Would Wizards Destory The World? Economically Speaking.

In every fantasy story, there’s that one moment where a wizard waves their hand and turns thin air into gold. It’s pretty miraculous—instant wealth, infinite resources, the end of poverty! But if you stop to think like an economist for even a minute, it’s a nightmare waiting to happen. What happens to markets when scarcity dies? What happens to value when anyone can print money with a spell? This is the thought experiment we’re diving into: a world where magic doesn’t just bend reality, it breaks the rules of supply and demand. Now get ready for this…

Imagine an economy where a wizard can conjure gold (or really anything) with a snap of their fingers. At first, that sounds like free wealth…until you remember how money actually works. In economics, the value of currency depends on scarcity and stability. If gold can be created endlessly, the money supply skyrockets while real goods—food, land, labor—stay the same. According to the Quantity Theory of Money (MV = PY), when the “M” (money) side grows faster than “Y” (output), prices soar. In other words, the realm experiences magical hyperinflation. Merchants double prices overnight, nobles hoard enchanted coins, and entire markets collapse under too much abundance. Gold quickly becomes worthless, and kingdoms are forced to adapt.

The first fix would be to outlaw conjured coins as legal tender. Only the royal mint’s “certified” coins, probably sealed with anti-duplication enchantments of the sort, would count for taxes. That creates a split economy: official gold backed by the crown, and conjured gold flooding black markets. Here, Gresham’s Law comes alive: bad money (conjured) drives out good (certified). Honest coins disappear into vaults, leaving merchants trapped in counterfeit chaos. As such, the most probable thing that’ll happen is that rulers will respond by switching to fiat money. These are notes or tokens whose value comes from government decree, not metal content. This is the system we use today.

And as real scarcity shifts away from materials, the new constraint becomes mana, or the magical energy required to make anything at all. Conjuring isn’t truly free: it costs energy, time, and attention. That’s where classic ideas like opportunity cost and diminishing returns sneak in. A wizard has to decide whether another hour of gold-making is worth the exhaustion it brings. Mana becomes the new oil, a limited, tradable resource that powers the economy.

Long term, power will concentrate in the hands of guilds, or magical monopolies that hold conjuring licenses and lobby rulers for favorable terms—pure regulatory capture. That is, the rich controlling policy to protect their position. Also, everyday traders face another problem: information asymmetry. You can’t see inside a spell, so you don’t know if your bread was safely conjured or laced with side effects. As such, shady mages will undercut honest ones, which is literally a textbook case of adverse selection, and to restore trust, guilds would have to introduce certifications, audits, and magical “warranties.” Lastly, spells themselves would likely become intellectual property, guarded like trade secrets or patented like technology. The most valuable assets aren’t physical goods but the formulas and runes that make them.

Governments will still try to control inflation. They might impose price ceilings on essentials like bread, but that leads to shortages and black markets, where real prices, or shadow prices, reflect true scarcity. Smarter rulers would subsidize mana instead of fixing prices. Trade between regions would evolve around comparative advantage: one city perfects spell design, another certifies safety. Systemically, banks would stop hoarding gold and start dealing in mana contracts, tax claims, and spell patents as collateral.

By this point, the value itself has changed. In the new economy, trust, rules, and reputation matter more than metal. Economists would say the world has shifted from a resource economy to an information economy. A merchant’s seal, a guild’s mark, or a bank’s enchanted ledger becomes the real currency because it signals credibility. Even in a world of infinite gold, scarcity survives, even if it’s now in energy, knowledge, and belief.

So if you hand a world to wizards, you don’t kill economics. You just move the battlefield. Scarcity shifts from metal to mana. Value shifts from stuff to signals: trust marks, audits, ledgers, and the promises people believe. The winners are not the loudest conjurers but the builders of rules, reputations, and safe, reliable systems. In the end, all currency still needs limits, and a rule-maker to keep things in check.

If you’re writing about this world, that’s your drama. A king fights “spellflation” with audits. Guilds duel over patents for bread spells. The economic theory doesn’t die because gold is easy. It evolves. It’s a universal fact.