously, how many pairs of jeans with rips and holes in them does a high school sophomore need?

So, we have Monopoly. A classic board game created on tablecloth in the early 20^th century. Obviously, the term “monopoly” is economic in nature: to control all aspects of a market and make every one else pay up to you. Real monopolies exits: in school the teacher monopolizes most classes. Of course the masses—the students—don’t necessarily like this. That is why monopolies are considered “un-American” or “anti-capitalist”. But, beyond the obvious, why is Monopoly, the game, an economic tool?

Most countries today are market economies. Actually, they mix the basic three: traditional (like it always has been done), command (pure government control), and market (buyers and sellers setting prices). Monopoly IS a market economy: everyone is a buyer and a seller—auctions for property, trades for “get out of jail” cards—if the price is right, the deal goes down. Wouldn’t it be nice if grades were like this? There are buyers aren’t there? Unfortunately for students, there aren’t many sellers.

The law of demand says buyers want to buy at the lowest possible price. The law of supply states that sellers want to sell at the highest possible price. Where they meet is called “equilibrium”. No one can say, “I paid too much for this.” Why? Simple. You paid for it! If you thought the prices was too high, chances are you didn’t buy it.

What property is in demand then? Most would say Park Place or Boardwalk due to their inflated prices on the board. However, statistical information and experience would say “not so.” The fact is, if you own one of the red or orange properties, you will more than likely win. Second? Try getting your mits on the green and yellow properties. In other words, you want to “corner the market”—control the corners and you win.

Obviously, this has a lot to do with scarcity. There is a bunch of money but the property is scarce. Unlike shortages, scarce items cannot be replaced or added on. And what is more, this scarcity applies to location as well—just like a starbuck’s or gas station.

So there is a dilemma for the players: I can buy if I have money, but what happens if I use my money for Marvin Gardens (low rent) and don’t have money for Atlantic Avenue (higher rent with more frequent visitors)? There are choices to make. Economists call this “opportunity costs.” Since you choose one thing (Marvin Gardens) you can’t get the next best thing (a higher property or houses). Of course there are other choices in the game as well: do I pick the thimble or the ship? Do I “partner up” with someone or go solo?

A huge part of Monopoly is accumulation of wealth. And, although economics is more about choices than money, money is a key concept as well. Money, in order to be considered “money”, must be acceptable, divisible, and have a store of value. Think about the US dollar: I haven’t had anyone turn it down yet, it is created in increments of 1, 5, 10, 20, 50, and 100, and it is about the same today as it was a week ago. Also, it must be durable, scarce, and portable. That’s why we don’t use fish, or post-it notes. Sure post-it notes are durable and portable, but they aren’t very plentiful, thus lowering it’s value. Fish are plentiful, but will rot over time, smell, and unless you have an aquarium in your trunk, hard to carry around.

Monopoly money is all this. It is accepted in the game, scarce to a point (not as scarce as the property, however), and keeps its value. This type of money is labeled “M1” in economics.

There are dozens of other economic concepts present in Monopoly that I will not go into: risk, entrepreneurship, shifts in demand and supply and so forth. However, the point is this: economics is around us in everything we do. Just think about it: why do you go to school? To your job? Why do you date? All of these questions can be answered through economic concepts.