Diagon Economy

December 2013 Sirius Fudge (Hufflepuff)

The Economic Diagon Alley

Diagon Alley is the economic center of wizarding Britain. There, many wizarding products can be bought – from robes and telescopes to potion bottles and globes of the moon. The place served as the shopping venue for almost all witches and wizards in Britain. In the Harry Potter books, only Diagon Alley and Hogsmeade were mentioned as the wizarding economic hubs in Britain. The latter served as the only pure wizarding community in Britain. For this article, I will just assume that the two are the only ‘major’ economic places in the region, with some justifications to be mentioned later.

Before Hiding in the Shadows

Economic activity in the wizarding world in integration with the Muggle community is made up in two ways. We had our share of history in the development of markets in the world. Witches and wizards would trade needed materials with each other. A potioneer would concentrate on making potions, and a broom-maker would make brooms. They would then exchange their products. Apply this method to many varied products and an intricate web of exchange would be created. Distance would not be a problem for much of the wizarding population because of the many modes of transportation available through magic, the most important being apparition and the use of the floo powder network.

However, at the context of the time, because the wizarding community is deeply embedded in and integrated with the Muggle community, we cannot avoid going with the flow of Muggle processes, like the formation of markets. There did exist wizarding stores in Muggle markets, selling some wizarding products secretly, carefully doing magic so as not to get caught by watchful Muggles. It would be extremely difficult for a wizard to maintain secrecy between packs of Muggle shoppers. Confundus charms, forgetfulness potions, and disillusionment spells are some of the key magic needed to protect the secrecy.

As with Muggle tendencies, wizarding populations flocked to the city and made their own place there. There are two shopping establishments that are theorized to be the start of the place we now know as Diagon Alley. There is Gringotts bank, the source and foundation of wizarding economy. A bank is a good place for shops to be near to. A witch or wizard who would like to buy things would go where the galleons are. They might need more galleons in the process, and it would be convenient to have a bank nearby. Another building believed to be the first of many in Diagon Alley is Ollivander’s Wand Shop, established in 382 BC. We know the importance of wands in the wizarding world. They are our extension, the tool to channeling our innate ability to use magic. I think that is enough reason to start the construction of many wizarding shops for the magical population to go to.

Agglomeration in the Wizarding World

Distance is one of the minor problems that we witches and wizards can manage easily with magic in our daily lives. We think that with the use of magic, agglomeration of many shops would not be necessary, since we have the ability to go far distances in an instant. Of course, there is the influence of Muggle markets before the Statute of Secrecy in 1692, but we can always go back to the cottage industry of trading products and not forming big economic centers at all.

Clustering of shops still survived as an economic process in the wizarding world due to many factors. First, wizarding shops would earn more savings in the agglomeration situation. Shops concentrated in Diagon Alley have more exposure to the wizarding population, so that a wizard could buy himself a cloak after having bought a much-needed potion in the nearby apothecary. The proximity of the shops to each other earns them more money because a wizard found them, even if they didn’t have the intention of buying a certain product in the first place.

Another factor for the grouping of shops is the shoppers' comfort and convenience. It’s far more convenient for a witch or wizard to find all the products needed in one place, with the shops near each other. This is especially true for a group of shoppers like an entire family. It would be very tiresome for a whole family to make trips to different houses selling different products at long distances from each other. Even with the use of magic, it’s still a big struggle, especially for the children who are not yet masters of their magical abilities.

Post-1692: A-Must Agglomeration

With the passing of the International Statute of Secrecy in 1692, agglomeration as an economic process was strengthened in a whole different level. With agglomeration, it was easier to contain magic. The whole of the economic process was easily hidden, and the Ministry just had to keep the entrances secret from Muggle eyes, which was the Leaky Cauldron's role in Central London.

Wizarding transportation is also simple to Diagon Alley. People can walk to the Leaky Cauldron, use Floo Powder, or apparate there, which does not arouse concern, as Diagon Alley is already hidden from Muggles. Inside Diagon Alley, witches and wizards can bring their whole family shopping far away from the worries of Muggles and violation of the Statute. It is the best situation for an enormous process like economic markets under the Secrecy Statute.

Not just satisfying our appetites with food and wizarding products, Diagon Alley is a safe haven for the wizarding economic processes that are very crucial to the magical population of Britain.