Everyday Economics: Bioshock Edition

On my recent trek between Virginia and Massachusetts (and back), I listened to an audio version of the book Bioshock: Rapture by John Shirley (If you’re looking for something light to take your mind off of things, this is a good book).  The book details the rise and fall of Rapture, a massive underwater city built by Andrew Ryan (a not so subtle jab at Ayn Rand) to escape the “parasitic” governments of the world and build a society dedicated to freedom and free markets.  While the initial goal of Rapture may have been freedom and free markets, as the novel (and the video game that the novel is based on) details, Rapture becomes a totalitarian police state with an extremely wealthy (and often sadistic) upper class, and extremely poor low class, and no one in between.  Some see Bioshock as a refutation of Randian philosophy, however, I will not address that here as I am no expert in Ayn Rand (for an excellent discussion, see The Value of Art in Bioshock: Ayn Rand, Emotion, and Choice by Jason Rose).  I’ll leave that to people far smarter than I.  Rather, I want to address the economic situation of Rapture and discuss, briefly, how that contributed to the downfall.

A few quick disclaimers before I begin:

1. As far as I know, Bioshock: Rapture is not canonical.  However, it is the only detailed source I can find thus far on the days of Rapture that take place before the video game (which is canon) so I will operate on the assumption that my source material is canonical knowing full well everything I write here could become completely worthless insofar as discussing canonical information (the lessons gleaned from this book are still important, however).
2. Nothing in this essay should be taken as implying the rise or fall of Rapture is purely economic.  There are many other factors involved (social, political, medical, psychological, etc).  I skip or gloss over these not because I think they are unimportant (quite the opposite, really), but because I simply lack the expertise to discuss them with any confidence.
3. I will be avoiding using direct quotes in this version of this essay.  The reason for this is simple: I have the audio book, not the book itself.  I can’t easily do verbatim quotes and attribute them to proper pages for citations.  Therefore, the reader should be aware that I am doing this partly out of memory (although I did scribble some notes) and further the reader should assume that whenever I describe what’s happening in Rapture, that is a reference to the work of Mr. Shirley.  The only original material will be my analysis.  Any inaccuracies, either to details or analysis, belong to me and me alone.

The short version of what follows: Rapture cannot be classified in any meaningful sense as a “free market.” It suffers from several deficiencies that prevent us from labeling Rapture as a free market: lack of property rights, lack of free trade (autarky), lack of labor mobility (autarky in the labor market), rejection of altruism, widespread and institutionalized fraud (this issue is speculative based off of interviews with characters within the book but not substantiated by details), and censorship (indirect at first, but more direct later).  In Andrew Ryan’s Rapture, “free market” and “laissez-faire” were not much more than dishonored buzzwords.  It can best be described, in the words of James Buchanan, as “moral anarchy,” (see Moral Science and Moral Order, especially page 190 and Limits of Liberty, especially Chapter 7).  These factors, coupled with other psychological, social, and other factors, lead to the decline, civil war, and eventual fall of Rapture. 

Property Rights

Nominally, the citizens of Rapture had property rights.  They could rent or buy real estate from Andrew Ryan (who argued that since he built Rapture with his own money, he owned Rapture and could do as he pleased with it).  There were shops that sold all kinds of Rapture-made goods that people could buy.  There was a police force that could prevent theft.  Robbery was a crime in Rapture.

In reality, property rights were very unclear.  There appears to be no clear protection of property rights short of vigilantism.

We have one documented case in Rapture prior the the Rapture Civil War, but it appears to be a representative case (other similar instances are hinted at throughout the book): two grocery store owners had stores across the street from one another.  One owner was dumping his garbage in front of the other’s store and, since he also owned the local garbage disposal service, refused to remove the refuse from in front of the other store (it should be noted this was not a violation of a contract, but rather he just intentionally raised the price for removing garbage to this one owner so high he could not afford it).  As a result of this, the second owner was losing customers to his rival.  The second owner appealed to Mr. Ryan to protect his property rights and prevent his rival from dumping in front of his store.  Ryan refused, citing laissez-faire (it is worth noting that the “dumping” owner was insinuated to be a friend of Mr. Ryan).  In his despair, the store owner committed suicide.

Without uniformly enforced and clearly defined property rights, commercial markets cannot function well.  In the above representative example, the store owners were not competing in a market sense, but rather one was violating the rights of the other (by way of example, this would be like two transportation companies competing and one slashing the tires of the other).

Without secure property rights, it’s hard for trade and commerce to develop.  People cannot plan when the ownership their goods are in flux.  It makes it hard to earn a living without property rights, contributing to a lack of a sense of security in Rapture, as well as sowing the seeds for the extreme poverty that would develop over the course of Rapture.

It is important to note that well-defined and secure property rights are a key element of free markets (see the works of Milton Friedman, Hayek, Mises, Coase, and Tullock, just to name a few).  In this area, Andrew Ryan violated tenants of free markets.

Free Trade

Rapture was an autarkic society.  Early in the book, Ryan himself establishes that Rapture needs to be entirely self-sufficient.  Ryan made this decision (and a similar one that I will discuss in the next section on labor) based on security: he feared infiltration by the CIA, KGB, or other governments should Rapture’s existence leak out to the outside world.  Leaving aside the merits of such an argument, it was in the area of free trade where Ryan most betrayed his own stated values.  In the area of free trade, Ryan is most socialist.

A free market, by definition, cannot exist without free trade.  By relying entirely on Rapture’s production processes for all goods (including air; they were on the bottom of the ocean, after all), Ryan virtually guaranteed the poverty of Rapture.  Rapture would devote many resources to providing basic goods and services, which meant fewer resources for more luxury items.  With trade and specialization, Rapture could have imported goods where it was relatively cheaper to purchase then make, and export goods where it was relatively cheaper to make than purchase, increasing the wealth of Rapture.

While Rapture did have some nominal luxuries, they were of low quality.  Surprisingly, the bottom of the ocean isn’t the best place to grow tobacco or grapes for wine.  Citizens, even the wealthier ones, would complain about the low quality (especially since many of them came from the First World countries and were very wealthy there).  The low quality of Rapture-produced goods (brought on by the poor conditions but also the lack of competition) allowed the smuggler Frank Fontaine to make lots of money smuggling in goods from the outside world (Fontaine owned a fishery and was allowed to leave to get fish).  Fontaine would later become a rival to Ryan and one of the main instigators of the Rapture Civil War.

Ryan also suppressed competition in the marketplace when it was turned against him.  Frank Fontaine grew in economic power and wealth and began encroaching on Ryan’s businesses (and the existence of a rival made Ryan’s power over Rapture weaken).  Several times throughout the book, we see Ryan bemoaning this competition.  While he initially does nothing, he later uses his power as Rapture’s leader to investigate, raid, and eventually nationalize Fontaine Industries (to Ryan’s credit, he realizes the nationalization is a betrayal of his principles, but he justifies this on security grounds).  Frank Fontaine was involved in illegal activities (smuggling), but the fact that Ryan nationalized Fontaine’s businesses and gave them to himself indicates that Ryan was not much more than a cronyist.

By preventing free trade in Rapture, Andrew Ryan betrayed his free market rhetoric.

Labor Market

The labor market of Rapture, much like the goods market discussed in the previous section, was autarkic.  The supply of labor was, for all intents and purposes, fixed.  Immigration to Rapture could be done only by invitation, and even then only after very careful screening by Ryan (this was done, like the lack of free trade, for security reasons).  After the initial populating of Rapture, when Ryan first “opened the doors,” so to speak, to people he had screened, immigration was severely limited.  Emigration was forbidden.  Once in Rapture, one could not leave.  This prohibition on mobility would have disastrous consequences for Rapture.

One of the early consequences of this lack of free labor in Rapture is severe labor shortages.  Ryan’s screening process resulted in a arts & sciences heavy community: there were lots of artists and scientists who were recruited to Rapture with the promise of complete freedom for their work.  However, maintenance workers and other blue collar jobs were in short supply.  While there was lots of art and music and science in Rapture, there were many maintenance issues (and, as a city built underwater, it is obvious why that is a problem).

Eventually, Ryan would begin bringing down more blue collar workers from the surface for work in Rapture.  These workers were promised work, but it was contract work.  Once it was done, they would be laid off.  Since they could not relocate back to the surface, they would become unemployed and quickly find themselves destitute.  The rigid nature of Rapture’s labor market prevented these formally employed workers from getting new jobs.  Additionally, the huge influx of unemployed caused the labor wage to crash, meaning even when workers did get a job, it paid very poorly.

There is an important question one needs to ask: initially, why didn’t the wage rate rise high enough to convince some of the arts/sciences people to become blue collar workers?  There’s a lot of potential answers to this question, all of which would require more details than the source material provides to answer.  Given the information we do have, I think the most likely scenario is Ryan Industries (the company qua government of Rapture) was a monopsonist buyer of both blue collar and (most) white collar jobs.  Given the proclivities of Ryan, he likely refused to pay higher wages to blue collar workers in favor of scientists and artists.  In short, he’d have to pay higher than the white collar jobs, which I doubt he was willing to do.  This monopsonist power is likely why these laid off workers could not find a job after their contract expired since monopsonists are quantity restrictors.  However, a fuller exploration of this point would require more information.

Rejection of Altruism

Ryan’s philosophy did not allow for altruism.  He believed that any kind of aid, even if it was personal, resulted in a person becoming a parasite on society.  Altruism was not initially banned in Rapture (although in the years leading up to the Rapture Civil War, it would be), but altruism was heavily discouraged through propaganda.  Discouraging altruism, first de facto and then de jure, is another way Ryan betrayed his free market rhetoric.

A market is nothing more than the name we give to the voluntary transactions between people.  A “market for cars,” for example just refers to the voluntary buying and selling of cars.  Money (or even other goods) need not change hands.  If I want to voluntarily give X to a person and get nothing in return, then that is a market transaction.  Recasting Ryan’s argument in market terms, he was objecting to voluntarily providing a good or service to someone for nothing in return.  He was objecting to a specific kind of market transaction, which his rhetoric opposed.

There is a subtlety when dealing with altruism, one that can be summed up thusly: if I help a person, am I doing more harm than good?  If a student comes to me complaining about his grade, do I do more harm than good by changing his grade upward so he might keep his scholarship (for a more in-depth explanation of this conundrum, see Freedom in Constitutional Contract, especially Chapter 12, by James Buchanan)?  However, it does not appear that Ryan is making this subtle argument.  He condemns all forms of altruism.  That is a violation of his own rhetoric.

Institutionalized Fraud

This point is largely speculative and is based off a single scene, never referenced again, in the book.  I will leave it to the reader’s judgment on how much weight to put on this source.

In one scene, Sophia Lamb (a psychiatrist brought to Rapture to help Ryan understand why people are unhappy in his paradise) is interviewing some of the aforementioned unemployed contract workers.  While it is never explicitly stated, it is heavily insinuated in the scene that the workers were brought down on the promise of secrecy but never told they couldn’t go back to the surface after.

Throughout the course of the book, we see more and more distrust developing among the people of Rapture.  A society cannot exist without some level of trust.

This development of mistrust may be caused, partly, because of this seemingly institutionalized fraud Ryan used to get blue collared workers to Rapture during the aforementioned labor crisis.  If a society cannot trust one another, then contracts and trade are impossible.  A contract requires trust: trust that 1) both parties will uphold their end of the bargain, and 2) should (1) not occur, trust that the agreed-upon arbitrator will make a fair determination.  It appears that this potential fraud by Ryan, and the property right violations discussed in the earlier section, destroyed that trust.  It’s no wonder these people turned dissident.

Censorship

Andrew Ryan early on in the history of Rapture established himself as the patron of the arts.  As mentioned above, Ryan brought many artists and scientists to Rapture, but they all shared his views and his tastes.  Given the aforementioned autarkic nature of Rapture, there was limited competition for art and music in Rapture (and with Ryan as the primary employer, if he didn’t like your stuff, you were out of luck).  Most of the songs and the art in Rapture are dedicated to extolling the virtues of Rapture, Ryan, and his philosophy of “The Great Chain.”

In this early point of Rapture’s history, the censorship was more unintentional than intentional.  Ryan was able to subtlety control the art market through his sole patronage (another monopsonist case).  It wasn’t until later when he began his overt power grab, did his censorship become legislation.  Regardless, Ryan betrayed his own free market rhetoric by messing around in this market.

Conclusion

Despite Rapture and its de facto leader Andrew Ryan being nominally pro-free market, the evidence from the history of Rapture suggests Ryan was anything but.  He sought power and preached a “freedom for me but not for thee” message with his actions.  Ryan liked competition, except when it was against him (or his friends).  He liked his own property rights, but would not honor others.  He refused to open trade outside of Rapture, either in labor or goods.  He rejected altruism and conceivably participated in fraud and censorship.  These factors lead to the economic decline and fall of Rapture.  Ryan may have supported the institution of the market, but he would not allow it to operate.  In short, Rapture was a lawless place, and institutions without laws lead to moral anarchy and, in an extreme case like this, civil war and destruction.  Rapture was not a free market utopia gone wrong; it was a failure of central planning.