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In Gringotts, Harry questions the goblin Griphook about the composition of gold coins and calculates about how much the gold in his vault is worth on the open market; he estimates about two million British pounds. Harry contemplates spending some of his money on things he wants, such as trunks that hold more inside than their outsides would indicate. McGonagall is at first skeptical, but she eventually capitulates to the logic in Harry’s words. Harry is also interested in a mokeskin pouch, if it can store more than its outside would suggest. McGonagall draws the line at additional spending money, and though Harry tries to wheedle her, she refuses so strongly that Harry, startled, falls back against a pile of coins, causing Griphook to comment that it would be doing wizarding Britain a great service if he was to lock Harry in his vault and leave him there.

Chapter TitleEdit

The Efficient Market Hypothesis

Title MeaningEdit

The Efficient Market Hypothesis is the idea in economics that markets take into account all information when setting prices, and thus cannot be systematically beaten in the long run. In this Chapter, it refers to the drastic differences in prices between Magical and Muggle economies, and the large amounts of money that Harry could make through arbitrage, by using Wizard gold to buy Muggle silver, to buy more Wizard gold and more Muggle silver, until a large proportion of the wealth of the Wizarding world is in Harry's control.

Title QuoteEdit

“World domination is such an ugly phrase. I prefer to call it world optimization.”

Detailed Chapter SynopsisEdit

Harry and McGonagall are taken to Harry’s family vault; as he views the piles of gold, silver and bronze coins he is filled with questions. He finally asks Griphook, the goblin who escorted them to the vault, if the coins are the pure metal. Griphook takes offense at this, believing Harry is questioning the bank’s integrity. Harry explains that he simply has no idea how their financial system works, and Griphook tells him the coins are pure metal. Harry asks about seigniorage, confusing McGonagall, and then asks if the coins aren’t supposed to be worth any more than the metal making them up, confusing both McGonagall and Griphook. Harry asks if he could bring in a ton of silver and get a ton of Sickles made. Griphook tells him he could, for a fee, then wonders where Harry would get a ton of silver. Harry replies he is only speaking hypothetically, but he considers that at certain times he could use the price ratio between gold and silver, and the cost of converting silver to Sickles, to increase the amount of gold he had.

Harry begins collecting Galleons to use to pay for his school supplies; when he reaches twenty McGonagall tries to stop him. Harry performs a Fermi calculation to estimate that his gold is worth about two million British pounds.

Harry wonders about the amount of gold in his vault. McGonagall tells him his father was the last heir of an old family. She adds that some of the money in the vault could be from bounties that were placed on You-Know-Who and that it had been paid into his vault. Harry then muses that since some of the gold is his, then he could feel less guilty about spending a very tiny fraction of it. McGonagall warns him that as a minor he will only be allowed to make reasonable withdrawals from the vault. Harry agrees with this, but suggests that certain purchases would fall within sensible, grown-up guidelines. Such as trunks whose insides hold more than their outsides. McGonagall turns stern, saying that such trunks are very expensive. Harry points out that he’s sure that when he’s an adult he’ll want one. And since he can afford it now, it makes just as much sense to purchase it now and have the use of it right away. McGonagall doesn’t waver, and asks what he’d store in such a trunk. Harry suggests books. Harry tells she should have let him know about such trunks much earlier; as it was now, he and his father would have to spend the next two days hitting up all the used bookstores for books on science and math, and maybe a mini-SF&F collection as well. He also suggests that he would leave some of the books at the Hogwarts library, to sweeten the deal if she agrees.

McGonagall bridles at this, thinking Harry is trying to bribe her. He tells her he’s not, except that bribing people with books is okay, isn’t it? Because it’s a family tradition.

McGonagall agrees to let him take an extra hundred Galleons, and Harry suggests that he’d like a mokeskin pouch as well; McGonagall warns him it will not hold as much as a trunk, but Harrys says it will be like having Batman’s utility belt of holding, and she allows him another ten Galleons.

But when Harry asks for a little extra for spending money, McGonagall draws the line. He tries to wheedle her, saying she shouldn’t want to rain on his parade this day, the day he discovers all things wizarding for the first time. McGonagall responds so sternly that Harry, startled, falls back into a pile of Galleons, scattering them about, and Griphook comments that he would be doing Wizarding Britain a great service if he locked Harry in his vault and left him there. But he doesn’t, and they leave without any more trouble.

Shout-outsEdit

Batman has a utility belt which always seems to have just the item he needs, but is not considered magical.

A bag of holding is an item in the Dungeons and Dragons universe which can transport items weightlessly, with a capacity far larger than its apparent volume.

CharactersEdit

LocationsEdit

MagicEdit

Rationality and ScienceEdit

Author NotesEdit

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 British pounds to the Galleon doesn't square with seven Galleons for a wand and children using hand-me-down wands.

External LinksEdit

Chapter 4 at HPMOR.com

Chapter 4 at fanfiction.net

TimelineEdit

29 August 1991, continuing from Chapter 3.

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