Seen on an International Political Economy quiz:
The world of Middle-Earth has become largely peaceful, and international trade is growing. The Shire, Gondor, and Mordor
are three countries in Middle-Earth. The Shire is abundant in land and scarce in labor and capital; Gondor is abundant in labor and capital and scarce in land; Mordor is abundant in labor and scarce in land and capital. Some of the products these countries trade include Longbottom leaf (produced intensively with land), mithril chain-mail armor (produced intensively with labor and capital), and raw iron ore (produced intensively with labor).
Questions:
- If you had to guess, which product(s) do you think the Shire imports, and which product(s) do they export?
- What would you predict to happen to the prices of Longbottom leaf and mithril chain-mail armor in Gondor after Gondor opens up to trade with the outside world?
- In Mordor, owners of which factor(s) of production tend to support free trade in the long run, and which factor owners tend to support protection instead?
First commenter to get all three answers right wins Commenter of the Day with a nice, big, fancy, front-page post and everything.
UPDATE FROM EDITOR: See here for the Answers and Winner.
PILEUS 
Obviously a trick question, since only elves make mithril.
And don’t forget Dwarves. But that was in the Third Age, and I like to think that before the Elves all left, they passed along some of their lore to Arwen’s folk. 😉
I knew I was in trouble making a snarky comment.
Dwarves make mithril mail, and dont live in mordor, gondor, or the shire. Furthermore, at the end of the war of the ring, Gondor was united with Rohan dynascially, so it has plenty of land and labor given the supply of horses from gondor. Professor Sorens fails Middle Earth History and Geography.
LOL… I was really thinking about Minas Tirith specifically as being scarce in land, but I had to make some compromises for student comprehension.
1. The Shire exports Longbottom leaf and imports the other 2… with a particular import/export company, Gandalf Inc, involved heavily in the market.
2. Longbottom leaf prices will drop due to increased availibility, and Mithril prices will rise slightly very slightly. The only slight increase would be due to the reduced size of the Shire’s inhabitants using smaller armor, and the lack of Mordor’s use/need of Mithril armor.
3. Mordor’s ore factories are heavily unionized by the orcs, so despite the abundant labor, the resulting expection that they would be for free enterprise is mistaken, as they still want to control the market and production to protect their union wages and are anti-competition. Mordor’s poor leaf production, and even poorer Mithril production (see http://lotr.wikia.com/wiki/Mithril ) would tend to support protection of those industries as well. Since Mordor is a fascist economy, controlled by Sauron, protectionism is the general trend.
[response to Soren’s facebook point about the difference between factors and industries]
As Mordor is a fascist economy, with all of the factors of production state controlled, there is little difference between the factors of labor/capital/land and the industry factories themselves, so protectionism for all factors, though as discussed above, once the One Union is busted in the fires, that might change, with free labor seeking to open trade with other markets.
OK, Seth, your answer with clarification comes very close to being 100% right on all three questions. There’s a little flaw in your answer to #2, however – mostly in the logic rather than the answer itself. I’ll stress again that the question is about changes in the prices of leaf and mithril mail in Gondor – not globally.
Hmm? Rewritten for clarity:
The price of leaf in Gondor will drop (as stated) due to the imports, and Mithril armor in Gondor would increase due to exporting some of that armor, except that hobbits need custom (small) armor sizes, and Orcs in Mordor tend to not like Mithril fashion, so for the average person in Gondor, Mithril prices will rise slightly but not as much as if regular sized Mithril armor was in high demand in the other 2 nations.
What’s wrong with my logic? (grin)
OK, I misunderstood what you meant. Yep, you got it! 100% right.
1. One might expect the Shire to export longbottom leaf. And to import mithril mail and iron ore.
2. Longbottom leaf prices would fall; domestic prices of mithril mail would rise.
3. Each factor owner will support protectionist policies as a factor owner, but support free trade in factors believed to increase the returns on his factor. Therefore, we might expect that:
-Landowners would restrict foreigners from owning land. But they would probably like free trade in both capital and labor.
-Capital owners would restrict free trade in capital. But they would probably like free trade in land. They may be largely indifferent to labor, but if capital use requires skilled labor that is unavailable in Mordor, they may support free trade in labor generally.
-Labor is harder. Labor would like to restrict who can labor to keep wages up. Labor might also oppose free trade in capital–if they believe that using that capital reduces wages. Labor would probably support free trade in land ownership as more land ownership (by more people) probably means more land in production, means a greater demand for using labor.
This answer (and mine) illustrates why you hire lawyers like Brandon for dealing with the facts, and hire computer geeks like me for creative problem solving.
Here’s my shot
1) Import-chain mail armor
export-long bottom leaf
2) The relative price of longbottom armor decreases
The relative price of armor increases.
3) abundant labor supports free trade
Scare land and capital are protectionist
You got it, but Seth got it first. 🙂
We need some institutional context:
http://superiorw.blogspot.com/2011/09/institutional-economics-of-lord-of_14.html
More institutional context of the Middle Earth:
http://superiorw.blogspot.com/2011/09/institutional-economics-of-lord-of.html
http://superiorw.blogspot.com/2011/09/institutional-economics-of-lord-of_12.html
The hobbits can’t import mithril armor, it’s too expensive. One set of mithril rings is worth more than all the land in the Shire.
I assume the major exports of the Shire would be
i) Grain, since they seem to have a surplus, and
ii) Clocks and pocket-watches since they seem to be the only people in Middle-earth to have mastered clockwork.
Heh Middle-earth does not compose only of Gondor, Mordor and Shire :). But thinking about it the economies of various lands in Middle-earth are quite interesting. The problem with trade is very long distances, little contact between far flung corners of the ‘civilized’ realms, Dwarves naturally are the proxy “travelling, labouring and trading about the lands” since time immemorial. For thousands of years in Middle-earth Dwarves were hardy travellers engaging in commerce. Naturally each realm or land has it’s own economic traits, depending on local conditions and resources available. Shire is primarily agricultural land, quite fertile (it is said that in the time of North Kingdom of Arnor kings had on these lands before they became Shire, many fields, woods, vineyards), so even after Hobbits took over the land, they maintained it’s fertility with skilled agriculture, so their export would be all kinds of food and agricultural products (so all sorts of grain: wheat, barley, and of course malt, then certainly meat production as the lands of Shire would have much room for herds of cattle and other domestic animals, and so that means other products, like milk, cream, cheeses, then alcoholic beverages, like beer: mainly ale, porter, but wine as well “bottles of Old Winyards”, “strong red wine from South Farthing” etc.). The buyers of that food would be mostly Bree-landers as closest neighbours and Dwarves especially of Ered Luin, since Dwarves usually prefer to trade for food and not grow it themselves. But when it comes to Mordor, I think it actually has everything the capital (there’s enough treasure in Mordor taken as a loot, or paid in tribute from subordinate and conquered lands, and there’s even some amount of mithril the Dark Lord gathered, Orcs even paid tribute to Sauron is form of mithril when they plundered Moria), there’s enough land, whole region suitable to agriculture in Nurn, with great slave-worked fields, and a huge Lake Nurnen/Sea of Nurnen that would provide for fishing, there is enough work force in form of Orcs, Men, either slaves or more willing servants, there are mines and forges, there’s everything. Gondor also seems to have great agriculture and additionally many industries, and specialized craftsmen, the Ered Nimrais the White Mountains are rich in resources, so there would be stone quarries and mines and very skilled metalworkers. The more serious analysis may actually go even deeper :). There’s certainly more to be told.