Measuring the Economics of Skyrim

Recently, I’ve started on a new play-through of Skyrim, the excellent 2011 game that is the most recent single player addition to the The Elder Scrolls series. Being a general numbers guy and also of the generation where home ownership seems like both a massive undertaking and largely uphill battle, it struck me when the first house you have the chance to buy in Skyrim, Breezehome, cost only 5000 gold to buy.

That got me thinking – what kind of economy does Skyrim have, and what can we learn about our own by studying this virtual one?

Establishing Demographics

Let’s start by establishing demographics – the core unit of economics is people, so we need to understand the people that we are studying. The folks at the Unofficial Elder Scrolls Pages are a great resource for this – they provide a page that contains, by hold, the number of named people by race.

Using this, we can calculate the total number of people in each hold, and indeed throughout Skyrim. Let’s assume that Nords, in general, will make up 90% of the unnamed population, Imperials will be 5%, and everybody else is a split of the remaining 5%. Let us also assume that named people make up 5% of the population of Skyrim. Everybody else is unnamed.

It so happens that there are 648 named people, so there are 12,960 people in total. Taking the distribution of named people over the Holds, we can calculate the population of the holds as such:

Looking at the picture by race:

Establishing the Cost of Living

While it’s clear that the majority of the population of Skyrim subsists through farming, we know there to be a number of city dwellers for whom subsistence comes from mercantile trade, mercenary work, thievery, or skilled trade. To maintain their lifestyle, they’ll have to purchase food and shelter on a regular basis. Let’s assume that 20% of residents are such city dwellers, 70% are farmers, and 10% are itinerant.

We know that the lifespan in Skyrim tends to be largely immobile, short (due in no small part to the player, doubtless), and its residents marry young and quickly. Therefore, we can assume that healthcare, education, and transportation are available only for the wealthiest residents, and therefore not a major cost. Cohabitation also changes the math around cost of living – we will assume 80% of individuals reside in a household consisting of two adults and, because lifespans tend to be short, three children. We will assume the remaining 20% live alone or are itinerant.

By this measure, we calculate that 10,368 people live in a household, for a total of 2074 households, and 2952 people live alone or are itinerant.

The value of a Homecooked Meal is 5 Septims. If we assume that every person must consume two of these per day to survive, then the cost of acquiring food is 10 Septims per day. For a five-person household, this indicates a cost per day of 50 Septims for food. Skyrim uses a calendar equivalent to our Gregorian one, so a typical household will spend 18,250 Septims per year on food.

The cost of a room at an inn is 10 Septims everywhere across Skyrim. If we estimate that, per night, staying at an inn is 30% more expensive than staying at home, then the cost per night of living at home is 7 Septims. Over the course of a year, this means that the typical household will spend 2,555 Septims on housing.

Therefore, the minimum subsistence income for city dwellers in a Household in Skyrim is 20,805 Septims per year. Using this information, we can calculate the costs for other demographic groups:

Calculating Annual Personal Consumption

Now that we know the subsistence income in Skyrim, we can learn a lot more about the economy of Skyrim. Assuming discretionary income of 20% after essentials, and a personal savings rate similar to America as of February 2016, 5.4%, we can calculate the total annual disposable income and total annual personal consumption for each of our demographic groups:

Talking Taxation

If you’re lucky enough to be a Jarl, you probably believe that you’re providing a pretty valuable service to your constituents. Enough, in fact, to extract some compensation in the form of taxes. After all, when they’re not taking arrows to knee, small armies of Hold guards don’t simply pay for themselves. Let’s assume you’re a fairly well educated Jarl, enough so to realize that arcane or byzantine tax codes can be just as detrimental to the stability of your reign as unduly high rates.

Because of your wisdom (and because progressive taxation hasn’t been invented yet), you institute a flat tax of 15%, which is anywhere from 30% to 100% lower than the current median effective tax rate in the US, depending on which irreparably biased source you ask.

This being the case, we calculate can calculate the annual gross incomes of our demographics:

Calculating the GDP of Skyrim

With this information, we can now learn a lot more about the state of the economy in Skyrim as a whole. Let’s assume that annual government expenditures exactly equal revenues every year. Therefore, we can calculate the annualized Gross Domestic Product (GDP) to be 34.964,604 Septims:

And of course, using this information we can also calculate the GDP of each hold:

Focus on Housing Market

One interesting peculiarity of the economy of Skyrim is that for non-farming Households/Individuals, the bigger component of the subsistence expenditure is actually food, rather than housing. Let’s examine the degree to which the housing prices in Skyrim reflect the cost of living as a gauge of the health of the economy. All things being equal, an efficient housing market generates a reasonable rate of return for owners, but is still accessible at the low end of house values.

First, let’s calculate the annualized average income per capita. In this case, we use the demographic unit as the basis for measurement and take a weighted average. This will give us a benchmark for the optimal price for housing. Using what we know, we calculate it thus:

When all is said and done, we calculate that the annualized per capita income in Skyrim is 7,855 Septims. For City Dwellers alone, it is 18,577 Septims, and for non-City Dwellers alone it is 5,152 Septims. So, there is a decent degree of income inequality between City Dwellers, Farmers, and Itinerants. Of course, the cost of living for City Dwellers is also significantly higher than it is for Farmers or Itinerants (who don’t pay for food and housing, respectively).

By comparing the purchase price of housing to income, we can gauge its affordability. The historical ratio of housing purchase price to median annual income in the United States is 3 (as of 2012), but can be as high as 8 in San Jose, CA or as low as 1.5 in Detroit.

For Skyrim:

By calculating the ratio for Non-City Dwellers separately from that of City Dwellers, we can see that upward mobility through the purchase of real estate is significantly harder for people who don’t already live in cities. That being said, compared to the United States, housing is significantly more affordable in Skyrim.

In only two cases does the price-to-income ratio for Non-City Dwellers exceed the historical ratio for the US. Proudspire Manor in Solitude has a ratio of 6.98, which is similar to the ratio of Los Angeles and San Francisco, whose residents spend 29% and 28.8% of their gross income on housing costs, respectively. In Windhelm, the ratio of 4.07 is similar to Portland, OR or Seattle, where residents spend 17.3% and 17.2%, respectively.

On the other hand, moving between cities is quite affordable – if you’re already a City Dweller, living in Solitude is only about as expensive as living in Atlanta, and there isn’t a single recorded city with a ratio lower than Detroit, at 1.5.

Conclusions

It’s a testament to the writers and developers of Skyrim, and The Elder Scrolls series at large, that the properties of their simulated economy come as close to the parameters of the real economy as they do. It takes meticulous planning and a keen mind for economics to design a system that not only works on a functional level, but even makes our own economy look bad by comparison. Of course, that is perhaps the premium that we pay for living in a world that has such things as modern medicine, the internet, and No Dragons (though some might identify this as a weakness of its own).

As a side note, this has been an exercise in Fermi Estimation, which uses probability and estimation to make informed predictions using limited information. If you’re interested in reading some of the other work that I’ve done using this technique, click here.