So you enter the "Magic Shoppe", and inside you see...what ?

[Dannyalcatraz]

For all of human history, in any culture you can examine, trade in things humans THOUGHT were magic or otherwise supernatural- potions, talismans, artifacts of the divine, holy relics, etc.- has occurred. That magic may not actually exist is immaterial-

Entirely wrong. The actual non-existence of magic is the most salient fact in the real world beliefs about magic. The actual non-existence of magic shaped everything that people believed about magic and how they behaved toward it, regardless of whether they actually believed in it. The real world being exactly like it was, but also containing magic, is a fantasy that can only occur in stories regardless of whether or not you believe in those stories. Just as the existence of Superheroes would profoundly alter society so that the comic books world of being almost exactly like the real world but with Superheroes can't exist outside of a comic, so the sort of magic people believed in could only exists in the stories people told themselves. The people in the real world believed that they lived in a world of magic, but since magic wasn't exactly an everyday experience, believed that magic was rare, that it required special people to perform it, or that it was almost non-existent here but that they'd heard reliable reports that it was prevalent elsewhere. Dragons always lived in the unknown spaces of the map.

I'm sorry, but your understanding of the fundamentals of economics is flawed here.

Supply is the material object or service side of the issue, but the demand curve is set more by human psychology than anything else. Beliefs, no matter how irrational or unfounded, drive demand. That's how fortunes get made & lost in volatile commodities markets.

Which means the actual existence or non-existence of magic is immaterial- those creating the demand are behaving as if magic exists, even if it does not.

And in the relevantly analogous RW time period, belief in magic & the supernatural was arguably more common than non belief. Certainly, beyond the noxious vials the crazy hag at the edge of town was selling as potions or the like, most probably believed magic was rare. But all that rarity does is drive the price up because the supply is small and/or hard to acquire.

Even today, some still believe. I live in one of the USA's biggest metropolitan areas, and can drive 5 minutes from my house and buy "authentic" talismans and potions. Until belief in magic is eradicated, a market will exist for it. It may be small; the prices may be exorbitant, but it will exist.

Or, to put it differently, the non-existence of magic does not eliminate a demand curve, it simply changes the size of the market. And as long as there is a demand curve, there will be someone out there to supply products and services to meet that demand- even though the buyers may be delusional and the suppliers charlatans. This is fundamental economics.

 

[gamerprinter]

RW historic Japan had a branch of the imperial government called the Ministry of Onmyodo whose purpose was the academically training of arcane spellcasters. It had an annual budget. Among its duties were to create an annual calendar of official events based on comparisons to astrology. In a cycle of good and bad days, no one wanted to hold an important event that lay on the same day as a presumed bad karma day.

Comparitively in medieval Europe the buying and selling of church relics was an active part of the ecclesiastic economy.

It doesn't matter that magic is not real. Historic peoples and institutions believed it was real and money was exchanged for services and goods that relate to the magic industry - and is still true today, though much more incremental than the past. To state that a magic economy only exists in fantasy and not the real world since magic isn't real is pretty meaningless statement to make. Belief drives motivations and economic decisions whether those beliefs are true or not.

 

[Celebrim]

Supply is the material object or service side of the issue, but the demand curve is set more by human psychology than anything else. Beliefs, no matter how irrational or unfounded, drive demand. That's how fortunes get made & lost in volatile commodities markets.

Which means the actual existence or non-existence of magic is immaterial- those creating the demand are behaving as if magic exists, even if it does not.

And in the relevantly analogous RW time period, belief in magic & the supernatural was arguably more common than non belief. Certainly, beyond the noxious vials the crazy hag at the edge of town was selling as potions or the like, most probably believed magic was rare. But all that rarity does is drive the price up because the supply is small and/or hard to acquire.

Even today, some still believe. I live in one of the USA's biggest metropolitan areas, and can drive 5 minutes from my house and buy "authentic" talismans and potions. Until belief in magic is eradicated, a market will exist for it. It may be small; the prices may be exorbitant, but it will exist.

I agree for almost all of that, but I never argued against the demand for magic much less what you describe here which is the demand for placebo magic. Indeed, I'd fully expect fake magic to be treated as a commodity to buy and sell. So sure, belief in magic creates a demand for magic and the resulting market in fake magic looks exactly like a commodity market for other non-magical goods - because the fake stuff is just another non-magical good.

I'm arguing that if magic was real, it would be fundamentally different than anything that is actually in the world. Real magic is postulated to have properties that aren't actually observed in the normal matter and laws of the universe. Indeed, the whole point is that it doesn't obey those normal laws but defy them. If it defies fundamental laws of the universe like gravity and interia, if it possesses perverse, animistic, non-deterministic, personal, esoteric, and gnostic characteristics there is no reason to expect that its relation to human behavior is going to be like that of non-magical items (and every reason to suspect otherwise), and therefore it is doing all these things no reason to suspect that an observation like, "Well, there is supply, and demand, so it will be a commodity like any other good." is true of it.

But by that I never argued that no demand for it would exist. Again, the demand for Tony Stark's suits of armor is basically infinite, it's the supply side that falters. No supply exists regardless of the price anyone places on it.

And as long as there is a demand curve, there will be someone out there to supply products and services to meet that demand-

Why? First, because there is someone out there that believes that they can profit by doing so. But what does profit mean in this sense? Just because it generally means economic profit doesn't mean that this is the only measurement actual people use of profit. Second, this happens because a product or service actually exists to meet the demand - that is to say that there is a supply. But in the case for the real world demand for magic, there is no supply so people buy the substitute good of placebo magic believing that it is real magic. In some cases both buyer and seller believe it is real magic, but critically they behave as if real magic is placebo magic.

The supply-demand curve isn't a fundamental law of the universe in the same way that inertia or gravity is. It's a strong observation on the basis of human behavior. It's true only for the vast majority of human economic transactions that we observe in this universe, although its true only in a very loose sense in that it generally involves at least two unknowns since there is no perfect way to turn supply or demand into a quantity. We see a price move and we go looking for reasons - supply must have gone done, or demand must have gone up. There is no guarantee however that it will govern non-human economic transactions, no guarantee it works for all universes, and no guarantee that it works for all hypothetical goods. But even to the extent that we can apply the law to singularities like Tony Stark's armor or Excalibur or the Rod of Seven Parts, there is no reason to expect that the result of supply and demand is to produce human behavior treating these as commodities.

Suppose I want to buy the Statue of Liberty. What's the market for that like? Suppose I want to buy the Lincoln memorial? What's the market for that like? Suppose I want to buy a Time Machine? What's the market for that like? Suppose I want to buy Eternal Life? What's the market for that like? The whole thing breaks down and gets fuzzy or just falls apart when you are dealing with items that aren't commodities. You seem to think that the law of supply and demand turns everything into a commodity. You've got it entirely backwards. The law of supply and demand applies - at least in the simple way you are using it (as long as there is a demand curve, there will be someone out there to supply products and services to meet that demand) - only when things are commodities. In order for us to expect that magic will be treated as a commodity in the world in which it exists, we first have to make it behave like a commodity to a greater (Discworld) or lesser (Harry Potter) extent. But there is no reason to apriori assume it is a commodity, and certainly much reason to assume for most narratives we might be inspired by (other than Discworld or Harry Potter) that it isn't one.

More briefly, demand for something that isn't a commodity can very well create a market for a commodity fake of the thing actually demanded, but this is no proof that the thing that isn't commodity is a commodity and actually quite the contrary if you think about it.

 

[Celebrim]

I'm sorry, but your understanding of the fundamentals of economics is flawed here.

The quoted paragraph isn't about economics. It's about magic. Clearly you've got a high understanding of economics, but your faith in it is too great. Your understanding of magic is lacking. Even with you understanding of economics though, I've got several quibbles.

Supply is the material object or service side of the issue, but the demand curve is set more by human psychology than anything else.

Quite wrong. Supply is also set more by human psychology than anything else. Human psychology tends to see most things as commodities and this particular seeing motivates humans to meet demand by creating supply. The seeing of the thing as a commodity is an essential aspect governing the supply. If the thing isn't seen as a commodity, this will determine supply - and there are plenty of things we see as a commodity in only a limited way or which are seen as commodities by only a limited number of people (who exclude themselves as suppliers), or which aren't seen as commodities at all (even if they could be).

A good example of how psychology effects supply is the market for slaves. Prior to the late 18th century, there was a robust market for slaves everywhere in the world. Almost everyone saw slaves as commodities and so the normal laws of supply and demand applied to human lives. To a larger and larger extent ever since the 18th century, increasingly people have been cultured to not see slaves as valid commodities and these people consequently place no price on slaves much less persons regardless of demand. So the market gets hit from both directions - reduced demand and reduced supply. A market still exists to be sure because of lingering combinations of culture and sociopathy, but you can't claim only the demand side is effected by psychology.

One could imagine a sentient species that sees nothing as a commodity at all. In that case, no markets or prices in a traditional sense would exist. The species is appalled by the whole idea of, "Because you want something, I should go get it for you and then charge a payment." Again, the laws of economics for the most part aren't physical laws like inertia or gravity.

 

[Celebrim]

Supply and demand as applied to an example magical item.

The Ark of the Covenent

a) Available supply: Probably 0. Theoretical supply: At most 1. The item can't be duplicated or even recreated. If it isn't available, it isn't available. And even if it is available, it isn't available - see nature of market below.
b) Available demand: It's the Ark of the Covenant. See price.
c) Price: It's the Ark of the Covenant. It's figuratively priceless if and only if you actually believe it's just a non-magical artifact of profound historical, artistic, cultural, and religious significance. Presumably every curator in the world would want it in their museum. Israel would probably be willing to go war to insure it resided within their borders, which is economics continued by different means with rather different rules. However, all this only applies is it's not magical. If you believe its actually magical, or even the actual sacred seat of God's presence in the world, it's priceless in a different more literal sense. No one who believed owning it would bless them would willingly part with it because its economic value in that case exceeds the value of the entire rest of the planet (other magical items if actually existing, excepting). There are no substitutionary goods, including money itself. Thus there is no basis for an economic transaction.
d) Consequence of Ownership: If it's really magical, the probable consequence is you die. As no one is presently the legitimate sanctioned user of the item, it's actual legal owner would certainly curse (as recorded in the historical records/myths regarding the item) any nation that obtained possession of it and it would kill anyone that touched it. One of the basic problems here is physical possession doesn't necessarily mean actual ownership. Actually becoming the legitimate owner is not an economic transaction. No economic offer can be used to claim ownership. If you possess it and it's not actively cursing you, the best thing to do with it is put it somewhere and hope it doesn't kill you. If you own it and it's actively cursing you, it's actual value is infinitely negative and you'd pay any price to get rid of it. However, see 'Nature of market' below. If your are deriving some benefit, it owns you and not the other way around.
e) Nature of Market: Attempting to buy or sell the item is blasphemy. Consequences are probably fatal or at the very least very painful. Theft of the item also is likely to have similar consequences. Arguably theft is only possible in the first place if the item wants an excuse to make a painful point, because otherwise the owner of the item is invincible. As a result, there is demand for this item only among the ignorant, the insane, or those that don't actually believe it is really magical or at least not really magical the way it is described. A few ignorant persons might believe it is a talisman of some sort or a charm with properties similar to the fake magical items they are used to (regardless of whether they believe them real or not), rather than an actual magical item but they'd quickly be disabused. Transfer of the item is likewise only possible for non-economic reasons.

 

[Dannyalcatraz]

Condensed reply; no particular order:

1) the laws of economics are about as fundamental as the social sciences get- they're a description of how thinking beings distribute resources of finite availability.

2) unique items follow all the same rules. Structures every bit as unique as the Statue of Liberty and the Lincoln a Memorial have been sold, sometimes legitimately, sometimes by con men. The Eiffel Tower, for instance, was famously sold multiple times by one particularly good con.

3) the only ways in which supply is affected by psychology is by passing laws interfering with the market OR by simply by would-be suppliers being unwilling to sell at any price. Even then, this can be described using the normal tools of basic economics. IOW, it is a corner case, not an exception.

Essentially, this is a definition of terms thing: in economics, only demand has a true psychological component.

You mentioned slavery. For one, it is covered by my oft-mentioned exception about laws interfering with the market (see above).

Even despite those laws, it is a practice that is still going on, even in places like the USA. By current best estimates, @30M people live in slavery today- moreso than in any prior point in human history. The market exists, it is just not out in the open. A black market is still a market; it behaves according to the rules of S&D curves.

And the raw material of slavery- the supply of living beings- is simply unaffected by the psychology of the slavery market. The supply exists independent of that market. The only way in which psychology is affecting the slavery market is the demand curve- kill the demand for slaves, there will be nobody to supply them to. Would-be slaves then could enter the job market.

Back to relics. When relics hit Europe, they were- in some areas- no longer for sale or were only bought by royalty or the Church, true. But that is because of artificial rules placed on the market: it was illegal to sell them to anyone else. And even then, the market was quite substantial in areas not governed by those laws, and the black market in relics was extant within those regions.

Really, the one and only way in which magic items could behave in a non-economic fashion is if there was something inherent in them that actively prevented their resale...as I already mentioned. Mere blasphemy won't do it- there will always someone who doesn't give a damn about damnation. Many reasons exist for this- being a different faith, being of the same faith but in financial extremis, etc. If, OTOH, the doom promised by blasphemy was backed up by bolts from the blue sky, that pretty much kills the market. But that's typically only going to cover the more powerful items of divine magic (IOW, not CLW potions) or those that some arcane crafter makes specifically for a single person or subset of people. And those would be far and away the exception and not the rule- certainly not bog standard D&D magic items. The closest things I've personally seen to this in game were the swords of the elemental champions in the RttTOEE adventure path (and similar intelligent or aligned magic items) and the pre-3Ed drowish magic items which lost power outside of the Underdark.

4) you mentioned beings that don't see things as commodities. Nice thought, but that doesn't void the laws of economics. Even the most collectivist, non-monetized, non-commoditized beings must distribute resources, and will find some functional basis for doing so. In such a society, the exchange could be in any one or all of time, energy, food, grooming, sexual favors, protection or what have you.