Harry Potter and the Methods of Rationality (3 page)

BOOK: Harry Potter and the Methods of Rationality
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Chapter 4. The Efficient Market Hypothesis

Disclaimer: J. K. Rowling is watching you from where she waits, eternally in the void between worlds.

A/N: As others have noted, the novels seem inconsistent in the apparent purchasing power of a Galleon; I’m picking a consistent value and sticking with it. Five pounds sterling to the Galleon doesn’t square with seven Galleons for a wand and children using hand-me-down wands.


World domination is such an ugly phrase. I prefer to call it world optimisation.

Heaps of gold Galleons. Stacks of silver Sickles. Piles of bronze Knuts.

Harry stood there, and stared with his mouth open at the family vault. He had so many questions he didn’t know
where
to start.

From just outside the door of the vault, Professor McGonagall watched him, seeming to lean casually against the wall, but her eyes intent. Well, that made sense. Being plopped in front of a giant heap of gold coins was a test of character so pure it was archetypal.

“Are these coins the pure metal?” Harry said finally.

“What?” hissed the goblin Griphook, who was waiting near the door. “Are you questioning the integrity of Gringotts, Mr. Potter-Evans-Verres?”

“No,” said Harry absently, “not at all, sorry if that came out wrong, sir. I just have no idea at all how your financial system works. I’m asking if Galleons in general are made of pure gold.”

“Of course,” said Griphook.

“And can anyone coin them, or are they issued by a monopoly that thereby collects seigniorage?”

“What?” said Professor McGonagall.

Griphook grinned, showing sharp teeth. “Only a fool would trust any but goblin coin!”

“In other words,” Harry said, “the coins aren’t supposed to be worth any more than the metal making them up?”

Griphook stared at Harry. Professor McGonagall looked bemused.

“I mean, suppose I came in here with a ton of silver. Could I get a ton of Sickles made from it?”

“For a fee, Mr. Potter-Evans-Verres.” The goblin watched him with glittering eyes. “For a certain fee. Where would you find a ton of silver, I wonder?”

“I was speaking hypothetically,” Harry said.
For now, at any rate.
“So… how much would you charge in fees, as a fraction of the whole weight?”

Griphook’s eyes were intent. “I would have to consult my superiors…”

“Give me a wild guess. I won’t hold Gringotts to it.”

“A twentieth part of the metal would well pay for the coining.”

Harry nodded. “Thank you very much, Mr. Griphook.”

So not only is the wizarding economy almost completely decoupled from the Muggle economy, no one here has ever heard of arbitrage.
The larger Muggle economy had a fluctuating trading range of gold to silver, so every time the Muggle gold-to-silver ratio got more than 5% away from the weight of seventeen Sickles to one Galleon, either gold or silver should have drained from the wizarding economy until it became impossible to maintain the exchange rate. Bring in a ton of silver, change to Sickles (and pay 5%), change the Sickles for Galleons, take the gold to the Muggle world, exchange it for more silver than you started with, and repeat.

Wasn’t the Muggle gold to silver ratio somewhere around fifty to one? Harry didn’t think it was seventeen, anyway. And it looked like the silver coins were actually
smaller
than the gold coins.

Then again, Harry was standing in a bank that
literally
stored your money in vaults full of gold coins guarded by dragons, where you had to go in and take coins out of your vault whenever you wanted to spend money. The finer points of arbitraging away market inefficiencies might well be lost on them. He’d been tempted to make snide remarks about the crudity of their financial system…

But the sad thing is, their way is probably better.

On the other hand, one competent hedge fundie could probably own the whole wizarding world within a week. Harry filed away this notion in case he ever ran out of money, or had a week free.

Meanwhile, the giant heaps of gold coins within the Potter vault ought to suit his near-term requirements.

Harry stumped forward, and began picking up gold coins with one hand and dumping them into the other.

When he had reached twenty, Professor McGonagall coughed. “I think that will be more than enough to pay for your school supplies, Mr. Potter.”

“Hm?” Harry said, his mind elsewhere. “Hold on, I’m doing a Fermi calculation.”

“A
what?
” said Professor McGonagall, sounding somewhat alarmed.

“It’s a mathematical thing. Named after Enrico Fermi. A way of getting rough numbers quickly in your head…”

Twenty gold Galleons weighed a tenth of a kilogram, maybe? And gold was, what, ten thousand British pounds a kilogram? So a Galleon would be worth about fifty pounds… The mounds of gold coins looked to be about sixty coins high and twenty coins wide in either dimension of the base, and a mound was pyramidal, so it would be around one-third of the cube. Eight thousand Galleons per mound, roughly, and there were around five mounds of that size, so forty thousand Galleons or 2 million pounds sterling.

Not bad. Harry smiled with a certain grim satisfaction. It was too bad that he was right in the middle of discovering the amazing new world of magic, and couldn’t take time out to explore the amazing new world of being rich, which a quick Fermi estimate said was roughly a billion times less interesting.

Still, that’s the last time I ever mow a lawn for one lousy pound.

Harry wheeled from the giant heap of money. “Pardon me for asking, Professor McGonagall, but I understand that my parents were in their twenties when they died. Is this a
usual
amount of money for a young couple to have in their vault, in the wizarding world?” If it was, a cup of tea probably cost five thousand pounds. Rule one of economics: you can’t eat money.

Professor McGonagall shook her head. “Your father was the last heir of an old family, Mr. Potter. It’s also possible…” The witch hesitated. “Some of this money may be from bounties placed on You-Know-Who, payable to his ki- ah, to whoever might defeat him. Or those bounties might not have been collected yet. I am not sure.”

“Interesting…” Harry said slowly. “So some of this really is, in a sense, mine. That is, earned by me. Sort of. Possibly. Even if I don’t remember the occasion.” Harry’s fingers tapped against his trouser-leg. “That makes me feel less guilty about spending
a very tiny fraction of it! Don’t panic, Professor McGonagall!

“Mr. Potter! You are a minor, and as such, you will only be allowed to make
reasonable
withdrawals from -”

“I am
all about
reasonable! I am totally on board with fiscal prudence and impulse control! But I
did
see some things on the way here which would constitute
sensible, grown-up
purchases…”

Harry locked gazes with Professor McGonagall, engaging in a silent staring contest.

“Like what?” Professor McGonagall said finally.

“Trunks whose insides hold more than their outsides?”

Professor McGonagall’s face grew stern. “Those are
very
expensive, Mr. Potter!”

“Yes, but -” Harry pleaded. “I’m sure that when I’m an adult I’ll want one. And I
can
afford one. Logically, it would make just as much sense to buy it now instead of later, and get the use of it right away. It’s the same money either way, right? I mean, I
would
want a good one, with
lots
of room inside, good enough that I wouldn’t have to just get a better one later…” Harry trailed off hopefully.

Professor McGonagall’s gaze didn’t waver. “And just what would you
keep
in a trunk like that, Mr. Potter -”

“Books.”

“Of course,” sighed Professor McGonagall.

“You should have told me
much earlier
that sort of magic item existed! And that I could afford one! Now my father and I are going to have to spend the next two days
frantically
hitting up all the secondhand bookshops for old textbooks, so I can have a decent science library with me at Hogwarts - and maybe a small science fiction collection, if I can assemble something decent out of the bargain bins. Or better yet, I’ll make the deal a little sweeter for you, okay? Just let me buy -”


Mr. Potter!
You think you can
bribe
me?”

“What?
No!
Not like that! I’m saying, Hogwarts can keep some of the books I bring, if you think that any of them would make good additions to the library. I’m going to be getting them cheap, and
I
just want to have them around somewhere or other. It’s okay to bribe people with
books,
right? That’s a -”

“Family tradition.”

“Yes, exactly.”

Professor McGonagall’s body seemed to slump, the shoulders lowering within her black robes. “I cannot deny the sense of your words, though I much wish I could. I will allow you to withdraw an additional hundred Galleons, Mr. Potter.” She sighed again. “I
know
that I shall regret this, and I am doing it anyway.”

“That’s the spirit! And does a ‘mokeskin pouch’ do what I think it does?”

“It can’t do as much as a trunk,” the witch said with visible reluctance, “but… a mokeskin pouch with a Retrieval Charm and Undetectable Extension Charm can hold a number of items until they are called forth by the one who emplaced them -”

“Yes! I definitely need one of those too! It would be like the super beltpack of ultimate awesomeness! Batman’s utility belt of holding! Never mind my swiss army knife, I could carry a whole tool set in there! Or
books!
I could have the top three books I was reading on me at all times, and just pull one out anywhere! I’ll never have to waste another minute of my life! What do you say, Professor McGonagall? It’s for the sake of children’s reading, the best of all possible causes.”

“…I suppose you may add another ten Galleons.”

Griphook was favouring Harry with a gaze of frank respect, possibly even outright admiration.

“And a little spending money, like you mentioned earlier. I think I can remember seeing one or two other things I might want to store in that pouch.”


Don’t push it, Mr. Potter.

“But oh, Professor McGonagall, why rain on my parade? Surely this is a
happy
day, when I discover all things wizarding for the first time! Why act the part of the grumpy grownup when instead you could smile and remember your own innocent childhood, watching the look of delight upon my young face as I buy a few toys using an insignificant fraction of the wealth that I earned by defeating the most terrible wizard Britain has ever known, not that I’m accusing you of being ungrateful or anything, but still, what are a few toys compared to that?”


You,
” growled Professor McGonagall. There was a look on her face so fearsome and terrible that Harry squeaked and stepped back, knocking over a pile of gold coins with a great jingling noise and sprawling backwards into a heap of money. Griphook sighed and put a palm over his face. “I would be doing a great service to wizarding Britain, Mr. Potter, if I locked you in this vault and left you here.”

And they left without any more trouble.

Chapter 5. The Fundamental Attribution Error

J. K. Rowling is staring at you. Can you feel her eyes on you? She’s reading your mind using her Rowling Rays.

“It would’ve required a
supernatural intervention
for him to have
your
morality given
his
environment.”

The Moke Shop was a quaint little shop (some might even say cute) ensconced behind a vegetable stall that was behind a magical glove shop that was on an alleyway off a side street of Diagon Alley. Disappointingly, the shopkeeper was not a wizened ancient crone; just a nervous-looking young woman wearing faded yellow robes. Right now she was holding out a Moke Super Pouch QX31, whose selling point was that it had a Widening Lip as well as an Undetectable Extension Charm: you could actually fit big things in it, though the total volume was still limited.

Harry had
insisted
on coming here straight away, first thing - insisted as hard as he thought he could without making Professor McGonagall suspicious. Harry had something he needed to put into the pouch as soon as possible. It wasn’t the bag of Galleons that Professor McGonagall had allowed him to withdraw from Gringotts. It was all the other Galleons that Harry had surreptitiously shoved into his pocket after falling into a heap of gold coins. That
had
been a real accident, but Harry was never one to discard an opportunity… though it’d really been more of a spur-of-the-moment thing. Ever since Harry had been awkwardly carrying the allowed bag of Galleons next to his trouser pocket, so that any jingling would seem to come from the right place.

This still left the question of how he was actually going to get the
other
coins into the pouch without getting caught. The golden coins might have been his, but they were still stolen - self-stolen? Auto-thieved?

Harry looked up from the Moke Super Pouch QX31 on the counter in front of him. “Can I try this for a bit? To make sure it works, um, reliably?” He widened his eyes in an expression of boyish, playful innocence.

Sure enough, after ten repetitions of putting the coin-bag into the pouch, reaching in, whispering “bag of gold”, and taking it out, Professor McGonagall took a step away and began examining some of the other items in the shop, and the shopkeeper turned her head to watch.

Harry dropped the bag of gold into the mokeskin pouch with his
left
hand; his
right
hand came out of his pocket tightly holding some of the gold coins, reached into the mokeskin pouch, dropped the loose Galleons, and (with a whisper of “bag of gold”) retrieved the original bag. Then the bag went back into his
left
hand, to be dropped in again, and Harry’s
right
hand went back into his pocket…

Professor McGonagall looked back at him once, but Harry managed to avoid freezing or flinching, and she didn’t seem to notice anything. Though you never
did
quite know, with the adults that had a sense of humour. It took three iterations to get the job done, and Harry guessed he’d managed to steal maybe thirty Galleons from himself.

Harry reached up, wiped a bit of sweat from his forehead, and exhaled. “I’d like this one, please.”

Fifteen Galleons lighter (twice the price of a wizard’s wand, apparently) and one Moke Super Pouch QX31 heavier, Harry and Professor McGonagall pushed their way out of the door. The door formed a hand and waved goodbye to them as they left, extruding its arm in a way that made Harry feel a bit queasy.

And then, unfortunately…

“Are you
really
Harry Potter?” whispered the old man, one huge tear sliding down his cheek. “You wouldn’t lie about that, would you? Only I’d heard rumours that you didn’t
really
survive the Killing Curse and that’s why no one ever heard from you again.”

…it seemed that Professor McGonagall’s disguise spell was less than perfectly effective against more experienced magical practitioners.

Professor McGonagall had laid a hand on Harry’s shoulder and yanked him into the nearest alleyway the moment she’d heard “Harry Potter?” The old man had followed, but at least it looked like no one else had heard.

Harry considered the question.
Was
he really Harry Potter? “I only know what other people have told me,” Harry said. “It’s not like I remember being born.” His hand brushed his forehead. “I’ve had this scar as long as I remember, and I’ve been told my name was Harry Potter as long as I remember. But,” Harry said thoughtfully, “if there’s already sufficient cause to postulate a conspiracy, there’s no reason why they wouldn’t just find another orphan and raise him to believe that
he
was Harry Potter -”

Professor McGonagall drew her hand over her face in exasperation. “You look just about exactly like your father, James, the year he first attended Hogwarts. And I can attest on the basis of
personality alone
that you are related to the Scourge of Gryffindor.”


She
could be in on it too,” Harry observed.

“No,” quavered the old man. “She’s right. You have your mother’s eyes.”

“Hmm,” Harry frowned. “I suppose
you
could be in on it too -”

“Enough, Mr. Potter.”

The old man raised up a hand as if to touch Harry, but then let it fall. “I’m just glad that you’re alive,” he murmured. “Thank you, Harry Potter. Thank you for what you did… I’ll leave you alone now.”

And his cane slowly tapped away, out the alley and down the main street of Diagon Alley.

The Professor looked around, her expression tense and grim. Harry automatically looked around himself. But the alley seemed empty of all but old leaves, and from the mouth leading out into Diagon Alley, only swiftly striding passersby could be seen.

Finally Professor McGonagall seemed to relax. “That was not well done,” she said in a low voice. “I know you’re not used to this, Mr. Potter, but people do care about you. Please be kind to them.”

Harry looked down at his shoes. “They shouldn’t,” he said with a tinge of bitterness. “Care about me, I mean.”

“You saved them from You-Know-Who,” said Professor McGonagall. “How should they not care?”

Harry looked up at the witch-lady’s strict expression beneath her pointed hat, and sighed. “I suppose there’s no chance that if I said
fundamental attribution error
you’d have any idea what that meant.”

“No,” said the Professor in her precise Scottish accent, “but please explain, Mr. Potter, if you would be so kind.”

“Well…” Harry said, trying to figure out how to describe that particular bit of Muggle science. “Suppose you come into work and see your colleague kicking his desk. You think, ‘what an angry person he must be’. Your colleague is thinking about how someone bumped him into a wall on the way to work and then shouted at him.
Anyone
would be angry at that, he thinks. When we look at others we see personality traits that explain their behaviour, but when we look at ourselves we see circumstances that explain our behaviour. People’s stories make internal sense to them, from the inside, but we don’t see people’s histories trailing behind them in the air. We only see them in one situation, and we don’t see what they would be like in a different situation. So the fundamental attribution error is that we explain by permanent, enduring traits what would be better explained by circumstance and context.” There were some elegant experiments which confirmed this, but Harry wasn’t about to go into them.

The witch’s eyebrows drew up beneath her hat’s brim. “I think I understand…” Professor McGonagall said slowly. “But what does that have to do with you?”

Harry kicked the brick wall of the alley hard enough to make his foot hurt. “People think that I saved them from You-Know-Who because I’m some kind of great warrior of the Light.”

“The one with the power to vanquish the Dark Lord…” murmured the witch, a strange irony leavening her voice.

“Yes,” Harry said, annoyance and frustration warring in him, “like I destroyed the Dark Lord because I have some kind of permanent, enduring destroy-the-Dark-Lord trait. I was fifteen months old at the time! I don’t
know
what happened, but I would
suppose
it had something to do with, as the saying goes, contingent environmental circumstances. And certainly nothing to do with my personality. People don’t care about
me,
they aren’t even paying attention to
me,
they want to shake hands with a
bad explanation
.” Harry paused, and looked at McGonagall. “Do
you
know what really happened?”

“I
have
formed an idea…” said Professor McGonagall. “After meeting you, that is.”

“Yes?”

“You triumphed over the Dark Lord by being more awful than
he
was, and survived the Killing Curse by being more terrible than Death.”

“Ha. Ha. Ha.” Harry kicked the wall again.

Professor McGonagall chuckled. “Let’s get you to Madam Malkin’s next. I fear your Muggle clothing may be attracting attention.”

They ran into two more well-wishers along the way.

Madam Malkin’s Robes had a genuinely boring shopfront, red ordinary brick, and glass windows showing plain black robes within. Not robes that shone or changed or spun, or radiated strange rays that seemed to go right through your shirt and tickle you. Just plain black robes, that was all you could see through the window. The door was propped wide open, as if to advertise that there were no secrets here and nothing to hide.

“I’m going to go off for a few minutes while you get fitted for your robes,” said Professor McGonagall. “Will you be all right with that, Mr. Potter?”

Harry nodded. He hated clothes shopping with a fiery passion and couldn’t blame the older witch for feeling the same way.

Professor McGonagall’s wand came out of her sleeve, tapped Harry’s head lightly. “And as you’ll need to be clear to Madam Malkin’s senses, I am removing the Obfuscation.”

“Uh…” Harry said. That did worry him a little; he still wasn’t used to the ‘Harry Potter’ thing.

“I went to Hogwarts with Madam Malkin,” McGonagall said. “Even then, she was one of the most
composed
people I knew. She wouldn’t turn a hair if You-Know-Who himself walked into her shop.” McGonagall’s voice was reminiscent, and very approving. “Madam Malkin won’t bother you, and she won’t let anyone else bother you.”

“Where
are
you going?” Harry inquired. “Just in case, you know, something
does
happen.”

McGonagall gave Harry a hard look. “I am going
there,
” she said, pointing at a building across the street which showed the sign of a wooden keg, “and buying a drink, which I desperately need.
You
are to get fitted for your robes,
nothing else
. I will come back to check up on you
shortly
, and I
expect
to find Madam Malkin’s shop still standing and not in any way on fire.”

Madam Malkin was a bustling old woman who didn’t say a word about Harry when she saw the scar on his forehead, and she shot a sharp look at an assistant when that girl seemed about to say something. Madam Malkin got out a set of animated, writhing bits of cloth that seemed to serve as tape measures and set to work examining the medium of her art.

Next to Harry, a pale young boy with a pointed face and
awesomecool
blonde-white hair seemed to be going through the final stages of a similar process. One of Malkin’s two assistants was examining the white-haired boy and the chequerboard-gridded robe he was wearing; occasionally she would tap a corner of the robe with her wand, and the robe would loosen or tighten.

“Hello,” said the boy. “Hogwarts, too?”

Harry could predict where this conversation was about to go, and he decided in a split second of frustration that enough was enough.

“Good heavens,” whispered Harry, “it couldn’t be.” He let his eyes widen. “Your… name, sir?”

“Draco Malfoy,” said Draco Malfoy, looking slightly puzzled.

“It
is
you! Draco Malfoy. I - I never thought I’d be so honoured, sir.” Harry wished he could make tears come out of his eyes. The others usually started crying at around this point.

“Oh,” said Draco, sounding a little confused. Then his lips stretched in a smug smile. “It’s good to meet someone who knows his place.”

One of the assistants, the one who’d seemed to recognise Harry, made a muffled choking sound.

Harry burbled on. “I’m delighted to meet you, Mr. Malfoy. Just unutterably delighted. And to be attending Hogwarts in your very year! It makes my heart swoon.”

Oops. That last part might have sounded a little odd, like he was flirting with Draco or something.

“And
I
am pleased to learn that I shall be treated with the respect due to the family of Malfoy,” the other boy lobbed back, accompanied by a smile such as the highest of kings might bestow upon the least of his subjects, if that subject were honest, though poor.

Eh… Damn, Harry was having trouble thinking up his next line. Well, everyone
did
want to shake the hand of Harry Potter, so - “When my clothes are fitted, sir, might you deign to shake my hand? I should wish nothing more to put the capper upon this day, nay, this month, indeed, my whole lifetime.”

The white-blonde-haired boy glared in return. “And what have
you
done for the Malfoys that entitles you to such a favour?”

Oh, I am so totally trying this routine on the next person who wants to shake my hand.
Harry bowed his head. “No, no, sir, I understand. I’m sorry for asking. I should be honoured to clean your boots, rather.”

“Indeed,” snapped the other boy. His stern face lightened somewhat. “Tell me, what House do you think you might be sorted into? I’m bound for Slytherin House, of course, like my father Lucius before me. And for you, I’d guess House Hufflepuff, or possibly House Elf.”

Harry grinned sheepishly. “Professor McGonagall says that I’m the most Ravenclaw person she’s ever seen or heard tell of in legend, so much so that Rowena herself would tell me to get out more, whatever
that
means, and that I’ll undoubtedly end up in Ravenclaw House if the hat isn’t screaming too loudly for the rest of us to make out any words, end quote.”

BOOK: Harry Potter and the Methods of Rationality
11.78Mb size Format: txt, pdf, ePub
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