Economics and films do not generally go well together. Films rely on the audience’s willing suspension of disbelief, but economists find it hard to buy into the fiction. Not the “school for teenage magicians”. That’s fine. The issue is why Harry doesn’t just shoot Voldemort with a gun? Economists are supposed to point out “but that’s not subgame perfect!” or “that violates the model’s assumptions.” We at least expect the fictional characters to act rationally. Not that we should. The director, because this is real life, faces an optimisation problem: the film must maximise the number of romcom tropes or action sequences by contriving irrational scenarios and characters. There is no fun in an action movie where the main character strenuously (rationally) avoids danger. Instead, they must implausibly dodge bullets and progress through a series of antagonists who get incrementally more threatening. The final boss always talks for just long enough so the trapped hero can escape. Still, it is a sign of lazy writing. Exactly like a microfounded model, the most satisfying fiction has characters that act rationally to events that don’t feel contrived.
There are some good examples. One film, that comes straight out of a macroeconomics textbook, is Deux jours, une nuit (Two Days, One Night). Marion Cotillard plays a worker who will get fired from her low-paying job – unless she persuades a majority of her sixteen colleagues forego a pay rise. We are taken on a tour of labour market frictions. At the bottom end of the income spectrum, many need the extra money desperately. Altruism tapers off, even for people who have known each other for a long time. The bosses, desperate not to involve their own salary, send the problem downwards. (And in the back of a well-informed audience’s mind, the workplace – a Belgian solar panel factory – is very vulnerable to Chinese competition.) In all, a thorough dive into Hicks-Kaldor efficiency.
Films about finance and economics are usually not up to this standard. The Wolf of Wall Street is as much about business economics as Anchorman or Dodgeball. But not Oliver Stone’s Wall Street. Michael Douglas won an Oscar playing Gordon Gekko, investment banker extraordinaire. Gekko’s strong belief in the efficient markets hypothesis drives the plot of unscrupulous deals and insider trading as he tries to beat the market. Released just after the Black Monday crash in 1987, the film is the defining picture of the 1980s freemarket revolution. In an empassioned speech defending his takeover attempts (to shareholders of a company with inefficient management) Gekko exclaims “Greed, for lack of a better word, is good! Greed is right, greed works!” It is a shame that the film walks this back, and Stone opts to end with a banal morality play as Gekko’s victims take formulaic revenge. We never truly see the message that we know (as economists) to resonate in real life: for actions in aggregate, consequences have nothing to do with motivation, and are often in complete opposition.
By far the best work of fiction for economists is a TV series. The Wire is widely regarded as the greatest television show ever made. It is a drama about the battle between citizens, criminal gangs and police in the city of Baltimore. As the series progresses we see the gang leaders’ attitudes fluctuate between violence and pragmatism while the underworld economy evolves. Do they fight for territory, or consolidate and cartelise the whole industry – but then won’t not fighting signal weakness and encourage defection and/or entrants? Idris Elba plays a gang warlord who goes as far as to take evening courses in economics, and seeing him use microeconomics to argue over strategy with his underlings is one of the highlights of the series. The Wire does full justice to the economics of drug crime in America, which by itself is an insanely interesting topic (e.g. in David Skarbek, “Governance & Prison Gangs”, the only economics paper that reads like a tense thriller).
But the show is more than that, an intense depiction of pretty much every economic issue from which we construct our society. We watch the gangs provide public goods in poor areas that were abandoned by the state, itself composed from an intricate balance of the political economy of the whole city. The police have little information and less resolve – surely it is easier to legalise the drug market and regulate the externalities, when the violence that gets out of hand.
The whole world is leaving Baltimore’s rustbelt behind, and we are shown every consequence. In The Wire the main character is the city, Baltimore, more than any one person in it. It is a hyper-realistic world illustrated through the endless interactions of the supporting cast – and what more from a drama could economics want?