I’m safe for now, but the office door won’t hold them back for long. The campus is overrun with zombies, and I don’t mean the usual hung-over students in the back row.
In my final minutes, perhaps I can make one last contribution to humanity: economic advice for you, the survivors of the zombie apocalypse. How can you rebuild your civilization and economy in the aftermath?
By any reasonable historical standard, the modern zombie-free world of just a week ago was incredibly prosperous, although many people falsely assumed otherwise. On almost any measure—life expectancy, infant mortality, caloric intake, real income per capita, variety of goods and services, and more—humanity had achieved a level of success that our ancestors would have considered astonishing. These victories were most obvious in the developed world, but increasingly apparent in the rest of the world, too.
But the zombie apocalypse has wiped out most of those gains in a matter of days. And for survivors, the worst is still ahead.
To understand why, we need to think about how we became so prosperous in the first place. The answer goes back to Adam Smith, the father of —
—hang on, gotta wedge my chair against the door—
Okay, I’m back. Where was I? Oh yes. Adam Smith, the father of modern economics. Smith’s great insight was to recognize the power of specialization, division of labor, and trade to elevate living conditions. Self-sufficiency, he realized, is a recipe for poverty. Society as a whole becomes more productive as people specialize in narrowly defined tasks and then trade with each other to get everything else they need.
Almost every good or service that we consumed in the pre-zombie economy depended on materials and labor from all over the globe. This was the most massive system of cooperation the world had ever known—made all the more remarkable because most of the cooperation happened without central management, without a single plan, through the interaction of people who were mostly strangers.
This web of trade was supported by an astoundingly high degree of specialization of both labor and capital, and also by legal and cultural institutions that enabled trade to occur in an environment of trust and nonviolence.
How has the zombie invasion affected this web of trade? To put it simply, it has shredded it. Let’s walk through the process in a series of steps–some of which have already happened, some of which are yet to come.
1. Rapid Zombification of the Labor Force
The first step has already begun. The zombie apocalypse has eliminated large numbers of people, most of whom played some part, however small, in the global economy. Imagine a giant pair of shears snipping strands at random in a spider’s web. If it had been a small number of snips, the web could have survived. But with so many snips all at once, everything started to unravel.
As more and more people disappeared, the world experienced massive disruption of established patterns of production. We no longer have reliable sources of materials and labor. With the massive loss of population came a drastic reduction in the division of labor. As a result, we’ve experienced a dramatic drop in productivity.
2. Drastic Increase in Transportation Costs
Then transportation costs rose, for two reasons. First, truck drivers, airplane pilots, and shipping crews were among those decimated by the plague of zombification. Second, the threat of marauding zombies made it extremely dangerous for anyone still trying to transport goods. In the months ahead, survivors will be stuck trading mostly with small groups.
Adam Smith observed that “the division of labor is limited by the extent of the market.” In other words, in order to specialize in smaller and smaller tasks, we need a large number of people. If you’re Robinson Crusoe, you can’t specialize at all; you do everything yourself. If you’re Robinson Crusoe and Friday, you can specialize a little, but you’ll both still do many different tasks.
Only in a market with a large number of people can we truly take advantage of the division of labor. The larger the market, the more extensive the division of labor.
But the present zombie invasion, by killing large numbers of people and spiking transportation costs, has shrunk the relevant market from over 7 billion to a small group or community. Soon, survivors will be reduced to mere subsistence.
3. The Collapse of Money
Money in the modern era is mostly fiat money, meaning money whose value derives from its backing by a government that has promised to accept it in payment of taxes and other debts. Now that most of our government personnel have been turned into mindless, shambling corpses, people have begun to lose confidence in fiat currency. When all confidence is gone, we will be left without a medium of exchange, at least until we find some substitute.
In the meantime, people are likely to rely on barter. This is the system that Adam Smith described as “very much clogged and embarrassed in its operations.” Why?
Imagine that next month by some miracle you’re still alive, and you’re trying to buy a medical kit. You have batteries to offer. But when you find another survivor with a spare medical kit, it turns out he doesn’t need batteries; he needs a winter coat.
So now you have to find a third person who’s willing to sell you a coat for your batteries and then return to the first guy, hoping he’s still alive and willing to trade you the medical kit. Clogged and embarrassed, indeed.
Eventually, some kind of new money may evolve, much as cigarettes have sometimes become currency in prison camps. But until that happens, the absence of money means that whatever paltry trading people continue to do will be especially difficult, because mutually beneficial exchanges are harder to find. And such exchanges will be made even more difficult by…
4. The Rise of Predation and Banditry
Without courts and government enforcing the rule of law, you will lack reliable protection of your person and property. Whatever goods you have might be taken by other humans, some of whom may pose as potential trade partners. Indeed, we’ve already seen a sadly predictable rise in human-on-human violence. So beware: other survivors can constitute a greater threat than the zombies.
In the coming days, interacting with other people will become substantially more dangerous, making it even harder to engage in the kind of trade that would improve living standards. And this sets the stage for…
5. Dramatically Lower Accumulation of Capital Goods
People have already stopped maintaining and creating the equipment, machines, and factories that allow for mass production. Some are being destroyed right now. Others will be rendered unusable for lack of qualified operators. The rest will slowly break down and fall apart.
Anyone tempted to invest in creating more capital goods will face the threat of appropriation or destruction by hostile humans. Those who take the risk will tend to focus on technologies that produce output for a relatively small number of people and require relatively few workers to operate — thus ruling out economies of scale. Furthermore, because of the constant threat of zombie (and human) attacks, they will tend to focus on capital goods that are movable, such as portable weapons.
So is there any hope of economic recovery for you, the survivors in a post-apocalyptic world?
To state the obvious, it depends in large part on how bad this epidemic proves to be. But judging by the events thus far—not to mention the cacophony of moaning outside my office door—we appear to be looking at a genuine apocalypse. So any recovery is likely to be slow.
It will begin with small bands of humans who eventually settle down in secured safe zones, such as islands and walled cities. Here, people can begin to engage in internal trade. They can establish some level of rule of law, enforceable contracts, and property rights.
But still, the quality of life in these communities will be on the level of small towns in the Middle Ages. For economic growth to take off again, these communities will have to start connecting with each other, clearing zombie-free corridors between them, thereby allowing for the creation of a widening market that facilitates a deeper and more extensive division of labor. And that’s how the web of trade will start to grow.
If this sounds familiar, that’s because it’s very similar to the history of civilization and our modern world—but it took centuries to get here. You might have some advantages that our forebears did not, including technologies that we’ve already discovered, such as antibiotics and electricity. But even those technologies rely, to a great extent, on a market large enough to support them.
Economic recovery from the zombie apocalypse will be long, hard, and painful. Almost as painful as what will happen when my TA breaks through the door and devours me at last.
Glen Whitman was a professor of economics at California State University, Northridge, and editor, with James Dow, of Economics of the Undead: Zombies, Vampires, and the Dismal Science. Before his demise, he scrawled an acknowledgement to Brian Hollar, James Dow, and Steven Horwitz & Sarah Skwire, whose insights he drew upon in penning his final words.