What Lesson Does Monopoly Teach?

Harper’s magazine, talking to Monopoly champion Richard Marinaccio, writes:

“Monopoly players around the kitchen table”—which is to say, most people—“think the game is all about accumulation,” he said. “You know, making a lot of money. But the real object is to bankrupt your opponents as quickly as possible. To have just enough so that everybody else has nothing.” In his view, Monopoly is not about unleashing creativity and innovation among many competing parties, nor is it about opening markets and expanding trade or creating wealth through hard work and enlightened self-interest, the virtues Adam Smith thought of as the invisible hands that would produce a dynamic and prosperous society. Instead, it’s about shutting down the marketplace… The initial phase of competition in Monopoly, the free-trade phase that happens to be the most exciting part of the game to watch, is really all about obliterating free trade and annihilating competition in order to replace it with monopolistic rent-seeking.

Right, but Adam Smith never imagined someone would confuse a game in which people randomly land on properties and arbitrarily have to pay exorbitant sums with the free market.

Ben Powell explained the problems with Monopoly in a nice article at Mises.org. (Now let me note: I am not a humorless automaton who can’t just shut up and enjoy a game of Monopoly. I have in mind here the people out there who actually think Monopoly is supposed to be an approximation of the real free market.) He writes:

In the game Monopoly, owners of land and houses and hotels, though acquiring their possessions by luck, are flattered into believing they are masters of the universe, extracting profits from anyone who passes their way. There is no consumer choice and no consumer sovereignty. This is not a small detail. The entire raison d’etre of the market is missing, and thus the real goal and the guide of all production in a market economy.

Consumer choice is replaced by a roll of the dice. The player then becomes passive. Landing on property owned by another person creates not a mutual gain but a loss. In this way, trade is portrayed as “zero-sum.” The elimination of consumer choice leads to the belief that businesses profit only at the consumers’ expense….

In Monopoly, a roll of the dice forces exchanges between producers and others. However, business to business transactions are left to free negotiation. Players are allowed to offer property for trade or cash to other players on mutually agreeable terms. Even in these transactions, regulation raises its ugly head when there are buildings on the property. Players are forced to demolish buildings before making any property exchanges.

The pervasiveness of monopolies in the game does not represent the situation in the real world. Every piece of property on the game board is essentially a monopoly; once the dice roll determines where a player lands, there is only one seller who the consumer must purchase from….

In fact, Monopoly better illustrates how an economy works when it is based on intervention, central banking, and government privilege.

Read “What’s Wrong With Monopoly (the game)?“

http://rosarynovice.stblogs.com/ Augustine

Monopoly taught me about fractional reserve banking and central banking. We always lost to my cousin, who owned the game and thus would claim the privilege of being banker all the time. It didn’t takes us many rounds to figure out why she always won: using clever sleigh of hand, she’d pay for properties using the bank’s money, eventually bankrupting us.

PS: any resemblance with actual event in America since 1913 is not merely a coincidence, but the plan from the get go.
Ana

Ron Paul behaving badly

http://www.ronpaul.com/2013-02-08/ron-paul-vs-ronpaul-com/
http://www.facebook.com/profile.php?id=13718790 Nicholas Spohn

Dr. Woods, such a negative view of the most popular board game of all time! I am going to respectfully disagree with this assessment and present a case that monopoly is an outstanding way to learn business and economics, despite its imperfections, and central banking rules.

Sure, monopoly is not perfect, but lets examine its merits. Asset allocation is arbitrary, but only initially. Monopoly is more about trading and adding value than initial asset allocation. A good monopoly player figures out how to use resources to their highest valued uses (in conjunction with other similar assets). The properties initially landed on have very little importance compared to trading. To successfully trade it is necessary to propose trades that are mutually beneficial for both players, or the trade will not be completed. Looking out for their own self interests, players are not going to make trades in which they are “exploited”. There is no central authority that can put a gun to your head and make you trade, or prevent you from trading. This is an important point. If I have 3 railroads I can more efficiently make use of the 4th railroad (returns to scale), so I will trade you for a property that you value more highly. We are both better off. If one player does make a trade that “exploits” others, or in some way spoils the relationship in the game, others will team up to bring down that player. Usually, I am the strongest player in the game and others will make plays that hurt themselves just to get revenge on me. According to game theory this doesn’t make sense, but time and again experiments show that, at the margins, some people value revenge more highly than monetary gains.

If a player cannot effectively use his assets he will not make enough money to keep them and they will be sold or traded to others who can more effectively manage them and said player will be at the mercy of earning wages by circling the game and passing go. How perfect! The goal of course if to obtain a monopoly and “extract” monopoly rents. However, the monopolist is really adding some value by investing in houses and hotels, building the capital stock, which has a great return on investment. Those that get overextended in investments often have to mortgage them or sell them back at half the price, just like during the housing bubble!

We live in a world where central banking is ubiquitous and to design a game without it would be kind of silly. Prices are fixed only in the first few rounds of the game. Once a few rounds have been played the prices for trade fluctuate (granted, rents do not). The money supply increases as more players collect wages and the prices of properties increase with it, although not symmetrically, just like the real world. A good player knows what properties have the highest likliehood of being landed on (a metaphor for being valued by the consumer), and in an entrepreneurial spirit will strive to control these assets (Orange properties statistically are the most undervalued).

I agree monopoly is a zero sum game, which free trade and economics is not. But there is no way in hell I am going to play a board game where everybody wins. All board games involve some luck, and monopoly and more importantly, business, are no different. Monopoly has done a great job of instilling principles of trade and markets, lets not criticize its imperfections too harshly. It is, afterall, just a board game.
Khadija Umayyad

Tom, there is a book and an entire blog about the abuse of the ‘invisible hand’ metaphor. This metaphor had literally nothing to do with market coordination.

I know it’s too much to expect people to stop repeating memes, because they’re fools, but I thought I’d point out that it’s just a wrong use dreamed up by people who have never read Adam Smith.
http://adamsmithslostlegacy.blogspot.com/2012/07/cracks-in-invented-invisible-hand.html
chris

Hey Tom, maybe the Mises institute should issue it’s own version of the game (or better yet a whole other game) with improved rules ! And then to prove the point, the rules would be modified by “government” and “politician” cards which would begin to mandate a certain % of rent controlled apartments; interest-free loans, bribes, defense spending etc. (I’m sure Bob Murphy could add to this)
Anonymous

Challenge accepted, create a free market board game.
http://twitter.com/MALiberty1985 MALiberty1985

Monopoly has a finite amount of wealth and goods – In a zero-sum gain the more others have, the less you can have. If there was a free-market inspired game, I think you would have to get over the hurdle of this Merchantilistic mentality.
http://twitter.com/MALiberty1985 MALiberty1985

This actually sounds like a really good game, haha. The game would get progressively more difficult as more rules and limitations are put on the players. Also, you could add things that benefit the players losing at the game. See how much incentive there is to reach the next level when each player has to give you $100 per turn until you have over X amount of dollars – just spit-ballin’ here.
ugly american

not so wile the envrons are a closed set as is the earth the “monoply money” is unlimited as the rules state that if the bank runs out players are to cut up some slips of paper and write in the denominations.

http://richard_wilding.tripod.com/monorules.htm#banker
The Bank “never goes broke.” If the Bank runs out of money, the Banker may
issue as much as needed by writing on any ordinary paper.
lol they would never leave somthing as important as printing money OUT of a game called monoply.
ugly american

@tom woods what is your take on this? to me not only is he WELLwith in his ‘rights’ these people are making money off of his “brand’ have never paid him a cent , tried to make him buy there mailing list and are now in FACT damaging the freedom movements brand as a whole with this CHILDISH crap!

@ana DUDE YOU people need to give the man his name back! if you all had ANY morals what so ever you would NEVER have regestered it in the first place it was an act of theft right from the get go and just because he let it slide this long dont mean dick he was BUSY runing a canpaign.or gid you fail to notice he has now requested that you cease and desist , you are now trespasing on privite property and have been told to step the hell OFF in no uncertain terms……. do you people actually think sniping at him at this point will help your “buisbess model” NOT the man has PLANS and needs that domain for WAY more important things than you people have been using it for im quite shure. GET OVER YOUR SELVES your NOT ron paul
jeremy cobert

go play Settlers of Catan, then come back and apologize. monopoly is a horrible example of a free market . It makes no sense as a teaching tool of any kind.
http://twitter.com/MALiberty1985 MALiberty1985

Oh wow – did not know that. I guess I was not good enough at the game to get to the point where the bank had no money left. Maybe if I am the Battleship they would just print money into perpetuity for me.
chris

very funny making it progressively more difficult, MALiberty!

The sad part is that you wouldn’t even have to make any of it up you would get cards that say: “OCEA has determined that your factory is not in compliance with regualtion 3843942398 pay $300000″ or “your striptease joint has been fined for not providing a handycapped access ramp for one legged dancers and does not provide special seating for blind customers”

I think it really is time to develop a game like this, each government department could have its own game: Energy, Defense, Education, IRS though I wonder if there would be any takers for Housing and Urban Development !