Star Wars: the collapse of a galaxy deep, deep in debt

The Empire is back. Or at least, something that looks an awful lot like the Empire.

LOS ANGELES, CA - DECEMBER 17: Star Wars character R2-D2 droid brings the wedding rings during the Star Wars-themed wedding of Andrew Porters and Caroline Ritter of Australia in the forecourt of TCL Chinese Theatre IMAX on December 17, 2015 in Hollywood, California. (Photo by Kevork Djansezian/Getty Images)

The Empire is back. Or at least, something that looks an awful lot like the Empire.

Star Wars: The Force Awakens, features plenty of stormtroopers, TIE fighters, and really evil-looking guys who are the apparent heirs to the Evil Galactic Empire from the original trilogy.

But the last episode we saw, the Emperor was dead, the second Death Star was destroyed, and the Dark Side was vanquished.

So how’d those guys come back?

It’s the economy, stupid.

A Washington University economics professor is making the case that the destruction of the two Death Stars unleashed an economic collapse in that galaxy far, far away.

In a tongue-in-cheek white paper, he argues that the financial crisis overwhelmed the Rebel ­forces in a way the Empire itself could not. The paper itself is a perfect mix of sober economic analysis and Star Wars fandom, referencing everything from Bothan spies to “a continuous probability density function”.

The paper, titled, “It’s a Trap: Emperor Palpatine’s Poison Pill”, would not be sent out for peer review, said Zachary Feinstein, the paper’s author. Mr Feinstein, 28, was not alive when the original trilogy was in theatres, and is in his second year of teaching at the university. He did it for fun, but noted that the kind of analysis he used was identical to the kind of analysis he’d use to model real crises.

“It is real academic research,” he said. “I could’ve looked at 1998, at the Asian crisis. Instead I looked at Star Wars.” The paper sets out to show how the destruction of the two Death Stars was an economic calamity for the galaxy, and that the scrappy underdog Rebel Alliance almost certainly would not have the means to enact a bailout that would rescue the economy.

To do this, he makes a model of the costs of building the two moon-sized space stations — a massive government spending project that would have cost $419 quadrillion for the steel alone, he calculated — and the financing necessary for it. He draws in real-world parallels like the costs of constructing aircraft carriers and the Manhattan Project.

From there, he builds a model of the galactic banking system, and the debt those banks would almost certainly be carrying after the Empire financed the construction of the two projects.

To keep it simple, he excluded things like the cost of interest, and assumes the Empire didn’t have any other debt outstanding.

“This is assuming that Emperor Palpatine was fiscally conservative and kept the overall debt load under control,” he wrote.

When the two battle stations were destroyed, the government defaulted on its debts, which started a banking crisis, which led to an economic collapse. In fact, he says, this would have been something the Emperor actually planned out.

“The true power of the technological terror is from the power of economic terror unleashed in the case of its failing,” he wrote.

The Rebels were able to destroy both Death Stars, but in this scenario, it unleashed a sort of Mutually Assured Destruction, since the Rebels almost certainly lacked the foresight to plan for winning the peace, he argues. To rescue the galaxy from the economic fallout would almost certainly ­require a bailout equal to 15-20 per cent of the Galactic Gross Product, he says, an amount the Rebels simply wouldn’t have on them.

“The Rebel Alliance … never placed importance on long-term planning.”