The Game of Monopoly versus Equopoly Why It Matters
The Monopoly game originated as an economic lesson, and still offers economic policy insights.
In the board game Risk, all the players start out equally. Each can place the pieces on any country in the map. Then both luck and strategy enable a player to conquer others’ territories, until one has taken over the world. The rule that a player may attack and conquer another player’s troops and territory illustrates what’s wrong with the world today.
The board game Monopoly provides another lesson. The game was invented by Elizabeth Magie Phillips, a follower of Henry George, as The Landlord’s Game to illustrate how land monopolies create inequality and economic woes. During the 1930’s, somebody who played the game made a couple of changes and sold it to Parker Brothers, despite Magie’s prior patent. The game is now sold by Hasbro.
The Landlord’s Game Players roll dice and select cards, which determines their moves, and they obtain real estate. The game’s landowners can then collect rent from those landing on their properties. Eventually all the players go bankrupt, and the real estate baron ends up monopolizing all the land and wealth. In the U.S. version, the properties are named after locations in Atlantic City.
The properties include houses, hotels, streets, railroads, and utilities. (The railroads offer the best cash flow and return on asset value.) Each player begins with some Monopoly-game currency. The game also includes a banker. Whenever a player lands on an unowned property, he may buy that property from the Bank at its printed price. If the player declines, then the Banker sells it at auction to the highest bidder.
When one lands on property owned by another player, the owner collects rent based on the list printed on its Title Deed.
There are also tax squares in which players pay a tax to the bank, but, unlike in Magie’s game, there is no land-value tax. One can mortgage a property, but then a player who is in debt and cannot pay what he owes is bankrupt and eliminated from the game. One wins not just by accumulating real estate but also by a strategy of bankrupting the other players.
The economic lesson of the game is that a player who, by luck and strategy, accumulates real estate can get rich at the expense of the players who pay rentals. If the game is changed so that the land rent is collected periodically, and distributed to the players equally, there would still be a game, but now there is no more gain from a land monopoly, and the players end up in a more equal financial status. The game can then proceed indefinitely.
The economic lesson of the game is that a player who, by luck and strategy, accumulates real estate can get rich at the expense of the players who pay rentals. The game’s land is a monopoly in the classical meaning of having a fixed supply. Eventually, the landlords get rich and the tenants become poor, or bankrupt.
Strategies for winning include holding sufficient cash, following a plan rather than buying randomly, and analysing cash flow relative to asset price. Thus in the real world, successful speculators know the real estate market and buy properties selling at a discount from average. There is some skill involved in land speculation. But that does not justify keeping all the rent. Success in exploiting some rules does not necessarily justify the rules. If the game is changed so that the land rent is collected periodically, and distributed to the players equally, there would still be a game, but now there is no more gain from a land monopoly, and the players end up in a more equal financial status. The game can then proceed indefinitely.
In the real world, the economy is in part a repeated, co-operative game. In a co-operative game, everyone may win. But since there are entry-monopolies, in which there is a fixed supply of a necessary resource, the game also becomes rival. The gain to the monopolist is a loss to the payer, such as a tenant. When the land rent is instead distributed equally to all players, then the natural monopoly of a fixed amount of land is no longer rival, as all the players benefit when the rent goes up. The rules no longer let some gain at the expense of others.
When the rent is shared equally, monopoly becomes an “equopoly”. In an equopoly, all players equally share the gains from a natural monopoly. That’s the game that true progressives should promote.
When the rent is shared equally, monopoly becomes an “equopoly”. (The word “geopoly” is already taken; not so “equopoly”.) In an equopoly, all players equally share the gains from a natural monopoly. That’s the game that true progressives should promote.
© Text Copyright 2016 Fred Foldvary, Ph.D. All rights reserved.
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