The economics of Fallout: New Vegas
What can video games teach us about the economics of democracy?
Fallout: New Vegas is a 2011 video game by Obsidian of which I am a huge fan. In this classic game, the main character (known as The Courier) must side with one of four factions in an upcoming war over the Hoover Dam, the heart of the lands known as the Mojave Wasteland.
The first of these factions is the New California Republic (NCR), an flawed democracy with a mixed record and expansionist ambitions. The second is Caesar’s Legion, a militaristic totalitarian slave monarchy inspired by the Roman Empire. The last two are differing factions aiming to lead the rebuilt city of Las Vegas. First is the keeper and founder of New Vegas itself, Robert House (Mr House), simultaneously an iron-fisted tyrant and a laissez-faire free marketeer. And finally is the Courier themselves, who can seize power of the New Vegas Strip from Mr House and command their own army.
WARNING: This posts contains major spoilers (for a decade-old game).
The case for the New California Republic
If you want to see the fate of democracies, look out the windows.
The main selling point for siding with the New California Republic is that it’s the only faction to be an actual democracy. Led by former general Aaron Kimball, the Republic has had a strong presence in the Mojave for years and has already defeated the Legion five years before while it attempted to take Hoover Dam.
The NCR, however, is a far weaker faction than it seems. Its forces are stretched thin throughout the Mojave, leading to many roads being unprotected and towns and merchants being frequently terrorized by bandits and gangs. Plus, the NCR’s commanding officer, General Lee Oliver, was picked for his political allegiance to President Kimball, and the military as a whole seems to heavily favor political hacks and personal ties over competence.
Additionally, it also has a dark history and a shaky human rights record in the Mojave and elsewhere. Its most notorious atrocity was the Bitter Springs Massacre, which happened while the NCR waged war against the members of a fierece pro-Legion tribe. NCR forces opened fire on members of that tribe fleeing the city, but due to (perhaps intentional) miscommunication, most of the casualties were actually women and children. Nobody ever took responsability for this. Plus, the second most senior officer in the Mojave, routinely takes it upon himself to fake intelligence reports and sabotage the Republic’s war plans due to his personal opposition to remaining there.
“Are democracies richer than dictatorships” is a very hard question. Democracies have been observed to perform better than dictatorships, but it’s also true that poor countries (that typically grow very slowly) are far likelier to be dictatorships in the first place. And in addition, economically unsuccessful democracies might simply collapse, leading to a selection bias of successful democracies.
In the end, there’s three issues to clarify. First, whether or not the NCR is a successful democracy, and if that is a guarantee of economic success. Second, if the NCR is actually suited to rule the Mojave given these characteristics. And third, if the NCR’s governance structure is well suited for growth in general.
Regarding the first point, democratic polities have incentives for providing important public services that dictatorships do not; however, democracies of lower quality (say corrupt, unstable, badly managed democracies) have far weaker incentives to do that than strong democracies. This occurs because weaker leaderships has to spend many more resources in securing power, even if they did have a genuine interest in governing. Regardless, it seems that the selection effect weighs heavily, and that stable democracies are rich not because they are democracies, but because they are stable. And the NCR is not a strong, stable democracy. It has politics that are corrupted by the pervasive influence of rich cattle ranchers, merchants, and military generals. NCR heads of state are less statesmen and more strongmen. The Republic seems adequate at maintaing property rights, but (as stated above) it has enormous blind spots basically everywhere else, especially in terms of internal stability.
Secondly, the Mojave is more like a developing country than a developed one. A key factor to consider is that it has enormous diversity between its “tribes”, which are frequently at odds with each other. Easterly and Levine (1997) note that many of the factors frequently blamed for Africa’s underdevelopment (poor schooling, instability, bad governance) are actually a byproduct of ethnic fractionalization. This is also correlated with the previous issue: stronger institutions can solve fractionalization and weaker ones cannot. The NCR heartland seems to be more or less culturally homogenous, but it seems that the ineffective, brittle institutions of the Republic aren’t actually up to the task of managing the Mojave’s endless rivalries and disputes - not to mention its various misaligned tribes.
Finally, the NCR is, once again, a very ineffective ruler. Its politics seem slow, and it has a powerful business class and highly corrupt and bureaucratic politics. Both of those are negatively correlated with growth. The politics of the NCR aren’t all that competitive, so the entrenched elite may actually attempt to block economic development to preserve their own positions. All of these make it a subpar ruler at best and a sort of quasi colonial exploiter at worst.
The case for Caesar’s Legion
Under the Legion’s banner civilization - savage as it was - finally came to the Mojave Wasteland
Caesar’s Legion was founded 35 years before the events of the game by a doctor named Edward Sallow, who renamed himself “Caesar” and led a small tribe to conquer most of Arizona, Colorado, and New Mexico and annex its inhabitants. The Legion is a brutal autocracy, ruled with an iron fist by a military caste, and its main ideology is a sort of all-encompassing expansionism. This Roman-inspired faction is incredibly harsh in its tactics, massacring their enemies and regularly crucifying dissenters, but also is a much more stable and “peaceful” ruler once it conquers an area. Traders are known to prefer legion territory because of its stability, low taxes, and ease of trading.
There is an old fashioned argument for the Legion: democracy can be a distraction from growth. Because democracies have to “pander” to the voters, they adopt suboptimal but popular policies: protectionism, overly high taxes, excessive welfare. As the conservative proverb goes “no democracy ever cut welfare”. This isn’t particularly true, as seen above: democracies have incentives to choose good policies to maximize voter income, all things being equal. But there’s a clear governance argument as well. The most traditional case for why England became rich is that its pre-1688 monarchs were despotic autocrats who could do whatever they wanted. This led them to routinely exploit private businesses and default on their debts. A war caused by these abuses led to a more restrained government, which was able to promote prosperity by securing private property. But there’s a problem in the converse: states that were too weak were incapable of raising revenues and became bastions of corruption, excessive regulation, and overtaxation. Since the Legion doesn’t have this problem, a more laissez-faire leader than Caesar could actually reform the Legion to become a richer nation.
The Legion’s brutality and slave-owning ways, in addition, could actually be a plus, in a deeply twisted way. The economic historian Walter Scheidel makes an interesting case: the main way to reduce inequality (a drag on growth, by any measure) are large-scale disruptions, such as war and disease. Much like the World Wars, the French Revolution, and the Black Death destroyed large amounts of wealth (and lives) and led to more equitable distributions of the remainders, the Legion’s path of destruction from Colorado to California would do the same. Or it might not, since there are probably better ways to boost growth than to just murder thousands of people without much rhyme or reason. The Cultural Revolution wasn’t the start of a golden age, after all. In a very simplistic neoclassical growth model, where income per capita is a function of capital per worker, reducing the number of workers without destroying the capital increases income per person in the long run. Plus, the widespread use of slavery might have the same the effect it had on European nations: it made (capitalist) merchants increasingly powerful, so their pro-growth institutions would eventually
The final problem with the Legion comes down to technology. Over the long term, growth comes down to productivity. Countries don’t just have endless amounts of resources - they eventually have to use them better. Technology is frequently loosely tied to productivity. But Caesar is a massive Luddite, banning even medical tech and begrudgingly allowing modern weapons to be used. The Legion’s refusal to use the available advances, such as robotics, power armor; nuclear, hydro, and solar power; and various medical improvements would in the long run cripple its economic potential.
The case for an Independent New Vegas
New Vegas continued to be the sole place in the wasteland where fortunes were won and lost in the blink of an eye.
There’s one final path that the player can take: an independent New Vegas, whether led by the billionaire tech genius Robert House or the player’s robotic henchman Yes Man. Mr House is more a traditional ruler, using his army of robot enforcers to keep order within New Vegas while maintaining the rest of the Mojave under a loose sphere of influence. Yes Man is a much more laissez faire type, a “live and let live” type.
Mr House himself is frequently compared to Singapore’s Lee Kuan Yew. He seems to be a believer in a firm, authoritarian government, headed by an unquestioned leader, who uses a grand economic vision to usher in prosperity through free markets combined with a schedule of central planning. New Vegas, where House has free reign, is the perfect encapsulation of the strenghts, and weaknesses, of this model. On the one hand, House proves an adequate steward of property rights and contracts, leading to a blossoming trade and tourism hub. On the other, his underlings (the so called Three Families) are the leading cause of corruption and crime in the New Vegas Strip, with two of them conspiring with the Legion for an invasion of New Vegas and the third resorting to cannibalizing visitors (talk about a breach of contract). House could have both the problems of a Caesar, that of the “unbounded Leviathan” type, but also the kind of stuff Argentina has had going on - a sort of interminable bargaining with private interests that lead to increasingly inefficient policies and a sclerotic economy, due to a very tenuous grip of power.
Yes Man, on the other hand, seems too laissez faire. An AI programmed to never say no, he seems a dangerous bet to place, with more downside than upside - besides unlimited market freedoms. While the regulatory capture and endless extraction of wealth that are incentivized by a Mr House type deal aren’t really possible (under someone so pliable they literally have “Yes” on their name), the reverse problem, of a state so weak it can’t raise any revenue, exists. Yes Man is very explicitly shown as not being able to maintain order in the Strip after his victory, and tax collection could prove a major issue. A New Vegas led by Yes Man appears to be one that doesn’t have a lot of potential in terms of maintaining property rights, enforcing contracts, or raising revenue - even if de jure allowed.
Both Yes Man and Mr House would have a similar political economy problem: representation without taxation, and taxation without consent. Both of the prospective rulers of the Strip are able to fund a government, since Mr House is directly stated to collect taxes on various towns (enforced by his robotic goons), mostly to punish them for siding with the NCR, and Yes Man probably retains some of the infrastructure House left behind. But taxing individuals who don’t have a say in how those taxes are spent, and not providing public services proportional to the amount of those taxes, seems like a clear way to spark at worst a revolution and at best just some really perverse incentives. Mr House might be inclined to provide public services in terms of economic efficiency (things like roads, schools, electricity, or running water) but Yes Man almost certainly won’t. If it can happen in colonial Latin America, it can happen in the Strip.
A final concern is inequality. Engerman & Sokoloff (2002) and the subsequent literature make the case that income inequality (created by plantation slavery and forced labor, such as the mita) harmed Latin American development in the long run. The evidence isn’t totally 100% on their side (in some instances, inequality promoted the creation of public goods by generating sources of countervailing power). In consequence, “highly unequal economies develop political systems that disproportionately favor established centers of power” is a real concern, especially due to the fact that these entrenched vested interests frequently block innovations and infrastructure that would benefit everyone else at their own expense.
Who should rule the Mojave? The question is, like everything else, complicated.
The NCR’s flawed democracy, warts and all, provides at least a guarantee that the incentives to eventually grow and develop exist - but, like in the real world, that might take a long time, maybe even milennia. The Republic, with its corruption and political weakness, might even be the worst kind of ruler for a distant, diverse, unstable environment.
The brutal, unforgiving nature of the Legion isn’t an appealing candidate, but many of its least favorable aspects resemble the kinds of regimes the wealthy liberal democracies of today sprang from. This is no reassurance, since their aversion to technology might make recovering the miraculous discoveries of the past (not to mention the future) impossible, and their warlike ways would make the victory of a liberal faction in the ensuing struggles between hardliners and reformers highly unlikely.
Yes Man and Mr House seem to have all of the drawbacks of the other factions and fewer noticeable strengths: an inability to create order, twisted political economies, and persistent fiscal issues, plus House’s voracious hunger for power or Yes Man’s inherent weakness creating a chance of misaligned incentives ossifying an unsustainable status quo.
In the end, it all comes down to priorities and how much each player likes each faction’s chances. As a committed liberal, I normally pick the Republic just because it’s a democracy, but the other factions have cases that seem far stronger than commonly thought, at least on purely economic grounds.
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The New California Republic
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Mr House and Yes Man
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