Transportation cost, for my money, is the big win. This would necessarily remove the World Market as it is now and would institute an actual buyer/seller scenario. Shipping and therefore naval might would become hugely important for purposes other than fighting the UK, and railroads would take on a whole new economic meaning. With known buyers and sellers numerous new socio-political relationships could be added, such as real tariffs and embargoes.
To completely derail the comparative advantage discussion, it's meaningless while all non-rubber goods saturate the markets. Right now, country 1 makes all the steel and lumber while country 2 rots.
How would one go about setting up different currencies? That would be a great feature along with some sort of comparative advantages and transportation costs for goods.
Actually the more I think about it, currencies would be so awesome. Making the ownership of colonies more important and also the "tuning" of the economy (import vs export).
Making the AI understand it, don't know since most people do not even get it
this is what I am proposing.
Maybe seeing any need as "covered" if only , say, 50% are fulfilled and make people choose their purchases to fulfil these 50% cheapest possible would be an easy way of implementing consumption side substitution.
Last edited by Eichenthal; 16-04-2012 at 16:31.
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It is possible that you could create comparitive advantage without multiple currencies though- the big problem is that there isn't much of a way to get a comparitive advantage in the first place- the techs benefit everyone equally.
I don't think local currencies can work without local markets and prices. You see anyway around this problem or would the whole edifice of the worlds economy have to be constructed in one go?
Production side substitution certainly helps but I strongly suspect that demand side substitution would be preferable. In some releases of APD we see prosperous nations intermittently plunged into famine because of disruptions in the canned goods market. With consumer side substitution a nation could always at least eat it's own agricultural outputs, no matter how little it's WM clout. But flexibility in either regards would be great. This could go hand in hand with multiple outputs from RGOs/factories/artisans.
And I'm pretty sure that comparative advantage can still work with symmetric prices. Prices being the same doesn't mean that profit margins are the same. As long as profits are asymmetric then a universal exchange rate multiplier would make some goods profitable for some countries to export and other goods profitable for others.
it seems some rather funny ideas of what a comparative advantage is are floating around here
imagine this simple cenario:
farmer A works 50 weeks a year. It takes him 2 weeks to produce 1 ton of potatoes and 3 weeks to produce 1 ton of grain. As he favours eating those two in equal amounts, he will spent 20 weeks to produce 10 tons of potatoes and 30 weeks to produce 10 tons of grain.
farmer B works 50 weeks a year. It takes him 6 weeks to produce 1 ton of potatoes and 4 weeks to produce 1 ton of grain. As he favours eating those two in equal amounts, he will spent 30 weeks to produce 5 tons of potatoes and 20 weeks to produce 5 tons of grain.
Obviously, farmer A has an absolute production advantage for both goods. He can produce potatoes "cheaper" than he can produce grain. Farmer B can produce grain "cheaper" than he can produce potatoes. Thus, farmer A has relative production advantage for potatoes and Farmer B for grain.
Overall production is 15 tons of potatoes and 15 tons of grain.
If we allow them to trade, each will produce more of the good he is best at. In this example, Farmer B would produce 12.5 tons of grain and farmer B 17.5 tons of potatoes and 5 tons of grain.
Overall production is 17.5 tons of potatoes and 17.5 tons of grain. Both could be better off with trading.
This little example shows, that you do not need different currencies to allow gains from trade. Aparently you don't even need one
I know what comparative advantage is in the real world and how it can take place within, for example, a currency union. However we are not discussing the real world. We are discussing the Vicky II economy and any hypothetical changed version of that economy.
Comparative advantage can also be seen in a pure barter economy. But anyone who's as well-versed in real-life and V2 economy, and has the username of, keynes2.0 definitely already knows this
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Yes, but comparitive advantage with a single currency doesn't work if your factories can supply the entire world market- it just means they focus on what your country is best at first, before hitting the other good.
Probably, but I don't think something like that currently exists in the game and I'm unsure what would be the best way to cause it. All I've ever heard suggested is having inventions fire that give bonuses to certain industries but provide malus to other inventions firing (like how the prestiege line works). I don't think that would get the results we are aiming for though.Originally Posted by keynes2.0
Um, assymetric profits are already in the game. Surely you noticed that the differences in input and output costs, not to mention the quantities needed mean that not all industries are equally profitable.
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No, a country would have it's currency depreciate until some factory or other became profitable for profit and the trade gap closed. At that point it's currency would stop depreciating. The factories wouldn't all become profitable at the same time (asymmetric profits) so currency depreciation wouldn't let you get ahead in everything. If for some reason you did get ahead in everything, your trade deficit would have been reversed so your currency would start appreciating until you start having industries become unprofitable.
I see what you mean and it could potentially work. My immediate concern was that there would be a ladder of most to least profitable goods and countries would cluster, but that autocorrects as it becomes saturated and countries move to them next one causing boom and bust cycles. Unless you use government stockpiles to attempt to equalize imports and exports, but it would be insanely expensive and only work buying raw materials.
Other problems I see.... since the currency is devaluing imports become more expensive which may screw over the factories and/or populance. While it woulld be historically accurate for aristocrats to continue importing goods, worsening the balance of trade and killing Latin American industrialization, it wouldn't be fun. Or an anarcho-liberal revolt in the US, taking over the grain districts, spiking the price of food which increases import costs for poor countries and since food is a giffen good, the value of their own exports drops, rapidly screwing them over and causing planet wide famine.
I think subsistence farming would have to be modeled in game in order to avoid things like that from occuring.