With the last Harry Potter novel out on the shelves over 4 years ago and the first installment of the final two movies in theaters last month, I thought now was a grand time to discuss the serialization.  Everyone on the planet by now capable of reading knows Harry defeats He Who Must Not Be Named, marries Ginny Weasley, and sires two sons and a daughter.   That's old news.   There's far more compelling stuff to discuss that, to my knowledge, no one else has seriously addressed.

Like how does Hogwarts School of Wizardry and Witchcraft stay in business?  Hogwarts is a boarding school.  The books never specify whether it's a public school or a private one.  Public here is referred to in the American sense of the word, as a school funded by the public at large through taxes imposed by local, state, or federal governments.  In the real world, the muggle world, there is no such thing as a public boarding school.  Anyone attending a boarding school would be paying tuition for the education plus additional expenses for room & board. 

Why would Hogwarts be any different?  In the wizarding world, people still use money to buy the goods and services they desire.  The wizarding currency, at least in the UK dominion, is the galleon and is fully convertible with muggle currencies.  Hermione's dentist parents at one point are in Diagon Alley swapping pounds sterling for galleons.  The galleon should technically be illegal.  Legal tender in the UK is defined as Bank of England notes, Scottish and Northern Irish promissory notes, and various pound and pence coins, and gold sovereigns.   While it's never specified in the books, I assume that the galleons are minted from gold or other precious metal that has a clearly definable value in the muggle world. 

There are wizard banks -- or one bank, Gringotts -- to store wizards' and witches' money and valuables.  How Gringotts generates revenues isn't made clear.  Does Gringotts create money out of nothing and lend it out with interest, like muggle banks magically do through the fractional reserve lending system?  Does Gringotts pay out account holders with interest on their deposits?  Does Gringotts earns its fees by an annual or monthly charge on deposits in exchange for the safekeeping of funds?  According to the Hogwarts' groundskeeper, Hagrid,  Gringotts is "the safest place in the world for anything you want to keep safe."  The bank utilizes state-of-the-art enchantment technology, dragons, and biometric wizarding software to keep valuables where they belong.  The safe storage of Hufflepuff's cup, the Philisopher's Stone, and other priceless possessions must have incurred their respective vault holders very sizeable fees from Gringotts.  

The point to be made here is that Gringotts appears to be run on a profit model just like any muggle bank.  The only branch of Gringotts ever mentioned in the books is the one in Diagon Alley.  Diagon Alley is also home to pubs, a wand shop, a furniture store, and, I venture, restaurants, theaters, and other outlets catering to wizarding needs, wants, and frivolities.  Later, Fred and George Weasley rent a store in Diagon Alley to open up their own joke shop, Weasleys' Wizard Wheezes.  All of this suggests that business in the wizarding world works under a freeish market capitalist system, and that some in the system succeed more than others, breeding rich wizarding families like the Malfoys and poor ones like the Weasleys.  Such a system seems to support the idea that the First Law of Thermodynamics holds in the wizarding world as well, that energy can neither be created nor destroyed, but only change form.  For if things like money, new broomsticks, a house, and new head of hair could be conjured out of nothing, a free-market capitalist system wouldn't exist.  Every wizard would have all he needed without having to work a job for it -- and bald wizards would be a thing of the past.  

The laws of bureaucracy remain inviolate in the wizarding world as well:  wherever a society forms, a bureaucracy forms around it to administer rules, taxes, certifications, and ultimately enrich itself at the expense of the people it's supposed to help.  Instead of a corrupt and inefficient central government, there's the Ministry of Magic.  The magical ministry is not powerful enough to disapparate Pournelle's Iron Law of Bureaucracy, which states that:

In any bureaucracy, the people devoted to the benefit of the bureaucracy itself always get in control and those dedicated to the goals the bureaucracy is supposed to accomplish have less and less influence, and sometimes are eliminated entirely.

Pournelle's Law is always evident to some degree in the books, but most obviously in The Order of the Phoenix, when the bureaucratic ministry imposes so many rules and restrictions that Harry and his cohorts must practice their defense against the dark arts via their secret club, Dumbledore's Army.

With a bureaucracy, banking, and economy organized along real world lines, we would not be assuming too much to figure that Hogwarts, too, would be organized in like fashion.  Professors, custodial staff, cooks -- all must be paid salaries.  Hiring elves and other undesirables for menial tasks and disdained squibs like Argus Filch as a caretaker for low or no wages helps to reduce costs significantly, even better than if the work could be outsourced to China, but there are still enormous expenses associated with maintaining Hogwarts and its grounds, heating it during the icy cold winters, feeding three all-you-can-eat daily buffets of dairy, meat, and pumpkin juice, and providing comprehensive medical, dental, and life insurance to all students plus liability insurance for the school should a student be killed there by Voldemart or a death eater and the grief-stricken parents attempt a lawsuit. 

Dumbledore and the senior tenured professors would be at least as well compensated as deans and top professors at MIT, Caltech, Stanford, and Ivy League institutions, probably a damned sight more. The books never mention another magical educational institution in Britain.   Competition for the limited headmaster and professorial spots would be fierce.  Snape has unsuccessfully tried to snag the Defense of the Dark Arts position for years and only acquires it in Harry's sixth year.  In any intensely competitive market, in securing the top spots the victors win all the lucrative spoils.  Think of how much star athletes in professional sports leagues or A-list Hollywood celebrities get paid after besting out the numerous competition.  Hogwarts' coffers are full enough to pay what I expect to be the equivalent of a six- to seven-digit 1992 U.S. dollar salary to celebrities like Gilderoy Lockhart in The Chamber of Secrets.  Lockhart, while a sham, is still a famous bestselling author, handsome, popular, with lots of options.  He wouldn't work for an average teacher's salary any more than Harrison Ford would star in the next Indiana Jones flick for Screen Actors Guild scale.    Hogwarts' significant expenses require some cool hard galleons to keep the engine running.  Who pays for it?

If the school is modeled like an elite muggle boarding school, as it appears to be, the tuition fees and room & board would be shouldered by the students' families.  Scholarships or partial scholarships might be offered to a few in need, those costs absorbed by higher tuition fees from those who can afford to pay in full as well as wizard taxes paid directly to the Ministry of Magic.  In 2007, Britain's posh Eton College charged students £26,490/year, about US$40,000 at the time.  Hogwarts would have to cost at least as much per pupil.  The average British muggle couldn't afford to send his children to schools with that kind of price tag.  So another reasonable Potterverse question is:  how can the average British wizarding family swing Hogwarts' tutition fees?  Is the standard of living in the wizarding world higher?   Let's take a look.

Harry Potter's best friend, Ron Weasley, comes from what looks like a Catholic wizarding family.  Birth control is another one of those areas where magic has no impact.  During Ron's and Harry's second year, the Weasley family have five kids enrolled at Hogwarts simultaneously.  How can patriarch Arthur Weasley, working in a lowly government position with the Ministry of Magic, foot these expenses?  Even if he gets a 50% discount at Hogwarts for working with the Ministry, that's still US$100,000 post tax he has to come up with each year.  Do Ministry jobs pay magical amounts of moolah?

Securing limited spots in the Ministry would be harder than landing a civil service position with one's own government.  In the muggle civil service, even if you are a certified idiot, you could probably land a job as a postal worker.  In the wizarding world, those jobs have been outsourced to owls.  There are only a few ways I can think of that the Ministry of Magic generates revenues to pay its employees.  The first is by renting out prime Diagon Alley real estate to merchants, only possible if the Ministry actually owns the land and/or buildings there.  That could generate some serious revenues. As a point of comparison, the Thai royal family earn over US$100m in rents each year from central Bangkok real estate.   However, the books offer no evidence that the Ministry is in possession of any lucrative Diagon Alley real estate holdings.  The second way is by taxing the wizard citizenry the Ministry presides over.  The book never alludes to this, but if my theory is correct, the British Ministry of Magic, through some tax scheme probably as equally incomprehensible as any muggle tax code, extracts some kind of cut from all the profits of British magical businesses.  Using the real world as a blueprint, this magical tax code was likely drafted so that rich wizards like the Malfoys pay little or no tax while poorer wizards, like the Weasleys, incur marginal European tax rates of 50% or more.  Tax evasion would be near impossible with goblins and other magical technology tools at the Ministry's disposal. Even if Arthur Weasley were earning US$200,000/year in galleons, a sky high salary for a civil service job, after Ministry taxes, paying Hogwarts' fees would still be out of his reach.

The cap on a wizarding civil servant's salary comes from the tiny tax base available for the Ministry to secure its funds.  The series' author, J. K. Rowling, stated in a year 2000 interview with Scholastic.com that about 1,000 students attend Hogwarts each school year.  Some web sites have debated this fact by showing footage from the movies, suggesting that the Hogwarts' student body numbers only 300 students.  I'll accept Rowling's figure as the definitive source.   It's her universe.  With seven grades in attendance at one time, this leaves 140-45 students per grade, 35-40 per house.  Each year, there are only 140-45 eleven year olds in the whole of the United Kingdom with wizarding skills worthy of Hogwarts' expert instruction -- assuming again that Hogwarts is the only wizarding institution in the UK and that every child with magical skills gets accepted.

How many eleven year olds are there in the UK at any one time?   That's not a very easy figure to come by, so we'll use some quick and dirty math.  In 2008, the approximate population of the UK was 60m, and the life expectancy, 80 years.  Though birth rates vary by period, sometimes significantly, and much of the UK's population growth over the last 80 years is due to immigration, we'll presume the same number of people were born each year over the last 80 years to yield this 60m population today.  This comes to 750,000 people in each age group.  The percentage of eleven year old wizards to all eleven year olds in the UK is slightly less than two-hundredths of a percent.  For every 10,000 people born in Britain, slightly less than two wind up a wizard or witch.  That translates to just 11,600 people with wizarding skills in all of the UK.   It's an invisible market even without being shielded by Harry's invisibility cloak. 

Standards of living only went up in the muggle world as specialization of labor became widespread.  The costs of production then went down and more people could afford to buy products that were once considered luxuries.  The Model T's sold in 1909 dropped by 85% in price 15 years later from specialized labor performed on an assembly line. 

With 0.019% of the world population being a wizard or witch, there would only be 1.3m witches and wizards on the planet, a miniscule market place by any standard.  Now it's quite possible for a country with this sort of population or less to have a decent standard of living.   Estonia (1.3m), Luxembourg (500,000), Iceland (318,000) spring to mind.  But they're exceptions.  Most of the countries with populations near to the estimated world wizarding population -- Trinidad and Tobago, Gabon, Swaziland-- are poor.  The rich ones are only rich because they have a valuable natural resource or, more importantly, because they actively trade with other countries who have the natural resources.  Indeed, it's possible to have no natural resources at all and become rich from international trade through labor specialization.  Japan, Singapore, and South Korea did it.  Seeing the world wizarding community of 1.3m as a country is incorrect.  These 1.3m constitute the entire wizarding world.  Outside these 1.3m, there is no one to trade wizarding services and skills with.  Remaining within this super small community, separate from muggles,  guarantees a lower standard of living for most wizards and witches based on accepted Ricardian economic analyses, and yet in Rowling's universe, completely cut off from the muggle society and economy is how most of the wizards and witches live.  Arthur Weasley, who has a fetish for muggle things and is therefore seen as peculiar by much of the wizarding community, often asks questions to Harry about the muggle ways.  If Arthur, working in the Misuse of Muggle Artifacts Office, has very little firsthand information on what it's like to live within the muggle world, the majority of wizards and witches possess no muggle knowledge whatsoever.

The ticket to wizarding wealth for the majority of the enchanted would be to join and live in the muggle world after graduation from Hogwarts (or even before), integrate with the larger world economy, and use one's magical skills to improve efficiencies in order to lower costs and undercut the muggle competition. For example, in the wizarding world, broken noses and bones can be magically healed with the flick of a wand or application of some magical poultice.  Why couldn't a wizard attend a muggle medical school, obtain a medical degree, and then practice magical medicine on the sly within his conventional medical practice?  He could call it new-age reiki or ayurvedic medicine, and no one would be the wiser.   His quick and successful healing sessions would cause his reputation to soar, he could command higher fees, get rich, then convert some of that wealth back into galleons at Gringotts and build a second palatial home in the wizarding world.  It's a win-win for him and the patients.    

Arthur Weasley knew how to cast a magical spell on a muggle car so that the car could drive itself in The Chamber of Secrets.  Imagine if he setup a pizza delivery service in the muggle world, but was spared the expenses of having to hire drivers and insure them and their cars for deliveries, instead using his magical driverless car?  Customers could order pizzas at magically low prices which would be prepared and baked with wizardry instead of wood-fire ovens and costly employees, and the pizzas would be delivered mere seconds or minutes after they came out of the magic oven.  Arthur Weasley gets rich, customers get amazing pizzas.  What's the harm?

Frankly, there just doesn't seem to be enough space in the tiny wizarding world for every graduating wizard and witch to secure a job in the native economy.  Sounds exactly like many an African economy of the past and the American economy today.   How many aurors (parallel: lawyers), aspiring pro league quidditch players (NBA basketball players, golf pros, soccer stars), and Gringotts consultants (investment bankers) does the world really need?  What if a wizard wants to pursue a more mundane activity, like act on stage, work as a gay prostitute, or write the next great novel?  To become noted in any of those vocations involves magic, but a different kind of magic, one not taught at Hogwarts and available to any mere mortal with the right gifts or practice.  There are more and better opportunities for those jobs and experiences in the muggle world.

Wizards and witches are still humans in the end.   They age, mate, and die just like any human.  They can get fat from overeating and presumably suffer from heart disease, diabetes, cancer, and other debilitating diseases, although magical medical care may be more successful in treating the ailment.  If I were a powerful wizard, I'd want the entire world as my easel on which to draw, not two hundredths of a percent of it. 

Hogwarts has large fixed expenses.  Any serious drop in the wizarding fertility rate means less future enrollees and subsequent tuition rises well above the rate of galleon inflation.  Harry Potter's grandkids wouldn't be crazy to consider enrolling in muggle community colleges instead and attend magic classes at night school as Hogwarts gets converted into a magical bed & breakfast.