Castle Consolidation as a raison d’ĂȘtre for the EU

People have given many (usually quite poor) arguments in defense of the EU. Perhaps this is because the EU is actually a quite poor quality institution. However, there is one argument for it that I have never seen considered in the literature: the argument from Castle Consolidation.

Castles are an excellent example of an industry fallen on bad times. Huge amounts of investment were poured into them a long time ago, but demand for their services fell over the centuries, as they were rendered obsolete in their primary market by new market entrants, like gunpowder and compacted earth forts. Regulatory change (the decline of feudalism) also hurt their profits. It’s safe to say that castles are no longer a worthwhile investment. Returns on invested capital1 are low, which is why few private equity funds are building new castles.

There are a great many castles in Europe, all in competition with each other for tourists and film production. What the industry needs to do is consolidate; if it could get down to a smaller number of firms, they could collude to raise prices. Import threat is limited, because although there are some nice ones in the Middle East like Krak des Chevaliers, shipping costs are prohibitively high. Returns are currently so low that they have room to rise substantially before new entrants are attracted to the market. There is little room for substitution because castles are awesome.

English Heritage has already successfully consolidate most of the castles in the UK; what remains is cross-boarder consolidation. That, presumably, is where the EU comes in: as a castle cartel.

  1. If you’d like to learn more, I recommend Damodaran