Megathread : The Economy In Victoria 2

[byzantium43]

It always seemed kinda silly how in Vicky there were just a few defined factories. More types of goods should be added but there should also be a 'General Goods' or 'Consumer Good's Factory complex that abstracts the construction of everything else that is not included by specific industries, because not everything that people use or need will possibly end up being included. Like HOI3 a sufficient amount of these generic brand goods should be necessary to keep people happy and content.

Edit: Reworded to avoid a misunderstanding.
Edit: again...

[Gwalcmai]

Huh... no.I much prefer "people need a of grain, b of beef, c of fish, d of fruit, e of clothes, f of furniture, g of wine, h of tobacco and i of coffee to be happy" than "people need x of generic product to be happy".

[angj57]

The kind of hyper abstracted economic model in HOI works fine as it is a war game and has a hyper detailed military simulation element like the command structure. In Victoria, where economics play a much larger role, it would kill the game to have something like "Consumer Goods" which demand "metal" "oil" and "rare materials", all of which are produced aroud the world, rather than specific items liek lux clothes, which demand silk, which is almost entirely produced in china, etc.

[rjf101]

Huh... no.I much prefer "people need a of grain, b of beef, c of fish, d of fruit, e of clothes, f of furniture, g of wine, h of tobacco and i of coffee to be happy" than "people need x of generic product to be happy".

I agree, the current diversity of consumer goods is much more interesting. In fact, I think luxury goods shood perhaps be broken down further into, say jewelry, luxury furniture (already there), etc.

[byzantium43]

hmm. you missed my point. I like the diversity and support even more types of goods. But not everything is included and there should be one generic type abstracted for the goods that are not added.

[Palisadoes]

It always seemed kinda silly how in Vicky there were just a few defined factories. More types of goods should be added but there should also be a 'General Goods' or 'Consumer Good's Factory complex that abstracts the construction of just about everything else, because not everything that people use or need will be included. Like HOI3 a sufficient amount of these goods should be necessary to keep people happy and content.

Edit: Reworded to avoid a misunderstanding.

How can you ask for more, yet want more generic terms to include more!? It makes no sense! Either very detailed or very generic.

[truth is life]

But this is unnecessary as each type of good also represents similar good. Grain is not just wheat, but also rice, barley, etc., beef includes pork, chicken, turkey, and so on, coffee and tea also represent other drinks, and so on. Adding an additional generic consumer goods factory is just unneeded.

[angj57]

There would also be the problem of what goods a
"miscellanious goods" factory would require. Would there be "miscellanious" RGOs to supply the factories? Where would those be? I just always assume each good like wine also includes other stuff like beer, etc.

[Fire_Unionist]

But this is unnecessary as each type of good also represents similar good. Grain is not just wheat, but also rice, barley, etc., beef includes pork, chicken, turkey, and so on, coffee and tea also represent other drinks, and so on. Adding an additional generic consumer goods factory is just unneeded.

Why would you have to assume that? Grain is grain, beef is beef, and coffee is coffee. To go further than that is confusing and redundant.

[truth is life]

Why would you have to assume that? Grain is grain, beef is beef, and coffee is coffee. To go further than that is confusing and redundant.

I'm confused. How is it confusing?

Certain resources also represent certain other RL items which were simply not included because they were either:

marginal production, where the equivalent of an RGO did not exist, and whatever it was was acquired either by processing RGO material or through minor mining/farming/whatever activity, mostly involving certain metals and industrial materials such as tin

or they were very similar to an already existent item (eg., pork is pretty similar to beef, so there's no need to have a separate pork resource complicating things). What is so hard about that?

[byzantium43]

How can you ask for more, yet want more generic terms to include more!? It makes no sense! Either very detailed or very generic.

There aren't going to be pencil factories, or toothpick factories or lamp factories. So lump generic little things like this that have no direct bearing of geopolitics into a generic category, while still retaining a diverse group of more important goods like cement, iron, steel, lumber, opium, etc.

[angj57]

Why would you have to assume that? Grain is grain, beef is beef, and coffee is coffee. To go further than that is confusing and redundant.

Half the provinces in China produce grain, with a picture of wheat on the RGO. I think it is meant to stand for rice, as having rice and grain as seperate RGOs would be redundant. In Europe, clearly it stands for wheat.

[Chargone]

to be fair, wheat, rice, etc ARE grain. grain is the group they all belong to.

on the other hand, chicken is not beef. if these were grouped, the word would be 'meat'.

[truth is life]

on the other hand, chicken is not beef. if these were grouped, the word would be 'meat'.

But, chicken and beef are pretty similar. It would be redundant, silly, and unrealistic to have separate RGOs (since the idea of massed poultry/cow/pig/whatever production is, IIRC, a post-WW2 idea). And most of the places that produce 'cattle' also produce chicken, pork, etc. too. Thus, cattle may reasonably be taken to represent *all* meats, not just cow meat.

EDIT: Anyways, I phrased it poorly and picked bad examples. Better would be pointing out that 'liquor' and 'wine' probably also include the production of beer, 'fruit' represents the production of a huge range of commodities (everything from sugar beets to blueberries), 'small arms' includes everything from pistols to mortars, 'steamers' are used for everything from dreadnoughts to cargo vessels, and so on. It's obvious that many or most commodities represent at least a range of products.

[Palisadoes]

There aren't going to be pencil factories, or toothpick factories or lamp factories. So lump generic little things like this that have no direct bearing of geopolitics into a generic category, while still retaining a diverse group of more important goods like cement, iron, steel, lumber, opium, etc.

Ahhh that makes sense. I would, however, hate it if my capitalists built a stationery factory!

[Lucky]

I would still love to see a flood of angry topics about "them capitalists building nothing but pencil factories"

[aenariel]

But, chicken and beef are pretty similar. It would be redundant, silly, and unrealistic to have separate RGOs (since the idea of massed poultry/cow/pig/whatever production is, IIRC, a post-WW2 idea). And most of the places that produce 'cattle' also produce chicken, pork, etc. too. Thus, cattle may reasonably be taken to represent *all* meats, not just cow meat.

EDIT: Anyways, I phrased it poorly and picked bad examples. Better would be pointing out that 'liquor' and 'wine' probably also include the production of beer, 'fruit' represents the production of a huge range of commodities (everything from sugar beets to blueberries), 'small arms' includes everything from pistols to mortars, 'steamers' are used for everything from dreadnoughts to cargo vessels, and so on. It's obvious that many or most commodities represent at least a range of products.

I also think that in Vicky 1 the only reason they've seperated Wine and Liquor was that they required different goods to produce (Fruit and Grain respectively). Otherwise they might as well have been the same generic "Drinks".

[Black Guardian]

Hello everyone!

I have waited a long time and I am very happy to see that Victoria 2 is finally being developed. Thus, I, as a nascent economist, want to contribute with some ideas that might be interesting in some or the other term to make economy and industry more realistic and dynamic, because economy is one important factor of societal life, if not THE most important one.
It will be a rather long post, but I will do my very best to keep it clear, understandable and easily accessible even for those that are not common with the topic.

However, this will be a rather long post and it might take some time to read through all this.


1. Major Criticism on the old model

This first point is not going to be a huge complaint about what was wrong in the old game, but rather an introduction into what I believe is important to be changed from the old system. Of course, I had no insight into the calculations and models of the game, but from my experience with the effects that are visible, I can tell that some things are not that optimal.

First of all, of course, it is the fact that we have only 1 market for the entire world. Though this is a good measure of abstraction, I believe that Vicky 2 does not require that much abstraction in this field but more regional differences in pricing. Because it is regional difference in pricing which makes trade attractive!
Of course the high-level-abstraction of the old system does work in a certain manner, by calculating an average price for the whole world, thus putting together peaks and lows into the average in between. But this feels incomplete, if you ask me. It oversimplificates the system and leads to a wrong indication, which is, that all goods are of the same value all over the world.

A small model with a brief calculation for that purpose might bring light onto the topic for all those who are still stepping in the darkness:

Let´s assume we have a strictly bipolar world, with 2 countries on 2 different continents with exactly the same population and 2 goods (say, Iron and Grain), whose prices are calculated through the world-market.

World-market price for Iron be 30$
World-market price for Grain: 20$

We would think that Iron and Grain is worth the respective prices in both countries on both continents. This is misleading!

If on continent 1 the price for Iron is 50$ and on continent 2 it is 10$, it is in average still: (50+10) / 2 = 30$

Same might be true with Grain, if Grain is worth 2$ on continent 1 and 38$ on continent 2, we will again get: (38+2)/2 = 20$ in average

Of course it could still be that the prices for both goods are indeed 30$ or 20$ on both continents, but this is rather inconvenient if we compare the possibilities for all the combinations that lead to an average price and the single case that leads to equal pricing!

And it is even logical that different regions have different prices for the same good, due to their nature.
In our case, Continent 2 (where iron is cheap) could be very mountainous with rich iron-deposits, where mining is easy.
Continent 1 (with cheap grain) could be flatland with fertile ground to grow much more and/or much better corn.

Furthermore, the world-market has a problem when it comes to price-adaption. It jumps around very quickly, prices vary from one day to the next in huge amounts. More realistic would be a gradual development, but I will come back to this later.

Apart from this first problem, a second comes up very quickly if one has an idea how private business works. In Victoria, goods are produced in factories, stored in national warehouses and than sold on the world-market.
Where´s the error?
Exactly: Goods are not sold by the state (at least not without planned economy), which is currently happening commonly. As if Capitalists are not allowed to sell their goods for their own profit but rather have to give it for zero compensation to the state which then sells it for its own profit, as the export-money flows to your treasury.
I do not have to tell anyone that this is far from realistic, have I?

Now, let us go on:
Is it only an impresson from my side or is it in fact true that capitalists do not have to buy goods from the world-market to build their factories or railroads? I am not quite sure about it, but it should definitely have an impact on the market! My impression so far was, that they pay a certain amount of money and build the factory with it, no matter if the ressources are available or not. In fact, Railroad-building was the most important factor for German industry to develop at all!
If this is already the case, ignore this part.

Another major point. Victoria lacks crises! Historically, there were several major economic crises, even several world-crises in the timeline. The most prominent example is the Great Depression, but even in 1873 there was a major crisis and several times before as well. This must not be a scripted event but has to be an integral part of the model (endogenous factors that are able to cause such crises). We will think about that later on as well.

Other minor critics are not explicitly stated here but incorporated into the proposals to improve the entire system. Such things are for example a proper relation of consumption, savings, production and investments or income-generation and effects.



2. The Basic pillars of the system

As some of you might now, economy is a cycle, a constant flow of goods and ressources. It is not a static construct and very easily influenced by internal changes within the system.

So, to get a basic idea where to start, we will chose what all of you are fond of and expierence every day: consumption.
In Victoria the consumption of the pops was modelled by the goods they bought from the world-market. This is an acceptable way of simulating consumption, with some edges that can easily be carved out.
First of all, consumption depends upon income. As everybody has experienced or will experience: money is spent more frequently the more it is available. However, this is not proportional, but underproportional: The higher the income rises, the lower the increase in consumption, resulting in something similar to a square-function.
One could argue that this is modelled fairly acceptable by Victoria as well, as the increase in a pops funds enables it to buy subistance-goods, convenience-goods and luxury-goods until its demand is saturated. My experience is but a bit different: The increase in consumption is actually a good deal higher the more technology increases. This sometimes peaked into a situation where my capitalists spent all their money for luxury-goods instead of investing into their industries and end up with 0$ cash reserves. While the technology-component is important for an economy, it should not affect demand! At least not in such a direct and tremendeous way. It will affect demand indirectly by its very own nature.
The general rule of thumb is: the more income available, the less the percentage of consumption out of the total budget is.

To make it short:
Private Consumption is affected by:
-Income (underproportional increase) & price
-trust into the system & certainty in regards to political or economical stability (people under uncertain circumstances tend to save more in case of something bad happening)
-interest level (though this is not neccessarily true, but in most cases)

As a second branch of demand-increasing factors we have investment. Investment is the money that companies use to increase their production or replace old machines/facilities and so on for new ones.
This affects demand too, because new machines or new facilities require production of those. And production of those require extraction of rare materials for these products and so on...
Furthermore, this is the part where technology impacts most. Factory equipment will be built with new technology instead of old, every 5-10 years the machinery will be renewed, sometimes even more frequently. Completely new machinery appears and is integrated into a network of evermore specialized industries, creating new demand for those branches that create new products which will be sold to customers, when private consumption creates slowly increasing demand in the end. This is were the error in the predecessor lies: New technology created instant new demand. But this is not true, demand grows only slowly first until it is fully acknowlegded and demanded by the broad mass (or at least those who have the funds to buy it).

So, private consumption (77,8% of the total GDP in Germany 2003, for example) and Investments (17,7% according to the same source) are the most important pillars of the economy, as total demand for goods, together with production, as total supply of goods.

Now, let´s bring this into a systematic circuit of a new ingame-model.

3. The Markets

The markets are the most important feature of a market economy, that is why they lend their name to it. They will be our tool of choice for modelling the victorian world as they are predominant in this era, though they have been in all the centurys before as well.

My proposal for Victoria 2 is to extend the market-system to a more detailed scale on a lower level.

Let us start on the lowest dimension of the game: The province.
A province may have markets in reality, but they are neglectably small and would not bring any use for us or the entire model, this is why they can and will be neglected. An important factor nevertheless the province is. It houses the POPs, our main consumers. Furthermore ressources are produced here.
The POPs will have a demand for goods, but this demand is not fulfilled on the province level but gathered through several provinces into the next level (as well as the ressource-production of the RGOs), the one where we will begin building our system:

The state.
The state, as in the original Victoria, consists of several provinces and houses the factories and thus the production of all manufactured goods that will ever be available for consumption or, as intermediate good, for production of consumer goods.

With these characteristics we are able to create a market for a state level, or, as I originally called them: Regional Markets.

In these markets, regional demand from the provincial POPs and regional production from the factories and RGOs meet in a market and create prices for those goods according to the basic principles of the market.
And of course, the dearer a good on a regional market, the higher the price.

[NOTE: I know that there are lots of states in HoI3. If the number of states is still to big to handle all the transactions in every state, it is of course possible to merge several states into regional markets. It is important however to not abstract this too much, as it will distort the realistic mechanism the higher the scale. 3-5 regions into a regional market is probably still okay, an entire country of the size of Germany might already be too much]

Furthermore it is (very!) important that the prices do not jump from one day to the next, as this will undermine the entire decentralized market system and may break the mechanism (see below "4. The Mechanism").

Price-adaption has to be a gradual and (rather) slow process - don´t let it take years, but several days to a week or even several (depending on the price-difference between old and new) are appropriate.
You will see why in the next part - I´ll explain it... or at least what I fear might happen.


4. The Mechanism

Let´s remind us what we have now:
-Regional Demand by POPs and Investment
-Regional Supply by Factories and RGOs
-Regional Prices by
-Regional Markets

Now we bring in a new feature: Trade.
Since the beginning of mankind, regional difference in pricing yields profits for merchants that transport goods from one place to another.

And exactly this is what is going to happen.
A bundle of goods produced in a factory will seek the market with the highest profit to be sold there. Highest profit means in fact not only highest price. Again, an example with numbers shall serve us:

The price for 1 unit of Iron in London be 35$, the one in Shanghai be 50$. Would it be more profitable to sell the Iron manufactured in London in the regional market or abroad in China?
This depends, of course, on the cost and expected risk of transportation. As long as it is <15$ it is more profitable to sell it to China.

Right now, I have already made the next step with my example: Transportation.

Like the supply-system in HoI3, the goods will have to travel from the place where they are produced to the place where they will be sold. Transportation will then be calculated into the product-price. This will by the way be another reason to build bigger ports and better railroads! The less expanded the infrastructure of a region is, the dearer the products will be, as it will cost more to export them. This will make railroads and ports to the veins of the new economic system, like in reality.
Furthermore, it justifies the possession of Bases like Hong Kong or (as an earlier example) Goa for the world powers - if their ports are bigger, it will be cheaper to transport more goods through the port and then onwards into China and thus the profit there will be higher.

On the long term and according to economic theory, prices should then adapt as more goods flow into the highly profitable markets, which increases the supply - increased supply will decrease the prices and make it less profitable to send goods into that market.

And this is ultimately, why prices MUST adapt slowly, at least in my opinion. Otherwise the machine could screw up the system:

Imagine 3 markets (Newhaven, Oldhaven and Victoriahaven)for one type of good.
The initial situation (price per unit) is:
Newhaven: 20$
Oldhaven: 30$
Victoriahaven: 40$

Now, the game is started and all of the commerce is suddenly transferred to Victoriahaven; as soon as they arrive there the prices in the other regions explode while it shrinks togethr in Victoriahaven. On the next day, commerce is transferred to that city of both with the higher prices (e.g. higher demand) and the price in Victoriahaven explodes. And so on...

Now, if the price is only lowered slowly, say 1/5th (0.20) of the total value per day, the goods can be transferred to another market at the right time to make a slow adaption possible...

Same example as before, now with a 0.2*total_price_change per day:
Victoriahaven is supplied, the price will now sink to the lower price within 1 week. As soon as it reaches the same Profit as Oldhaven (a price of 30$, if we neglect transport cost and set it to 0$, assuming they have a teleporter), a share of the goods is transferred to Oldhaven and the price-adaption will stop. Now, Oldhaven and Victoriahaven have the same prices as long as there is no further change in demand.

Of course, it could also happen that goods are not profitable and will not be produced anymore. This is the case if at any market, the price of good is lower than what was necessary to produce them (input factors -> wage & ressource-prices) or if transportation-cost and other expenses for other markets plus this minimum-price is always lower than market price for every place in the world.
Or, shorter: if profit is negative.

Profit, in our case, is:
Market price
- production price (wage & input price)
- transportation cost
- tolls/fees/tariffs

Profit will flow back to the capitalist into their cash-reserves, as it is what is left over from the produce of their investment, their reward, so to say.
He can use it to increase production by building new facilities, new railroads or new RGOs (they should be owned by Capis as well, at least in a free Market economy)

Wages, as payment for labour, will make up the income of most people in the society (craftsmen, clerks, labourers), can be determined as well on the local market. We can use the already existing mechanism of the Regional market for that purpose.
Just imagine "workforce" as a ressource, that is produced by POPs and can be put into a factory. It has a supply (total amount of people in your country), a demand (determined by the number of factories or better: by the number of potential maximum-workers in a factory), and thus a price can be calculated.
Depending on the number of unemployed people in the country, the price will rise or fall, attracting immigrants or lowering the wages to a level that is close to pauperism.
This price is the wage that is paid daily for a worker (or monthly, if you want more abstraction) - it is their income and what flows from factory to the employed POPs

Why from the factory? Because it is most reasonable to put the factory into the center of the model, because they connect everything. A small graphic will proof this:

The factory "pays" for the input (wage & ressources) and calculates these expenses into the product-minimum-value. The factory is still only the medium to sum them up and to make calculation easier.

If a good is sold, the revenue (what is left from the market price if we subtract transport cost and tariffs) will be decreased by the value of the production-expenses. What is left is the profit.
Which will of course flow back to its owner.

Same principle is applied for RGOs, where wages are the only expenses, no ressources for production-input of course.
Profit goes back to owner as well.

Same for railroads and maybe even ports? One has to think about that... It would make sense.

As you might have noticed, this requires that a factory is owned by someone. In my opinion this is the easiest way to model the entire system as I proposed it. It even enables you to nationalize certain industry-sectors by law, setting ownership to "owner = state" or something like this, giving control (and thus profits or losses) to the state.

Maybe it would even make sense to have a divided ownership (such as: 25% state, 40% Capi-Pop ID-Nr: 48409484 and 35% Capi-Pop ID-Nr: 5849303, profit split among those according to their respective percentage of ownership.)


5. Notes & Possibilities

Now, after having elaborated the very basic scheme to give you a rough idea of my perfect vision for an almost-realistic Vicky 2 economy, I shall view it from a different perspective: How to abstract it further, if necessary?

The sheer amount of data might be too much to handle for the PC, at all. 50 goods on hundrets or even thousands of regional markets every day, transportation of goods from every market to the next and the flow of money into the other direction, this could easily bust even a modern machine. (don´t know, I have no idea of the capabilities of those when it comes to single calculations. I just want to point out that there IS potential to make it less ressource-straining)

So, abstraction-possibilities:
-Wages and profits can flow to the POPs on a monthly or weekly basis. This should be sufficient, as long as their daily consumption is calculated based on this income.

-Markets can be checked weekly or monthly as well. Their price-development must not necessarily be tracked daily, though it is so in real life, it will not hurt if it is not ingame, as price-development is usually slow in real life anyway (only exeption in the stock market, but this is not displayed here)

-A good mechanism to calculate market-behaviour is the most important tool. The easiest way that comes into my mind: Using the daily balance of production and consumption to determine the price-development.
An example shall serve

Again we have 2 cities, Newhaven and Oldhaven that shall serve us as an abstracted example, where the only consumer-good is "consumer goods", produced out of Iron and Coal (steel-eaters in that world )
Newhavens RGOs produce a daily amount of:

• Iron: 1
• Coal: 2

Newhavens Factory has a capacity to produce 1 unit of consumer goods

Oldhavens RGOs produce a daily amount of:

• Iron: 4
• Coal: 1

Oldhavens Factory has a capacity to produce 1.5 units of consumer goods


Population demand in Newhaven is 1 unit of consumer goods
Population demand in Oldhaven is 2 units of consumer goods. (because they are more productive; thus earn more money or have more people employed, raising total demand)

What will happen? How to calculate?

Now, for our game, the easiest way is to compare: daily demand and daily production for both citys. This will serve our purpose.

Newhaven:

• +1 unit of coal (2 -1 refined in the factory)
• 0 units of iron (1-1)
• 0 units of consumer goods (1 produces, 1 demanded)

Oldhaven:

• -0.5 units of coal (1 produced, 1.5 needed)
• 2.5 units of Iron (4 produced, 1.5 needed)
• -0,5 units of consumer goods

From that, we can now draw the following conclusion:

• The price for consumer goods in Oldhaven is higher than the one in Newhaven.
• The price of iron in Oldhaven is really low compared to Newhaven
• The price of coal is somewhat higher in Oldhaven than in Newhaven.

Lets begin with this:

• The price of iron in Oldhaven is really low compared to Newhaven

What happens now, as a result of these first conclusion, depends mainly on the production prices and transportation cost.
If the production-price + transport cost of Iron is lower than the market price in Newhaven, Iron ore from Oldhaven will be transferred to Newhaven and competete away the dearer Iron from Newhaven, as the price will sink below the production-cost and profit turns negative for the mine-owner in Newhaven. This could only be prevented by new demand, for example due to a new factory, which raises the demand and the prices to rebalance the situation!
If the production-price for Newhaven is the same as in Oldhaven, then the situation would be the other way round! Oldhavens Iron cannot be sold without loss to foreign markets (as transportation cost would as well be added), and it cannot be sold to domestic market because it is so cheap there because plenty of it is available. Thus, some mines would close down until the daily balance hits 0.
Why zero?
Easy: If more is produced than demanded, the demand will be saturated by the cheapest producer, as he can sell the goods to the cheapest price - his competitors don´t get any revenue as nobody buys their dearer products that are as good as the cheap ones, he has to close down. Now, the cheapest producer(s) remain in the market and sell their goods for a profit of 0. They will not produce more than needed, as the expenses would exceed the revenue they get. Only if demand rises, production would be increased.

[Note: if only one remains we´d have a Monopoly, that is a different case and will increase the prices as the Monopolist artificially decreases production to get most revenue.]

[Note 2: This is the perfect case, that will of course almost never be true, especially the more connected the markets get. There will probably always be a situation where a foreign market yields higher profit.]

• The price of coal is somewhat higher in Oldhaven than in Newhaven.

Oldhaven needs 0.5 coal more than it can get from its own production. Either because it cannot produce more (limits in natural ressources), or because the capacity is not expanded enough (coal is deep in the mountain, the mine does not dig deep enough)
This results in a situation, where the price of coal rises, until demand is fulfilled and daily balance goes back to 0. With the rise in coal-prices, Newhavens miners are attracted to export some of their coal to Oldhaven, because it is dearer there. They will, however, only export as much as 0.5 coal there, otherwise the price will fall because the market is overstocked and does not yield more profit than the domestic market in Oldhaven. Maybe they will export even less, depending on their own cost of production (domestic wages) and transportation cost (the ships sailing between Oldhaven and Newhaven)

Then again, we have 0.5 coal in excess for Newhaven, which means coal consumption must rise, otherwise miners have to close down their mines because their profit keeps below zero for a certain amount of time and the business is unprofitable.

• The price for consumer goods in Oldhaven is higher than the one in Newhaven.

Again, the price is higher because there is more demand than production in the region, thus the price will rise, up to a level where only 1.5 units are requested (because only 1.5 are produced and nothing more can be consumed than is produced - prices will adapt).
Now, of course, this again attracts foreign commerce!
One could think that Newhavens balance of zero will keep zero. That is not true! Think of it.

Newhavens merchants will buy goods from Newhaven, transport it to Oldhaven and sell it for higher prices there, making a good deal of profit. This remains true until:
Market price Oldhaven < market price Newhaven + transport cost (+ tariffs, etc.)

Thus, on the long term, a new balance will be created, where prices in Newhaven will rise, because the domestic market is understocked now, and prices in Oldhaven will decrease as more is available.

Ultimately (if transportation cost is 0 and completely free trade between both citys possible) the daily balance for both would be -0.25;
However, due to the rising prices, the demand is now affected, as it will decrease. People buy less the dearer the products become!

Thus, the balance goes back to 0, until more production of goods is possible and the prices go down, inducing a rise of demand.

From this example we can derive the basic tools to make the calculations that are needed:

-daily balance of production and consumption
-production prices
-demand

If demand < production (or daily balance is positive), price decreases until the sum of production from the cheapest producers equals demand.

If demand > production (or daily balance is negative), price will rise.
Price affects demand through a function; demand will decrease. Balance is restored.


Now, how to determine the most profitable flow of goods with least effort for the CPU? If every market is checked for every good every day, the result will be devastating, the game will creep!

So, it might be useful to create a table at the end of every month for every good, where the all markets are listed according to their price, highest price first.
Example for such a list: Prices for Videogames per market

1. Newhaven 90$
2. Oldhaven 85$
3. Victoriahaven 83$
4. Monkeyhaven 80$

Now, every good that seeks a market will start at the top of the list, calculate distance, transportation cost, tariffs and other expenses and sums this up with the initial product price to check profitability.
So, Monkeyhaven, even if at the end of the list, might be supplied first if all the others have high tariffs or long and bad transportation-ways!

Another note: It would be wise to have high transportation cost at the beginning, so that closer markets are supplied rather than distant markets! Early trade, especially on long distances, is then only profitable if there is a good price-span for products. In general, land-trade is much more expensive than sea-trade in pre-industrial ages (and probably even today).

I know that this might not SEEM very abstracted, but in fact, this is now not much to calculate! Other methods would probably be require more calculations. But of course they are available.
Furthermore, the Computer can calculate this fairly well if he uses small steps and compares it in regular timescales.


Another question is, wether it is necessary to drain CPU-ressources by following the flow of every product through every province? Maybe, for sea-trade, if war erupts and freighters are intercepted by the enemy, like in Hoi3. For Land-trade?
Probably not. Land trade will flow through trough your own territory towards ports, as sea-trade is less expensive; or directly to a neighbouring trading-partner. A land-route from Germany through France to reach Spain more expensive than a sea-route through the English Channel.
And if you are at war with a certain neighbor, you are automatically embargoed anyway, such that land-trade needn´t be intercepted. It will simply stop. There is only a need to calculate the time needed from place of production to destiny. This can be set as a countdown, without tracing the flow of the goods. If the countdown is finished, the goods reach the market with a daily amount, which is then calculated into the demand-supply-balance in the next check.

Further abstraction is, as I already stated before, possible, if the Regional Markets are a little big larger than pure state-areas. They should be not as big as a COT in Eu3. Furthermore, every country should have at least 1 regional market.

This brings us to the next possibilities: A countrys markets can of course be closed for foreign commerce entirely, or charged with tariffs on import or export to make it more expensive for foreign goods to enter your country. This is what happened often historically to protect the own industry!
It would be nice to set special tariffs for all goods.

Countrys can be embargoed, stopping the trade with that country entirely. That may have severe consequences and can even lead to crises, when foreign markets break away and production has to be decreased, resulting in unemployment and reduced regional demand!
Just make sure, please, that the AI will use such tools veeery carefully, because they are powerful and can screw up the game if used too excessively!


Furthermore, a friend of mine has pointed out that Colonies should have a special treatment.
We have the tool of Statehood on our hand, to determine the status of a colony. If it has no statehood, it can be considered as "Colony of Exploitation", if it has, it will be "Colony of Settlement".

Excerpt from MSN Encarta

Colonies of settlement began by specializing in what are called primary products. These products included commodities such as wool, in New Zealand, and gold, in South Africa. Over time, however, economies of settlement colonies came to resemble those of European nations: their agriculture diversified, and they developed manufacturing industries.

Because most settlement colonies gained political self-rule early, they could use protective tariffs (taxes on imports) to shelter their young industries. These industries could grow without competition from more advanced industries in other countries. The result was high-wage labor and a high standard of living, both for white settlers. Examples of settlement colonies that followed this model include British colonies in Canada, Australia, New Zealand, and South Africa.

[...]

The colonies of exploitation had very different experiences: they remained politically dependent on the mother country and economically underdeveloped. Even after they achieved independence, many colonies of exploitation found developing their economies difficult. The economies of these colonies could typically be divided into two very distinct sectors, the export sector and the subsistence sector.

The export sector was based on the production or extraction of the colony’s principal primary products. These included cash crops such as sugar, tea, or rubber, or minerals such as gold, tin, or copper. Virtually all capital invested in a colony of exploitation went into the export sector.

This sector employed unskilled or semiskilled members of the relatively small native middle class, who earned more than their fellow citizens, although they were low-paid by European standards. The colony’s railway system operated like a funnel, moving goods efficiently outward to the ports, but not from point to point within the interior. Profits moved in the same direction as the goods on trains—out of the colony and into the colonizing country.

The subsistence sector was the traditional part of the economy. It employed (or underemployed) the bulk of the population and produced most of the food that fed them. The subsistence sector was inefficient, had little investment, paid poor wages, and supported a low and often declining standard of living. Its food production failed to keep pace with the country’s rising population. Because the export sector provided few health benefits or other kinds of social security (such as assistance for the unemployed, the elderly, or people with disabilities), the subsistence sector absorbed much of the cost of raising children and caring for sick or old people. The subsistence sector thereby subsidized the relatively prosperous and advanced export sector, much as the colonial economy as a whole supported the growth of the mother country.

We can conclude on the basis of this information, that Colonies of Settlement can be treated fairly like all other countries, they have a Regional market and produce what is most profitable as primary products - for the more diversified industry (apart from agriculture) they do not have enough workers anyway. This will develop as the country-population grows.
Colonies with statehood could furthermore be charged with a natural tariff for the import of foreign good, to prevent cheap european goods from flooding the market and wrecking havoc there.

Exploitation-colonies are those without statehood. Without the natural tariffs, the market will be swept by cheap food, deteroriating the local agriculture and making those colonies completeley dependant. Furthermore, the only investment there is made into rare materials of interest for the mothercountry, while the colonial workers are ill-paid and the production-price is thus very low, making the ressources cheap in the mother-country even with transportation.
For colonial RGOs another rule might apply as well: The ressources are not transferred to the place with most profit, but to the mothercountry first. Only if the price there has reached unprofitable levels it should be exportet to other countries.



Another Idea, that several other people have come up with before, could be used as programming abstraction as well: Companies.
Companies are then factory and/or RGO-owners, while the company itself is owned partially by several capitalist-groups. They are a kind of funnel between Capitalists and Factories.

Such a company could look like this:

company:
name="British East India Company"
ownership= 40% state, 5% [Capi PoP ID 1] , 30% [Capi PoP ID 2], 25% [Capi PoP ID 3]
Capital = X (Amount of money available for investments or dividend)

The company would now gather the profit of all RGOs and Factories, as constant flow into their Capital-value. If is has reached a critical mass and there is a good opportunity to make an investment, it will do so.
If not, all capital above a minimal reserve of X is returned to the owners according to their respective participation in the company at the end of a year.

This has the positive aspect, that the profits are not divided between the owners of several factories for each factory, but only once. This might save some calculations as well, because the profit is directly transferred to the company and divided there. And of course, it creates a more realistic feeling On the other Hand, ownership-changes within a company cannot that naturally be displayed, if Capitalists do not get the ability to join Companys and contribute a certain amount of capital for a share of the Company.

Now, it would of course be possible to create a stock market with these companies, where shares are traded.... But this goes too far and is not necessarily needed, though it would fulfill the wet dreams of all hardcore-vicky players.
However, if you ask me wether I like this being implemented - of course!




So, this is our final picture, with 2 regions that are interconnected. Looks nice, doesn´t it? And you an imagine what happens if we add several more regions Fortunately, the computer will do all the calculations that are otherwise done by millions of humans that do not even notice that they are a small gearwheel in a big machine...

If you can name the arrows in that graphic, you know that you have enough paid attention and understood everything.

I hope I have not annoyed you too much, and I hope that at least some Ideas are taken into consideration. I know it looks complex on the first glance, and maybe it is too much - further levels of abstraction are, as I said, possible, on almost arbitrary scale.

Thank you very much for your patience and attention. I am really looking forward to Vicky 2, be it with or without my proposals implemented.

Sincerely,
Black Guardian

[Gwalcmai]

tl;dr, so sorry if you correct this further on, but:

In Victoria, goods are produced in factories, stored in national warehouses and than sold on the world-market.
Where´s the error?
Exactly: Goods are not sold by the state (at least not without planned economy), which is currently happening commonly. As if Capitalists are not allowed to sell their goods for their own profit but rather have to give it for zero compensation to the state which then sells it for its own profit, as the export-money flows to your treasury.

That's not how the game works. At all. That summary actually reverses the way the Victorian economy functions. The state's budget pays for the raw materials, the factories (in many cases, state funded) create the stuff, and the proceeds of selling the produced goods go directly to the pockets of the population (divided up "semi-evenly"), only to be accessible to the state through taxation. Unless the products aren't being sold, in which case the state gets to stockpile and use them free of charge.

But yes, it's completely nonsensical. On the other hand, I remember Johan's words (although I might not remember them verbatim ): "if pink flying elephants make the game more fun, they're in".

[alvaro]

i quite agree in diagrams (so sorry, mate, i'll read it all later but is too much for one session)
i think that if pink elephants make learning curve more steep they should be out. that's what happened with victoria's economic model. the more real the easier the game.