Date posted: 30/06/2017 3 min read

Economics with a vampire

Incautious economists have produced a rich vein of research that vampires could really get their teeth into – to put the bite on us mortal beings.

In brief

  • Mathematicians Hartl and Mehlman identified a supply and demand problem, and found a fix in classical economic theory.
  • The mathematicians from Austria, only two borders away from Dracula’s home base in Transylvania, made a case for our continued survival.
  • Make your own conclusions about whether or not the economic vampire analogy is sustainable in an unpredictable economic climate.

By Toby fehily

A few factors have been working in favour of humanity’s ultimate survival so far. We have a climate conducive to the growth of garlic, enough trees to source enough wood for enough stakes, and a robust supply of silver from mines across Mexico, China and Peru.

To our credit, we’ve somehow managed to stick around despite legends of demonic, blood-sucking spirits circulating throughout many cultures for millennia. The vampires haven’t got us all yet.

But economists have now stepped in.A number of incautious economists have been writing papers and essays promoting vampire economics. Thanks to them, there is now a rich vein of pro-vampire research ready to be tapped and sucked dry.

Supply vs demand

It began in 1982 with two mathematicians, Richard F Hartl and Alexander Mehlmann, from Austria — only two borders away from Dracula’s home base in Transylvania.

Hartl and Mehlman identified a supply and demand problem, and found a fix in classical economic theory. In a paper titled The Transylvanian Problem of Renewable Resources they revealed pro-vampire loyalties, describing the vampire’s appeal and attraction as “awesome”.

RELATED: Economic forecasters failing on future growth predictions

Studies show economic forecasters get it right more often than a trained parrot — but only just.

From there, they went on to outline “optimal bloodsucking strategies for dynamic continuous vampires”.

“The vampire society derives utility from consumption of blood,” they explained, “but in sucking the blood of a human being and in turning him to a vampire, the resource of human beings is reduced whereas the number of vampires is increased. Both of these effects diminish the resource of humans per vampire, curtailing future possibilities of consumption.”

Then the pair handed the economic solution to the vampires on a decidedly-not-silver platter.

Sustainable business

In a paper titled Cycles of Fear: Periodic Bloodsucking Rates for Vampires they drew on a predator-prey model known as the Hopf-bifurcation theorem to recommend our fanged foes stick to cyclical bloodsucking strategies.

This involves keeping some humans around, instead of draining the lot dry in one go. So rather than stand up for humanity for humanity’s sake, the mathematicians made a case for our continued survival only as a reliable and sustainable source of blood.

It could have been worse. But for some rival economists, that was bad enough.

Writing in the Journal of Political Economy in 1982, Dennis J Snower hammered Hartl and Mehlmann’s reckless tack.

“Clearly, this approach is somewhat misguided,” he wrote. “One wonders what conceivable interest the authors could have had in helping vampires solve their intertemporal consumption problem.”

For a moment, it seemed as though economics, the so-called “dismal science”, would steer clear of aiding our supernatural enemies. However, Snower himself soon fell in with the vampires, his 1982 paper Macroeconomic Policy and the Optimal Destruction ultimately arriving at some fang-friendly conclusions.

Stakes are high

Macroeconomic Policy and the Optimal Destruction assumed that all humans provide their labour to produce either widgets, which increase human wellbeing, or stakes, which are used to kill one vampire.

Therein lies the macroeconomic rub: produce too many widgets and you’ve got a vampire problem on your hands; produce too many stakes and you miss the opportunity to increase human welfare.

So rather than stand up for humanity for humanity’s sake, the mathematicians made a case for our continued survival only as a reliable and sustainable source of blood.

Through a series of analytical equations complex enough to scare away any vampire, let alone a human reader, Snower comes to a handy tidbit he calls the Vampire Impossibility Theorem.“If the number of stakes per vampire remains below the critical level Sc = (p – σ) – n,” he writes, “it is impossible for the human race to survive” [with p representing a vampire’s blood requirement coefficient; s, the quantity of stakes produced; n, the constant rate of human procreation; and σ, the constant rate of vampire attrition through sunlight].

Put simply – we ought to ensure we have enough stakes. Too few and we reach a point where there is insufficient labour to continue to “put the stabilisation policy in place” – Snower’s polite euphemism for vampire slaying. So far, so good.

But Snower entered darker territory with his Vampire Neutrality Theorem, which suggested that destroying all vampires wouldn’t be “socially optimal” given the widgets and associated well-being that would be neglected. The smart idea, Snower says, would be to keep vampires as an endangered species. Humanity should produce a relatively low number of stakes that would enable the vampire population’s limited regeneration.

And so just as Hartl and Mehlmann argued that vampires need humans, Snower seemed to suggest that humans need vampires.

Privatisation of humans

With our fates thus intertwined, one might have expected pro-human economists and pro-vampire economists to return to their respective camps. But not so.

Two professors of economics at California State University, Northridge – Glen Whitman and James Dow – produced a 2014 collection of essays called Economics of the Undead that not only opened the floodgates for vampires, but also offered up some of economics’ sharpest brains to zombies, too.

In Economics of the Undead, Whitman makes a case for privatising humans in his essay Tragedy of the Blood Commons. Perhaps unfairly, he compares the entire human race to fish, a “fugitive resource” that can be difficult to privatise.

What’s at stake for vampires, he argues, is analogous to what humans are doing to the ocean’s fisheries now, with unchecked consumption of a common resource decimating the population to the detriment of both prey and predator.

Privatised humans could be harvested more sustainably, he says. On the plus side, we could at least be free range. “Privatised humans would not necessarily have to be raised on farms or in factories,” Whitman conceded.

As if the scales weren’t already unfairly weighted, his colleague Dow chimes in with tips for vampires to make a different kind of killing. In his essay Investing Secret of the Undead, he introduced vampires – blessed by the miracle of eternal undead life – to the equally miraculous concept of compound interest.

Compound interest

Operating on the assumption that US stocks yield an average of 6.7% per annum, then rounding it up to 7% as an unnecessary courtesy, Dow concluded that a canny vampire who invests US$10,000 will rack up US$9m within a century, as opposed to a mere US$80,000 without compound interest.He goes on to calculate the amount of money required to live on interest – and blood – alone.

At that 7% rate, Dow explains, a frugal vampire could haul in US$50,000 a year from US$714,000 in savings, whereas a more peckish specimen requiring US$100,000 a year would need around US$1.4m.

Are vampires real?

Costas J Efthimiou and Sohang Gandhi modelled what would have happened if the first vampire appeared on 1 January 1600, in their 2007 paper Cinema Fiction vs Physics Reality. Due to geometric progression vampires would have wiped out humanity by June 1602 – a swift two-and-a-half-year extinction.

The fact that we aren’t yet extinct is compelling evidence that vampires don’t exist, they concluded. But they failed to take into account the economics that support vampires.

Which leaves us with only two conclusions. Either vampires aren’t real, and economists are just goofing around. Or vampires are real – they just happen to be good economists too.

Further reading

Vampire tax

In his essay Vampires – Good for the Economy? comedian Michael Ian Black showed a sound understanding of economic theory. “Although vampires do not kill based on socioeconomic status,” he wrote, “we expect the poor to be disproportionately affected, since they will be the least able to protect themselves, as well as the most likely to be wandering outside alone at night.

We are calling this phenomena ‘the vampire tax’.“There could be an unintended benefit from this ‘vampire tax’. Because the most likely vampire victims are the same people most likely to use social services, there is a possibility that social welfare programmes may actually begin to shrink, as their clientele is slaughtered by marauding bands of soulless wraiths. Savings to the nation could be substantial.”