How is the vicky economy modelled? What are the formulas and underlying assumptions?

It's extremely simple actually, and makes a lot of sense. Pops get income from their jobs (unless their unemployed) and use it to spend on Life needs(grain,cattle,fish) Everyday Needs (Liquor, Clothes, Furniture), and Luxury Needs. It puts its excess money in the national bank (note that while pops will attempt to buy as much of their life needs as possible, if they cannot afford all of their Everyday/Lux Needs they will just put the money in the bank. If they cannot pay for Life Needs they will attempt to take money out of the bank to pay. If pops are not getting their needs satisfied they will become angry and militancy will rise. Countries also take out loans from banks when theyare in debt (and capitalists as of 1.20). There's a lot of things I don't like about this game, but the economy isn't one of them.

The reason you haven't worked this out is that, judging from the post, the importance of the pop, trade and production screens. The pop screen tells you their income, militancy and con. The trade screen tells you what is in high demand and therefore what factories you should build on the production screen, which affects your industry score and therefore your rank, not to mention unemployment and therefore the economy.

Re techs - I believe having invention invented in foreign countries helps your chance of inventing them, but using that for actual techs doesn't make sense. I mean, do you think Persia suddenly discovered dreadnoughts after Britain did?

Maestor said:

The problem is not on the demand side here, as this does indeed make a lot of sense. The supply side is the problem. Capitalists act like communists, ignoring potentially higher profits and efficiency. It is also the supply side formulas I am curious about. Is there a basic cost function for factories? How is this linked to decisions taken?

Click to expand...

What do you mean, ignore higher profits? There is a set cost for factories (varying by type), which you can see after pressing the 'Build Factories' button (capitalists also have to pay this to start up factories). Supply is determined by how much is produced. Industrial and Military Goods are produced by factories, as are Luxury Furniture, Clothes, Wine and Liqour. For other stuff, each province produces a good, coal, iron, cattle, precious metals and fish to name just a few. You can see what province produces what on the infrastructure map mode.

Maestor said:

I am not suggesting a model of technological diffusion that is that simple. What would not make sense is that while britain is building dreadnaughts, Persia is building man 'o wars. It would make even less sense for Germany or France to do so. What would make more sense is for other countries to take the new dreadnaught as a benchmark and build their own. Britain should still have the first dreadnaught, but it should not take France or Germany much time to build the second. By the time they have build theirs, britain should be building better dreadnaughts because of R&D. Even Persia sould realize that the dreadnaught is the new standard.

Click to expand...

But would Persia have the technical know-how to make them? The rest of your post however, I agree with, but the AI solely concentrates on their 'score', which cruisers don't make, meaning they wouldn't go for that branch until dreadnoughts are unlocked, by which time they'd have to solely concentrate on that branch and have to invest solely in that branch to get them within ten years, and why would they when they can increase industrial capacity and land army potency at a much faster rate.

Well, the research system is IMO pretty flawed.

For example: you could say that in 1914, Austri-Hungary had researched all of the available cultural and commerce techs.
While they had researched most of the army and industrial techs (so that they may have about 1-1.5 levels unresearched on each subject).
But they were maybe 2 levels behind in naval tech.
This is impossible with the current research system, I tend to be forced to neglect commerce, cultural and naval techs so that they are at basically stone-age level as a whole.

Also, the prices are for some reason based on potential demand and not actual demand which is also stupid (plus the fact that they can only fluctuate very slightly).

Mods deal with a lot of those concerns, tbh. Several of them revamp the economy to lower the overproduction crises that plague the game, and alter tech so that literacy or clerk numbers matter a lot more - allowing Japan to gain technological parity later in the game. This means the tech system is in no way beyond saving; while you can't effectively model direct tech spread, it's not really that appropriate to do so anyway - it took the Japanese 20 years to develop their own automobiles after the West, which in game terms is 20 techs worth of time. The best example for the direct spread of technology that you're looking for is the German adoption of the Dreadnought, and that was rather more of an exception to the rule, due to the British arrogance in inviting the Germans in to see it.

As for the factory problem - that's down to two things. The demand/desire problem causes prices to rise even when goods aren't being sold, as long as people WANT to by them, regardless of their own poverty. This leads to enormously overpriced goods which are in huge demand but cannot sell, leading to the second aspect of the problem - it messes with the Artisans/capitalist AI production AI no end. This leads to a recessionary spiral. However, both problems can be compensated for in modding, and have been.

The major, unchangeable flaw in the economic system is the price floors and ceilings, which Paradox assigned arbitrarily with no thought as to how common or rare an item was. Mods can limit the impact of this by lowering prices sharply across the board to minimize the difference between 'expensive' and 'cheap' goods, but can never eliminate the market distortions from it completely. Meanwhile, the prestige-based purchasing order on the World Market is equally rather flawed, mostly because the capi/arti AI has no idea that it cannot get access to inputs due to the low place in the pecking order. This is further compounded by the rather arbitrary nature of the prestige system, which makes it close to impossible for a low-ranked country to go up the ranks and so industrialize properly.

Most of the issues raised in this posts have been considered, debated and work-arounds implemented, which means that the system is NOT hopelessly broken. But the economy in the vanilla game IS broken, mostly due to it's starting position - most raw materials are horrifically overproduced, which means most people working to produce them can't afford to buy their own goods. This causes the massive early-game recession, which throws the whole economy into disarray more or less immediately. Fixing that makes the economy run far more realistically.

Well, as far as we can tell, there's not really been any major economic theory input into the game design. Goods are entirely happy to sell for less than the price of their inputs. 'Wages' don't actually exist - everyone acts as a shareholder. Transport costs are *probably* unmodleable, tho we have a few ideas on that.

The system basically works as follows:

RGO goods will produce their maximum output every day, based on throughput*output. These are then sold on the market. If any ouput cannot find a buyer, it is dumped into the sea. Income is split between the workers and the Aristocrats - tho no-one is entirely sure of the ratio it's handed out in. If only 2/3rds of the RGO goods created every day are sold, then EVERY RGO of that type sells 2/3rds of it's output. The exact forumula for RGO production is throughput * output bonus.

Factories purchase inputs if they can afford them. They do not consider the price of these inputs relative to their output. They simply buy as much as they can afford to buy, upto the input level required for their current throughput. Capitalists reduce inputs required by a small amount. Craftsmen then boost the throughput, while clerks increase outputs depending on their ratio of the workforce in the specific factory. The output is then treated just like RGO output - if it doesn't sell, it's dumped; if there's a portion of it wasted then that portion will be spread across the whole world economy. This means that the most efficient factories will survive, as they can turn a profit despite wasting a portion of output. The exact forumla, which can be found in the factory screen by hovering over any factory, is input*throughput*output bonus.

Industrial subsidies buy the inputs for a factory, and pay wages determined by minimum wage. If no minimum wage exists, then a factory failing to make a profit will not pay it's workers at all, even when subsidized. This can be easily modified by adding a minimum wage of £1 to 'no minimum wage', which helps the economy a fair amount straight away.

Goods are initially put onto the common market. In most countries at game start, this is just the country itself. Once a country is added to an SOI, either as it's leader or as a member, the common market expands to include ALL members of that SOI. Anything which is not sold on the common market is then transferred to the World market.

Goods are BOUGHT from the markets in Prestige order, with the highest prestige member of a common market getting first pick.. If only 2/3rd of the demanded goods on the market are available, then the first 2/3rds of countries in Prestige rank buy them. The bottom third receive nothing. However, if the POPs in the top countries cannot afford an item, it will be available to the lower order ones. In practice, the lower order countries will also be unable to afford them.

The exact order in which purchasing is done is: Highest prestige buys from common market, next highest prestige buys from common market, etc -> highest prestige buys from world market, second highest prestige buys from WM, etc. The common market acts as a 'regional' market in the sense that you're looking for.

Demand operates properly for Life needs and Everyday needs - that is, a POP needs to be able to afford the item to be capable of increasing demand for it. Luxury needs, on the other hand, pay no attention whatsoever to ability to afford an item, and increase demand by their full need, regardless of whether it can be bought or not. I have absolutely no idea why anyone thought this would be a good idea. This means any very expensive item that is present in a luxury needs category becomes completely unaffordable to everyone extremely quickly, as demand explodes and supply cannot sell, resulting in anyone producing it going bankrupt even as the price keeps rising.


Any further details you want?

Naselus described it pretty well, I just want to add that on top of that there is a promotion model. It is very important to understand promotion model together with economic model.

If we ignoring promotions, you always want to tax your population to max possible. IN many countries you can have 100% taxes and tariffs at game start( in reality it will mean something like 20% taxes). It Tend to be a good idea, why?
You population does not produce mach anyway and have low conscience. So, it will not move anywhere and do nothing, will not revolt. You do not produce mach and have no factories. Promotions are slow. If you give them as mach money as you can, you will just pay money into other countries economy. When you got factories, if this factories use imported material you want to drop tariffs down to 0. Us your population education and conscience raise, you will have to start to lover taxes, so they promote to think you want and do not revolt. you manipulation education, administrative, social and military slider to keep people happy, population move into jobs you want and do not move from the jobs you want to keep them in.

If it very complex system at the end. I do not know about realism, I study economy in my youth and I do not know any comprehended social/economy model that include pop migration and stability. I think game actually represent concept pretty well.

Maestor said:

I am, however, sorry to hear it is this simple... Maybe computing power and the resulting game speed set a limit.

Click to expand...

I think computing power is a huge part of the limitation, though I have my doubts that it's the economic model causing the slowdown in Vic 2. HOI 3 and EU 3 are also significantly slower and harder to run than their predecessors, but they don't seem to be significantly more complex. The detail of Victoria 2's economic model is quite a bit greater than Vic 1. Still, if turning off "moving water" has such a huge effect on system performance, then it's not unreasonable to doubt PI's ability to use system resources properly.

Maestor said:

Edit: I guess this also creates an important incentive for colonialism, as not producing the good domestically whilst having low prestige means you're not getting it.

Click to expand...

I've always thought that was a relatively cool and realistic feature of the Vicky economy.



I also have a pile of questions as to how exactly a number of things are calculated, including pop income, min wages, RGO and factory income and expenditures, taxes and tariffs, and goverment pay expenditures (military spending, admin, education). But it took me too long to write and the browser token expired. I also had some complaints about the inadequacies of the tooltips. Maybe another time.

NoClass said:

I think computing power is a huge part of the limitation, though I have my doubts that it's the economic model causing the slowdown in Vic 2. HOI 3 and EU 3 are also significantly slower and harder to run than their predecessors, but they don't seem to be significantly more complex. The detail of Victoria 2's economic model is quite a bit greater than Vic 1. Still, if turning off "moving water" has such a huge effect on system performance, then it's not unreasonable to doubt PI's ability to use system resources properly.

Click to expand...

You'll want to differentiate between processor power and GPU power. If the GPU is unable to cope then the CPU has to step in and slowdowns will occur. Since the map is 3D since Clausewitz it can be fully handled by the GPU and actually save more room on the processor.

The problem is that the newer games tend to have a lot of events which check often with a lot of variables to cross-check for every tag present in the game (not for every nation in the game) which quickly adds up to a lot of processor need. The biggest slowdowns in Vicky 2 seem to be related to armies, and especially massive revolts which add tons of armies at once. Another thing to consider is that the Clausewitz engine doesn't support multi-core, and processors haven't become much faster in the last few years on a single-core basis.

I never checked to see how big the impact is on the game's speed, and what I wrote above I got from testing with EU:3 which should apply to Vicky 2 as well.

Liquor is an everyday need? Must be a Welsh thing.

Very interesting reading. I hope some developer reads it, because I also think the system has some important flaws.

So factories just produce as much as possible (hire new pops) until they no longer make a profit (then they start to fire pops)?? In the real world a factory would only hire enough people so it can produce (ideally) just the amount demanded from the market. But in the game the only way a factory will make a profit if when it cannot find more employers or is limited by it's size... This doesn't sound right to me :/
And if the part that gets sold really is calculated globally it would mean that the countries with a lot of money to subsidize or with big population and factories just flood the market which will make it almost impossible for smaller poorer countries to start up their industry.

I really have a lot of trouble making any sensible industry wich small unimportant countries, and I actually think it is because of this. Also I experience times where just about every product is in overproduced -> prices drop -> my factories start to make losses -> I either have to subsidize with money I don't have or let the factories close down.

I think that if the factories would not just produce (hire pops) as much as possible that the economy will function a lot better.

No idea said:

Very interesting reading. I hope some developer reads it, because I also think the system has some important flaws.

Click to expand...

Frankly, I would be astonished if anything reported or discussed here was news to the developers. Undoubtedly one reason the promised 1.03 patch has not yet appeared is that they're fully aware of the currrent economic model's shortcomings.

Mammoet said:

So factories just produce as much as possible (hire new pops) until they no longer make a profit (then they start to fire pops)?? In the real world a factory would only hire enough people so it can produce (ideally) just the amount demanded from the market. But in the game the only way a factory will make a profit if when it cannot find more employers or is limited by it's size... This doesn't sound right to me :/
And if the part that gets sold really is calculated globally it would mean that the countries with a lot of money to subsidize or with big population and factories just flood the market which will make it almost impossible for smaller poorer countries to start up their industry.

I really have a lot of trouble making any sensible industry wich small unimportant countries, and I actually think it is because of this. Also I experience times where just about every product is in overproduced -> prices drop -> my factories start to make losses -> I either have to subsidize with money I don't have or let the factories close down.

I think that if the factories would not just produce (hire pops) as much as possible that the economy will function a lot better.

Click to expand...

Instead of think how it should be, think how can you use that!

Man, you have tools, first, your country factories are not only what produce goods, you have competitors, early on it is mostly artisans, then other country factories.

Make you unprofitable factories profitable, expand them and hire even more people. ( you can do it by additionally subsidizing them try import subsidies and direct subsidies.)
Make them more profitable in long run by focusing on clerks and promoting capitalists (technological research is factor too, but currently in the game you can overcome low tech with good play).
If you doing that long enough (running factories in loss why expanding them) you will start to push competitors of the market, starting with artisans and then other countries.

So, first other word production decrease and eventually demand increase as population become richer. when you notice in trade screen that supply begin to be ~= demand, time to cancel subsidies and enjoy strong economy.

IN real life it is call one way to push competitor of the market, selling at loss until competitor got bankrupt. It is one way to create monopoly, because your long running, fully stuffed factories with good mixture of clerk/craftsman/ capitalists will be mach more effective then newly open competitors one's.

By the way, in that century there was many registered cases when international monopolies dump excess produce into sea in order to keep prices up. Was one of point why socialism and planed economy looked attractive, capitalism was very wasteful with constant overproduction cycles, just like in game.

Now big company avoide dumping excess food in water by selling it to charities or using in UN programs, like oil for food, et.

I am very dissapointed in some moods that want to remove execly think which make games realistic, fun and challenging.

Mutineer said:

Instead of think how it should be, think how can you use that!

Man, you have tools, first, your country factories are not only what produce goods, you have competitors, early on it is mostly artisans, then other country factories.

Make you unprofitable factories profitable, expand them and hire even more people. ( you can do it by additionally subsidizing them try import subsidies and direct subsidies.)
Make them more profitable in long run by focusing on clerks and promoting capitalists (technological research is factor too, but currently in the game you can overcome low tech with good play).
If you doing that long enough (running factories in loss why expanding them) you will start to push competitors of the market, starting with artisans and then other countries.

So, first other word production decrease and eventually demand increase as population become richer. when you notice in trade screen that supply begin to be ~= demand, time to cancel subsidies and enjoy strong economy.

IN real life it is call one way to push competitor of the market, selling at loss until competitor got bankrupt. It is one way to create monopoly, because your long running, fully stuffed factories with good mixture of clerk/craftsman/ capitalists will be mach more effective then newly open competitors one's.

By the way, in that century there was many registered cases when international monopolies dump excess produce into sea in order to keep prices up. Was one of point why socialism and planed economy looked attractive, capitalism was very wasteful with constant overproduction cycles, just like in game.

Now big company avoide dumping excess food in water by selling it to charities or using in UN programs, like oil for food, et.

I am very dissapointed in some moods that want to remove execly think which make games realistic, fun and challenging.

Click to expand...

To a point this is a good mechanic, but the levels of overproduction are staggering. There can be 20x more supply of fabric than there would be demand just to name one product. At some point the factories should make the switch to higher quality instead of quantity.

Mammoet said:

So factories just produce as much as possible (hire new pops) until they no longer make a profit (then they start to fire pops)?? In the real world a factory would only hire enough people so it can produce (ideally) just the amount demanded from the market. But in the game the only way a factory will make a profit if when it cannot find more employers or is limited by it's size... This doesn't sound right to me :/
And if the part that gets sold really is calculated globally it would mean that the countries with a lot of money to subsidize or with big population and factories just flood the market which will make it almost impossible for smaller poorer countries to start up their industry.

Click to expand...

This is exactly how the economy behaves. The factories do not understand the idea of an optimal profit margin, and so regard the optimum as 0, hiring workers until it makes no profit whatsoever. Worse, it's not PAYING those workers - all money is used to purchase input goods, which are then converted to manufactured goods, which are then mostly chucked into the sea when they fail to sell.

Considerably worse than this is the aspect that, as more and more factories fall into this trap, overall real demand in the economy falls. This creates a feedback loop, causing more factories to begin overproducing, lowering wage payments for other factories and RGOs, and thus causing further drops in demand...

This feedback loop can be closed and prevented, and has been in PDM. The fundamental causes for it are the overproduction of goods at the start of the game, and the empty economy at the start of the game, but there are other aspects as well - the semi-random appearance of early gold mines mean there is not enough capital available for economy to work. This is because all money in the system can only be spent once per day - the velocity of money is either 0 or 1, never anything higher than that. This is fundamentally unsolvable, due to the way money works. A POP spends today's wages tomorrow, and cannot use them today. This means the usual economic equation that states that a low money supply will simply circulate faster does not apply here, and therefore the last of the fundamental tenants of economic theory is removed from the game.

Of course, money is another matter. Money, in the real world, is a medium of exchange. However, in V2, money is an absolute expression of value - hence only one currency, and no exchange rates or variable inflation. £1 is £1 is £1, and while goods may fluctuate in value, money does not. Inflation and deflation do not occur in the 'real world' sense; in fact, they are completely inverted. But that happens a lot in V2 - for another example, the commodities market follows strict controls, while the labour market operates under total freedom.

None of this means V2 is a bad game or a broken system, however. It is a game, and not a model built around the rules of economics. Do not expect anything you've learned in economics lessons or read in economics textbooks to work in the game world - it simulates rather than modelling. I strongly believe that the in-game system can be tweaked to work properly, simply because the existence of the downward economic spiral means that it can be followed BACKWARDS, provided the starting conditions are correct. The steps that various mods, not merely my own, have made toward that goal show that the system can work, either through self-propulsion like in PDM, or through outside manipulation like VRRP, or simply through changing the rate of RGO efficiency improvement, like AOC. And if a bunch of random pirates like the guys on the mod forum can put togather ways of fixing it in three months, then it's fairly clear Paradox's dedicated, qualified programmers can do it too, so don't give up on it.