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Concerning Hobbits

What can hobbits teach us about economics?

In J.R.R. Tolkien's first major work of fiction, Bilbo Baggins, a Hobbit from an agricultural land known as "The Shire" sets out on an adventure with a troop of dwarves that are determined to recover their gold-and their kingdom-from a dragon called Smaug. The book and movie focus on their adventures getting to the mountain and freeing its golden hoard, but there are lessons to be learned from Bilbo's quiet homeland.

First, we learn that it is a peaceful, prosperous place. While most of the drama in the book and film comes from fights with wolves, orcs, and other creatures, the hobbits' homeland is a place of fields and farms. Perhaps unintentionally, Tolkien is saying something about the economic role of the military. A large army may be necessary for defense, but it is at best peripheral to productivity

Second, the Shire's economy focuses on agriculture. From the time of the ancient Greeks, thinkers have noted that a key to economic prosperity has been the principle of specialization. By focusing on what we do best and trading with others who do what they do best, everyone benefits. In Tolkien's world, different races have different strengths: the dwarves are miners and smiths, the elves care for the woodlands, men are traders, and hobbits are farmers.

Finally, the hobbits' happiness comes mainly from their contentment. Throughout his adventures, Bilbo pines for his cozy hobbit-hole with its simple pleasures. Near the end of his life, the leader of the dwarf-band tells him, "If more of us valued food and cheer and song above hoarded gold, it would be a merrier world." It's paradoxical, but another key to prosperity is recognizing when you have enough.

Fictional works often illustrate deeper truths. Tolkien was no economist, but the economy of his world still rings true today.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.