Star Wars Economics and the Value of a Credit

Everyone generally supposes that 1 credit is roughly equal to 1 American dollar (although with recent inflation, that may require some adjustment :P), and some have even made fairly sophisticated analyses to show the correlation, often using easily-compared commodities such as food.

The resulting conclusions often leave some shaking their heads at the ridiculously low costs of starships and the like, but I had a brainstorm:

What if starships aren’t inexpensive, what if food is actually really expensive?

The Problem:

There are numerous logistical difficulties inherent to the Star Wars galaxy. Chief amongst them and key to our current topic is that each planet is really more like a single country or American state, sometimes like a single city or even smaller location. Pretty much all of one clime and generally rather culturally homogeneous with fairly uniform and limited exports.

There are some exceptions to this, however: Carida has a variety of climates, Corellia produces food as well as industrial goods and vehicles, Tatooine produces Force-sensitive podracers as well as sand, etc.

Contrast with Coruscant, which is the New York City of Star Wars. Rather than having any important physical export, it is a cultural center. It relies on a significant quantity of imports, as since the entire planet is given over to urban sprawl it has a decided lack of arable land, especially given its myriad denizens.

Effects of Trade and Development:

Since pretty much the entire galaxy is extremely interconnected and trades freely, each world would tend towards specialization. There’s no need to sacrifice land that could be used for mining to grow food if you can just import the food instead.

This means that you’ll have a few worlds that are self-sufficient, some worlds dedicated to farming, and many worlds that are extremely reliant on imports.

Ordinarily, this would mean that prices vary wildly between worlds. However, this brings up some interesting political problems.

Smaller, localized trade interests ferrying food between worlds within a sector have much lower costs than more spread out trade interests (such as the Trade Federation) that regularly ship food longer distances, such as from Outer Rim worlds to the Core. This means the “longer” traders have to increase prices, and if you try to balance it out, you’ll be undercut by the local interests.

What you end up with is highly-populated, non-agrarian worlds spending significantly more than other worlds, especially if they aren’t in a sector with enough agriworlds to supply food for the entire region.

At first, this wasn’t so bad. There were many new colonies, and worlds still had plenty of room to expand farms. However, as the galaxy developed, populations grew, worlds became more industrialized, and colonies became more distant. As the worlds became increasingly reliant on imported food, they became less concerned with growing their own, and prices began steadily rising.

And yes, if you haven’t guessed yet, I was one of the minority who found the prospect of trade talks in The Phantom Menace riveting.

The Economic Question:

Ordinarily, prices will naturally find an equilibrium. How much can you charge while still finding enough buyers, and how low can you go before you don’t make a profit?

If prices for food are very high on Coruscant, for example, wages will have to rise to meet that because people won’t work if they can’t make enough to feed themselves (or if they starve to death). However, that money has to come from somewhere. Consequently, businesses have to increase prices. What follows is an inflationary cycle, as the local value of the GCS (Galactic Credit Standard) becomes dramatically out of sync with its value elsewhere.

For example, you work as a farm laborer on Ukio and get paid 20 credits an hour.

You go to Coruscant for some unfathomable reason and suddenly you find that rather than costing you 10 credits for a good meal, it’ll cost you 40 (x4 conversion ratio for convenience). But if you work a job in a similar strata on Coruscant, you get paid 80 credits an hour.

This serves to give Coruscant a lot of monetary power over other planets because what’s cheap there is very expensive elsewhere. Likewise, it’s able to secure for itself a lot of military power since in “Coruscant credits” a warship will be much less expensive than in “Ukian credits,” to say nothing of the radically different tax schemes and revenues.

But still, Coruscant’s money has to come from somewhere, because it has to enter the economy. Coruscant has no major exports, and those that it does it would be hard-pressed to turn a profit on because it costs four times as much to produce. Places closer to agrarian worlds, with consequently lower food prices, could undercut their price fairly easily. This is a two-way street, however: If it’s cheaper to produce elsewhere, it can be more cheaply imported to Coruscant, allowing offworld producers to have lower prices and larger profit margins.

Therefore, a place like Coruscant can only really “export” two things: Information and IP.

Information (data and digital products like video games, computer programs, etc.) is perfect for this because it doesn’t cost anything to reproduce—the only cost is the labor to create it—and so it can be sold very widely, at market-acceptable prices.

Secondly, then you have the service economy: This would be maids, plumbers, etc. All self-contained since it would be prohibitively expensive to “import” this service, in spite of the dramatically increased cost of living on Coruscant (and subsequently inflated wages).

Political Shenanigans:

However, political pressure can shift this equilibrium dramatically, usually in the form of government intervention at the demand (whether for good or for ill) of its electorate, and as it stands, multiple factions wanted a change in the status quo.

  • Core Worlders wanted food prices reduced because they felt the price of living was too high, and why was food so much less expensive elsewhere, but not here? It wasn’t fair.

  • Agrarian worlds wanted to take some power back from the Core, and “free” themselves from what they saw as a pseudo-feudal system. The increased prices on Core Worlds wasn’t getting passed on to them in the form of profit, so they don’t care if the Core Worlders pay less.

  • Trade conglomerates were okay with the current arrangement, actually, since they were just moving the product. The end price or starting cost didn’t really matter, what mattered was the profit. However, why not? Perhaps they could turn things to their advantage.

  • Smaller trading interests were either ambivalent towards or leery of any sort of new arrangement, fearing that it could be turned against them when they were really in a pretty comfortable position.

The solution settled upon by the Galactic Senate was to fix prices. However, this would disincentivize traders to bring goods to Coruscant, since they knew they would not be able to break even, while profit margins would expand dramatically on worlds where the cost of transport was minimal.

Thus, the Republic added an extra step: It purchased all exported food at a fixed price, then sold it to various concerns at an increased base cost, minus a variable amount meant to equalize transport costs.

It was sold as a plan that paid for itself and would create “food equity” by equalizing prices across the board, with the promise that wages would adapt to accommodate the increased cost of living, but that was not the case.

Economic Effects:

While food prices did equalize, wages did not adapt as dramatically as were hoped and the plan did not pay for itself. While technically it drew no tax money, the increased price of food due to the Republic’s “operating cost cut” was, itself, a tax, as it increased the cost of the food.

In many areas, wages did go up along with the increased price in food, but usually not enough to offset both the now-greater cost of food and the now-increasing costs of other goods, which became more expensive as wages increased.

However, in the wealthy Core, little moved. With food being less expensive and the cost of living declining, many had their wages cut, but still others saw no change in their wages while the cost of food decreased. But simultaneously, Coruscant and other Core Worlds saw a resurgence of industry as they suddenly became competitive again now that wages were lower (which resulted in an increasing stratification of the local economy, with poor laborers forced into the lower levels by abnormally high housing prices).

Because of this resurgence, outlying worlds took yet another hit, resulting in significant unemployment across the Outer Rim, and thus an angry and desperate populace. Now the large corporate interests could easily move in and acquire cheap labor for mining interests, opening up more resources that had previously been considered too expensive to mine.

As for trading companies, the smaller outfits lost their edge now that prices were forcibly equalized. They lacked the capital and capacity to provide bulk shipments to the Core, but they could now be outcompeted by the bigger interests on the shorter runs.

The increasing supply of raw materials from expanded planetary mining did lower some consumer prices, but many of the benefits were not felt by the population at large since much of the supply went to expanding the rapidly growing corporate militias, which now had to handle many more strikes, uprisings, and incidents of unrest, as well as suppressing increased piracy that supplied the expanding black markets.

All together, this sets the stage for why everyone is unhappy around 40 BBY and why the outer half of the galaxy would be willing to secede from the Republic.

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Dude this is awesome. The only thing I could think about while reading this is how it would probably win the Essay of the Week Contest over on Wookiepedia.

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Thanks! I’m glad you liked it. I’ve always been fascinated by the behind the scenes motivations behind the on-screen action, so this was fun to think through.

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Star Wars is a fantasy galaxy, so we are meant to give it a lot of leeway, but I too have thought about similar things before.

The one that comes to mind is when I thought about it and even if you could travel to other planets, there would never be a guarantee that you could ever leave again. Ship could be impounded and some ridiculous local laws could be fabricated to ensure you never get a fair trial and are executed or imprisoned at the whim of the ruling power(s). Maybe they just really liked your ship?

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Just sounds like an adventure hook to me :wink:

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I know that the answer first coming to ones mind to the question “how much money will be enough to retire in the star wars universe” will be: Depends on the planet/rim and how much luxury do you want.
However, do you have any thoughts on the question?
I mean I do know the cost of ships and speeders and the value of some products of daily life.
But how much bounty does the Hunter need to collect to say “that´s the final one, I retire”

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Always, one more job’s worth…

Until the next job :wink:

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Well you’re in luck! Conveniently, retiring is a question I have handled for a few of my characters, mostly bounty hunters, and so I have many thoughts on this topic.

First off, like any good economics dabbler, my answer is “it depends,” so you got that right. :D

Overview:
What, really, do you need to retire? You don’t need enough money to take care of yourself/family until you die, you need enough money so that you can take care of yourself/family.

What do I mean by that? Money can make money. Stocks and banks are both, at their most basic, ways of lending money and earning “'interest.” Let’s just throw a number out there, say one million credits (remember, credits are much more valuable than a dollar). One million credits is the total amount you need to take care of all material needs for you and your dependents until you die. You don’t need to start with one million credits, you need to end with a total of at least one million credits.

You also want to leave an inheritance to any children you may have, so ideally, you’d have enough money that you can make a living off of just the profit, and never have to dip into the actual savings.

Types of retirement:
But that’s for full retirement where you’re now just dabbling in the garden or puttering around your basement’s shuffleboard court.

For a hybrid retirement, which would be especially common among bounty hunters who retire at a younger age, they won’t really be retiring, just ceasing to bounty hunt.

In this situation, the amount they need is whatever a home and the start-up costs of their next endeavor will be, plus a decent amount of savings as a cushion. For example, I have a Mando training sergeant character who makes a lot of money as a Cuy’val Dar (and previously as a bounty hunter), subsequently increased through investment, and uses that money to make a self-sufficient settlement on a backwater world where she can live in peace, and where “her boys” (the ARC trainees) can join her after the war.

One of my players has a pair of characters who plan to make enough money to start their own brewery.

Personally, I find these the most interesting methods of retirement, especially when a character is younger and may not want to be a bounty hunter until he dies, and would rather pursue some dream past that. It’s also hard for bounty hunters to start a family and settle down (although I have had a character who does that, and is seeking to retire for just that reason) since they are constantly on the move and in danger.

Some may simply take their skills into another line of work, such as settling down and becoming sheriff of their town.

Conclusion:
To give a hard answer of “how much do you need to retire” is difficult. However, I’ll give you three basic answers based on the three general sorts of retirements:
“I’ll never have to work again!”: This is best served when the number is astronomical. One final job and you’ll be set for life! Either one+ million credits, or some reference to being able to dramatically increase it with investment. But varies by how much the character wants/needs, etc.
“Always wanted my own ___!”: Enough to 1. Start said business, 2. Own your own home*, 3. Have a good cushion. A couple years’ worth of expenses, plus a cushion for any unexpected lump sums, and you should be fine. It also depends on how quickly the business will become self-sufficient and then profitable. If it’s something that will take a long time to become profitable, the need to take out loans or have a larger sum to begin with becomes stronger. However, if it becomes profitable almost immediately, then you don’t need as much of a cushion.
“If anyone steps on my peace of serenity, I’ll blow them away!” (okay, yes, that’s a terrible pun): Enough to own the land and anything on it. Never have to interact with anyone ever again. Enough to start your own sources of food, such as purchasing livestock/poultry/equivalents and planting crops. Ideally, you’ll have some fallback savings (hopefully in the form of hard assets or stocks that will appreciate over time) in case there’s an emergency, but you shouldn’t have to worry about them in day-to-day life.

Owing money:
*I briefly touched on this, but loans: “If you take out a loan, you pay more than you would have upfront!” Yes. But you might end up with more money on net since you can do things with the money you haven’t yet spent on what you took out a loan to buy.

Situation:
You spend X money to buy a house, or take out a loan for X money. Said money will cost you, say, 15% of its total amount in interest. Now you’re looking at a final cost of X*1.15.
But if you can invest that money and make 30% of its total amount, you’re looking at a profit equal to 15% of the money, where you otherwise would’ve had 0%. There are also other reasons to take out a loan, and good reasons not to, but in this situation we’re presuming you have the money to do so upfront.

With something more expensive like a business, you very well may not have the money needed to start it WITHOUT a loan. But OWN THE PROPERTY. If you can buy the actual land personally, you can then have the business lease the land from you. What you don’t want, if it’s plausible to avoid it, is to be leasing the land from someone else.

Many financial experts say “never pay interest,” but that isn’t universally true. Only pay interest if you make more money doing that than you do paying up-front.

Disclaimer:
There’s a lot that goes into all of this, and many variables. Plenty of "But what about…"s to discuss, but my goal here was to give a basic overview with general answers. I hope I did that accurately. If you want to ask about a specific situation, I’ll do my best to give a more specific answer.

Thank you for this detailed response.
What I am struggling with is the question what amount of money would you need to start each of those three options. 100k, 250k…
I don´t know why I am so unsure about it.
For example what do you need to pay for an appartment on Corellia or Coruscant or what kind of money would you need to build a cabin on a backwater planet or on the planes of Corellia?

*Drumroll* “It depends!” *confetti*

Yep. Sorry. That’s the best answer I can give you.

Now if you have a particular example or situation you need a better idea of, I’ll try to help you come up with something specific. But the problem is that we have a good many unknown variables, such as how much land costs in Star Wars (especially in given locations) and the property values of various structures on various worlds. The best we can really do is look to contemporary corollaries and dial it up or down a little bit since this is Star Wars and everything tends towards extremities.

In the story for which these factors were particularly relevant, my character purchased land in the middle of nowhere and bought some droids to build on it while she was busy on Kamino. I left the details of how much was spent very vague intentionally because there are so many unknown variables, one of which is how much is a credit really worth.

Because while I covered how it’s a greater than 1:1 ratio to USD, I didn’t really nail down what exactly it is. Perhaps that’s what we should do next, try to determine a precise ratio which we can then apply to the problem at hand.

The issue is, of course, that most people who priced things in Star Wars 1. Were fiction writers utterly lacking in economic sense or 2. priced them with the idea of a 1:1 credit to USD ratio.

If you’re interested in a more in-depth analysis, I’m willing to go the mile with you as time allows.

P-47Thunderbolt… If you have not read An Enemy of the State by F. Paul Wilson I think you would love it.

An Enemy of the State by F. Paul Wilson (goodreads.com)

Deals a lot with how Core Worlds and Colonies would potentially interact.

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I think in most of our general concept of Star Wars space travel it is not always just a straight line from Point A to Point B and Hyperlanes are a big part of this. Just like highways are for us. What level of importance do folks see to generally put on Hyperlanes? A couple of things I found had a major being a 0.75x multiplier to Travel Time. This seems way too low to be significant. For galactic expansion to have largely been along Hyperlanes and then moving slowly out from them it seems Hperlane Travel need to be significant in some or all of these (and perhaps other) ways… like the currents and trade winds of Earth.

Faster, Fewer Hazards, More Fuel Efficient, etc…

If you are on Corellia and want to go to Taanab to you just point your ship and go? Or do you follow the Gamor Run to Coruscant and then switch over onto the Perlemian Trade Route?

If travel along Hyperlanes is important then it makes the worlds on them significant. If just point your ship in the and traveling in a straight line is almost as good, them it makes this a lot less interesting… Navigationally, Politically, and Economically.

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Interesting take on things looking at it from a Food perspective, but you just need to look at our own History to see why Colonies might not be happy with their Colonizers. Doubly so since from what I have read of various Lore membership in the Republic was not exactly voluntary. Nor was leaving it. If it were then there would have been no need for a Separatist movement to lead to armed conflict.

What you could easily have is a rather direct parallel to our own last few 100 years. Corporations from the Core Worlds developing/exploiting (all a matter of perspective) the resources out in the Rim. With the added tension of Corps from long established Colonies trying to get the same favorable treatment as older Core based ones get. Those on the Rim really do get the short end of the stick in many ways.

Just take Tatooine if you want a perfect example of this. Large mining corps came and started wholesale operations. Indiscriminately killing the indigenous Jawa and Tuskan who might have objected. No concept of native sovereignty here! And then when mining proved problematic, they just pulled out leaving a mess behind. Sir the Republic is against slavery, but not when it is in somewhere out of the way.

The overall Galactic Society of Star Wars is far from Enlightened. Look to the last 500 years on earth for all kinds of examples which seem easily reskinned.

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In my method, FTL travel is ONLY possible along hyperlanes. The exception comes in the case of planets without hyperlanes leading to them on the map.

In that case, you have to go to the nearest planet and make a jump with a x1.25 modifier because the hyperlane is presumed to be there, we just don’t know the specifics.

Hyperlanes are very important because they linearize travel. To get from Georgia to Washington D.C., you have to go up through SC, NC, and VA. Or, you can take a loop way around if you don’t want to go through those states, but you have to pass through them. Hyperlanes introduce this concept to Star Wars since you can’t just “teleport” from point-to-point, you have to pass through certain areas (and stop to refuel).

I hear you. Definitely simple, but problematic. Sounds like you envision there being little “capillary” hyperlanes which connect each system without a larger hyperlane to whichever one is closest?

Does not really work for systems like Jakku or Cyrillia. It also seems to go contrary to a lot of Lore both Legends and Canon. I think travel through hyperspace needs to be possible without a hyperlane, but with travel along one much preferable. If not, you risk making things TOO linear.

Something else I just recently noticed… insofar as I can tell there are no published Freighters or other dedicated cargo ships with a 7+ Silhouette. Odd to have Warships so much vastly bigger than your Cargo Ships. My assumption is they were just too boring to put in a book. Hard to imagine how many ships it would take to feed Coruscant. The largest I could find was the Sil 6 Temple Class Heavy Freighter at 30,000 Enc of Cargo. You could always use the 250K ENC some Dreadnaughts have but that would be a little silly. Presumably there are Sil 8 or 9 Super Freighters which just blend into the background as they go about the job of Feeding the Galaxy.

We also cannot say “Ships above a certain size” need Hyperlanes to travel since… well… Jakku again.

Of course they can travel “off the beaten path” (after all, those hyperlanes had to be scouted) but travel without hyperspace lanes is dangerous and unpredictable without precise coordinates etc.

As for ship size, I believe that there are laws limiting the private ownership of ships above a certain size, although I could be misremembering.

The component of size to hyperspace travel is that, as much as EliasWindrider disagrees with me, the larger you build a hyperdrive the more expensive it is. Consequently, the lower the class the less expensive, so on a large ship they might choose a lesser hyperdrive to save money.

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