A few years ago, I wrote a post on the economics and politics of Harry Potter. In my original discussion, I suggested that opening the Wizarding World (WW) up to the Muggles might not be a good idea. I claimed that Muggles would be structurally disadvantaged because many of their areas of expertise are irrelevant to magic-users, and relevant skills could be learned by Wizards and others.
“The power imbalance between Muggles and Wizards is enormous. Since the WW is structurally limited in how much they can gain from trade within their status quo equilibrium, the Muggles, who have no magic whatsoever, would be automatically pushed to the bottom of heap.
Furthermore, the technology Muggles have developed can be learnt by wizards, particularly Muggle-borns, while Muggles (by definition) will never be able to adopt and use magic themselves, placing them at an inherent disadvantage. Especially since wizards don’t necessarily need technology, (having Skype beats sticking your head in a fireplace, but isn’t a crucial addition) this severely limits the development of comparative advantage, in which Muggle specialization would be potentially valuable. They would be wholly dependent on the Wizards to provide a wide variety of things, from medicine to food, amongst a variety of items which continue to be costly and resource constrained in our world today, particularly in developing countries. The incumbent racial inequality and prejudice that exists in the WW would likely be applied to the Muggles, turning them into the lowest class of citizen, forced to be servile, and at the beck and call of the wizards whose services they seek.”
Here, I want to reassess that argument. While it might be true that Wizards have an absolute advantage in most things, Muggles have a comparative and sometimes absolute advantage in some important areas. Wizards can conjure up or create many items that Muggles require time and resources to produce. However, their lack of magical ability means that Muggles have more intensively developed human capital for making use of the world around them. They may be able to find solutions to problems that magic cannot solve, or can only partially address.
Wizards appear to spend very little if any time learning about non-magical subjects such as math and science, depending on their magic to fill in the gaps. It is thus not surprising why they rely on Goblins to run their banking system, and seems likely that they might fall victim to financial scams. It is also very unclear how they are able to create buildings without any knowledge of simple engineering principles or potions without some understanding of fundamental chemistry. It is also surprising that there are not more serious Wizarding employment deficits. When they do not have a spell for something, or their magic is not powerful enough, they arguably are at a loss for what to do. Muggle knowledge of the makeup of the natural world, strong mental abilities, and ease with technology can serve as a complement to those areas where Wizards are weak.
While Wizards might also learn these skills, their abilities make extreme specialization potentially highly efficient, with magic users focusing on magic relative to other things. Even if Wizards have an absolute advantage in Muggle abilities, the opportunity cost of acquiring such skills is likely to be too high compared with the chance to refine one’s magical abilities. Thus, contrary to my initial argument, the balance of power between Muggles and Wizards need not be so lop-sided. While Wizards can overcome the limits of Muggles’ command of the physical world, they are likely to be deficient in the human capital which Muggles can provide.
Very good. I like the references and tie in to what we are where we are. Each needs the other. In my profession we have leads. We had one who thought he was a dictator. He learned quickly that to be a lead someone must follow. Following is not mandatory.
"Even if Wizards have an absolute advantage in Muggle abilities, the opportunity cost of acquiring such skills is likely to be too high compared with the chance to refine one’s magical abilities."
This is the gist of it, nicely put. Relative, not absolute, prices allow to (mutually) gain from trade.
Re the whole secrecy thing, drawing from another fictional setting: The last time supernatural creatures pushed humanity too far, in plain view, they got their magical powers shoved up their arcane arses and decided to just manipulate from the shadows (World of Darkness, Vampire: The Masquerade).
I am only vaguely familiar with the Wizarding World, maybe Muggles would indeed be servile to the mighty wizards, if the latter didn't overstep it. If they did, at some point masses, weapons and hatred would work "miracles" of another kind. No, trade seems a way better idea.