AHD Economy Discussion

Very good discussion in this thread, does anyone mind explaining to me how tariffs work in this game? or is there any way to stimulate POP demand for goods? I thought they would make goods on the WM cheaper for my POPs and that my POPs would buy more but are POP needs just a single value? e.g. When POP requires 100 units of fruit, buys 100 units, he is done buying fruit forever, regardless of the price of fruit?
(I wouldn't expect the game to really model people substituting goods based on prices but I would think maybe
they'd demand more).

All in all, what are tariffs good at doing in the game and how do they affect the economy when you raise/decrease them?

I'm fairly sure tariffs increase/decrease the price of all goods purchased from the world market. The difference is added/taken away from the state's coffers. It's use is to generate money or to subsidize world market purchases. I suppose it could be used to prevent your POPs purchasing from the world market to starve another nation, but the effect on your own nation would almost certainly be worse.

POPs that have extra money after purchasing 100% of luxury goods will contribute 10% of income into the national bank, then go back to purchasing luxury goods up to 400% of normal demand.

I wrote this as much for myself as an answer to espana33. Can someone else confirm/deny what I wrote? Also, what does happen after a POP hits the ceiling on luxury good purchases? Does the rest go into the bank?

marnues said:

I'm fairly sure tariffs increase/decrease the price of all goods purchased from the world market. The difference is added/taken away from the state's coffers. It's use is to generate money or to subsidize world market purchases. I suppose it could be used to prevent your POPs purchasing from the world market to starve another nation, but the effect on your own nation would almost certainly be worse.

POPs that have extra money after purchasing 100% of luxury goods will contribute 10% of income into the national bank, then go back to purchasing luxury goods up to 400% of normal demand.

I wrote this as much for myself as an answer to espana33. Can someone else confirm/deny what I wrote? Also, what does happen after a POP hits the ceiling on luxury good purchases? Does the rest go into the bank?

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I guess what I am also wondering is the following: In my games I notice a lot of over-production. It is really annoying and I'm wondering if I am making goods cheaper for my populace to buy from the WM, does this ultimately contribute to even more overproduction later in the game where the added demand only helps other countries ultimately produce more and they build even more factories or is it really a null factor.

Also based on what I see, that is correct the remainder of what they don't spend goes into the National Bank which is infuriating when capitalists are making a ton of money, I wish there was a policy by decision like "estate tax" or something to bring that $$$ back into the economy w/out taxing all rich POP types at ridiculous rates like 80%.

marnues said:

POPs that have extra money after purchasing 100% of luxury goods will contribute 10% of income into the national bank, then go back to purchasing luxury goods up to 400% of normal demand.

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POP starts saving (10%) as soon as it meets 100% of its everyday need.
Are you sure the upper limit of luxury overpurchase is as low as only 400%? In my impression it should be far larger.

No, I am not at all sure that's the correct number, but I feel it isn't large enough for rich POPs to buy up an insane number of luxuries either.

espana33 said:

I guess what I am also wondering is the following: In my games I notice a lot of over-production. It is really annoying and I'm wondering if I am making goods cheaper for my populace to buy from the WM, does this ultimately contribute to even more overproduction later in the game where the added demand only helps other countries ultimately produce more and they build even more factories or is it really a null factor.

Also based on what I see, that is correct the remainder of what they don't spend goes into the National Bank which is infuriating when capitalists are making a ton of money, I wish there was a policy by decision like "estate tax" or something to bring that $$$ back into the economy w/out taxing all rich POP types at ridiculous rates like 80%.

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Overproduction is a consequence of oversized tech boosts. You need to mod your game to cut out a few hundred % of the tech boosts if you want to change this.

You can borrow that money if you want to get it circulating again. However, the game generates excess cash so there will be a pile of it somewhere and all you can do is change where it piles up.

The Arch Mede said:

Overproduction is a consequence of oversized tech boosts. You need to mod your game to cut out a few hundred % of the tech boosts if you want to change this.

You can borrow that money if you want to get it circulating again. However, the game generates excess cash so there will be a pile of it somewhere and all you can do is change where it piles up.

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Interesting. I only really notice it happening once my POPs are about 50% craftsmen in my provinces (typically playing as Austria), between me the UK, the U.S., and eventually Germany it pretty much makes it impossible for Italy/Japan and others to build any factories at all, which I see as sort of accurate but also sort of not since goods from the major powers didn't have full penetration into the markets in other countries. U.S. wasn't supplying 100% of Japanese clothing and canned food for instance.

Maybe I will write some events to buff demand for "luxury needs" to include more basic goods as well...

Follow-up question, maybe someone can confirm my understanding. WM prices are fixed right? My local markets don't sell for cheaper than WM prices unless I use negative tariffs? Also, my POPs buy from my markets first right? So if I am building clothes, lets say I have an aggregate demand of 6000 clothes and I go and produce 6000 units of clothes in my factories and no more (carefully regulating how big my factories are and how many people I allow to work in them), does it then follow that ALL of my clothes sold are going to my own POPs?

If it does, then does it also follow that imposing negative tariffs or subsidies at this point will make the goods I produce only for my own POPs more cheaply available to my POPs?

Let's say my economy for factory goods (non-RGO goods) is fully self-sufficient I produce all the factory goods my POPs demand and not one unit more. Does that mean my entire market for factory goods (assuming my POPs can afford to buy them) is fully satisfied and all my goods will get sold? Also in turn that means I will not import any factory goods and that if I impose negative tariffs I will make all my production goods even more available to my POPs?

Side note: I feel like GDP per capita or income per POP should play a bigger role in migration choices in-game. If I am the USA and there's 0 jobs here for immigrants... why would they keep showing up? Some would be fleeing political oppression however certainly it'd be fewer coming over right? Conversely if I am a European power with an open immigration policy and very low unemployment... shouldn't European POPs be running over? But good lord I don't want to take all the time to MOD all the POP files for cultures and test everything

espana33 said:

Interesting. I only really notice it happening once my POPs are about 50% craftsmen in my provinces (typically playing as Austria), between me the UK, the U.S., and eventually Germany it pretty much makes it impossible for Italy/Japan and others to build any factories at all, which I see as sort of accurate but also sort of not since goods from the major powers didn't have full penetration into the markets in other countries. U.S. wasn't supplying 100% of Japanese clothing and canned food for instance.

Maybe I will write some events to buff demand for "luxury needs" to include more basic goods as well...

Follow-up question, maybe someone can confirm my understanding. WM prices are fixed right? My local markets don't sell for cheaper than WM prices unless I use negative tariffs? Also, my POPs buy from my markets first right? So if I am building clothes, lets say I have an aggregate demand of 6000 clothes and I go and produce 6000 units of clothes in my factories and no more (carefully regulating how big my factories are and how many people I allow to work in them), does it then follow that ALL of my clothes sold are going to my own POPs?

If it does, then does it also follow that imposing negative tariffs or subsidies at this point will make the goods I produce only for my own POPs more cheaply available to my POPs?

Let's say my economy for factory goods (non-RGO goods) is fully self-sufficient I produce all the factory goods my POPs demand and not one unit more. Does that mean my entire market for factory goods (assuming my POPs can afford to buy them) is fully satisfied and all my goods will get sold? Also in turn that means I will not import any factory goods and that if I impose negative tariffs I will make all my production goods even more available to my POPs?

Side note: I feel like GDP per capita or income per POP should play a bigger role in migration choices in-game. If I am the USA and there's 0 jobs here for immigrants... why would they keep showing up? Some would be fleeing political oppression however certainly it'd be fewer coming over right? Conversely if I am a European power with an open immigration policy and very low unemployment... shouldn't European POPs be running over? But good lord I don't want to take all the time to MOD all the POP files for cultures and test everything

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Your local markets don't sell for anything but the WM price whether or not you use tariffs. If you use tariffs, then imports are cheaper or more expensive depending on whether the government is taxing or subsidising them. Tariffs are utterly irrelevant if you have controlled your economy to be in complete balance without trade to the WM.

You can only do this management provided you are not involved in a sphere. If you are a sphereling you can do it to some extent, but if you are a GP you do not have a home market that is separate from your sphere. (This is AHD. Spheres were controllable by the GP in the earlier game.)

I think the current economic system has two major drawbacks:

1. All sellers on a market sell an equal share of their production.
That means that a factory that can make profits selling 90% of its production will close when the market only allows for selling 89%. The factory's owner can't do anything because lowering production won't fix it. As I've seen that factories don't lower production in this case until they get closed.
2. That leads to the second point: products not sold one day are lost. That's silly! Machine parts not sold today could be sold tomorrow or even next month. A Factory should stockpile them, lower production and sell from stockpile.

Every single bottle of wine that is thrown away is a loss to my national economy. I don't see the point why factories behave like they do. The effect is that a factory that can produce a bottle of wine for $1 and sell it for $1.20 won't make profit in V2 as soon as there is 20% more wine on the market than can be sold. In my opinion it should make profits!

The devs have already stated that there's no chance whatsoever of goods stockpiling being introduced to V2, IIRC - stockpiling already doesn't work well with the pricing model, so it'd be too fundamental a change to implement it. Here's hoping for V3.

Sellers on the WM all sell an equal share of their production, but that's why SOIs are important - they allow you to keep other nations out of your valuable markets. Factories fire workers when they start to lose money, so production will reduce as overproduction leads to loss of profit. Whether factories should have an 'ideal' profit margin below which they begin to fire is open to debate, but would be quite hard to set up properly - most likely, it'd just result in lots of startup fails.

Oh, and:

marnues said:

No, I am not at all sure that's the correct number, but I feel it isn't large enough for rich POPs to buy up an insane number of luxuries either.

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Rich POPs already have very expensive luxury needs. The luxury needs of a capitalist POP cost £1870.5 per day for 100% fulfilment - and that's not even including the cost of their everyday and life needs. So a 400% overbuy capacity puts that up in the range of £10k/day.

Of course, that's based on a 100k POP at CON 10, with no inventions, at market base prices. Most Capi POPs are under 1k in size, so this is reduced to the more realistic £100 a day - tho that's still rather larger than the balance sheet of about half the nations in the game. However, when we add inventions into that mix, the UK's capitalists (in 1836) start out with a 35% increase in their consumption, for around £135/day per 1k POP (this isn't strictly true on day 1, since they haven't got 10 CON; however, Capitalists overbuy luxuries so much that they rapidly reach 10 within 3-4 months anyway).

Xylander said:

Every single bottle of wine that is thrown away is a loss to my national economy. I don't see the point why factories behave like they do. The effect is that a factory that can produce a bottle of wine for $1 and sell it for $1.20 won't make profit in V2 as soon as there is 20% more wine on the market than can be sold. In my opinion it should make profits!

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Actually it shouldn't be able to sell at 1.20 in that case. Once there is more wine on the market than sells at the price the game sets, the game price is too high and it has to compensate in some way. Since it uses a command method to set the price, the compensation is trashing surplus product. If it used a market method for setting the price, the price would move to match supply and demand.

In this situation your factory is a marginal producer. However the game economy is structured, its not going to make a profit. That's what happens at the margin. You sell 5/6 of your production at 1.2 or all of it at 1.0 but the end result would be the same. No profit.

Secret Master said:

And yet, with Capis overbuying their luxuries to that extent (and I agree, they buy a lot of stuff), we still end up in the late game with tons of oversupply because POPs can't just buy it all. At the same time, I end up with a national bank swimming in deposits because of how the concentration of wealth works in Vic2. My 250 capi POPs are splitting the profits from 8 factories with 200,000 workers each per state. The concentration of wealth becomes ridiculous because those tiny capitalist POPs can't even begin to spend all their money. In fact, because of factory expansion times and the 8 factory per state rule, they can't even spend a ton of money investing in new projects.

I can turn on capitalist promotion NFs for decades at a time, and this problem still exists. I can pass all social reforms (hopefully cutting into the bottom line), and they are still swimming in more money than JP Morgan.

I don't know if raising their luxury needs or the overbuy effect would be a good idea, but that's because there is only a finite amount of rubber on the planet. If you increased their luxury goods by 10x, we'd end up with more demand for luxury clothes and furniture that could be used to soak up all that extra production, but I can only make so many cars, radios, planes, and telephones a day, even if I own Africa and sphere the top 3 other rubber producers. And if the capitalist POPs are kind of tiny, 10x ain't really going to move the needle on WM demand that much anyway. Either it wouldn't make a difference, or I'd end up being unable to meet that demand because of a lack of rubber. It's a paradox.

Personally, I wouldn't mind higher POP demand across the board for everyone and all kinds of goods. I also wouldn't mind a bigger impact from CON. Vic2 isn't going to model demand in an infinite way, so we need something else to tweak the late game economy.

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Moreover the economy can't invent new goods, so eventually, if we limited the types of goods we do buy in the real world, we would probably plateau in a similar way.

Does anybody know if there's a specific limit to the number of goods available in the game? In PDM they added in Banking & Financial Services as goods, maybe there should be increased demand for more abstracted goods categories "Poor Services"
"Medium Services" "Wealthy Services" and "Inferior Luxury Goods" "Moderate Luxury Goods" and "High Luxury Goods" (could be named a lot better than that).

Each could have different types of factories to produce them with different factory inputs. The abstraction helps conquer the 8 factory per state limit in the game and in the late-game or upon certain inventions (can production levels be a trigger for events?) you could have a series of events to gradually turn up demand as the global economy grows. First affecting big civilized countries and later minor powers and lastly uncivs (probably by 1900 or so). This also means if I want to boost my steel industry, I can choose the luxury factory type that utilizes steel. If I want to boost lumber, I can choose the luxury type with lumber. Or I could select the many other luxury good types. And if we make these fairly input intensive, as the cost of inputs should decrease over time to reflect steel etc becoming quite cheap relative to its price in 1850. I think this would let us without reinventing the wheel greatly fix the economy w/out placing huge burdens on POPs/economy/production that break the game.

Also at the same time we can make the amount of input goods required to produce basic goods like lumber and steel decrease over time, so that as you mention you don't arrive at a situation where all the rubber in the world is not enough to satisfy demand.

I think the key is to have event modifiers for this stuff be very gradual and tailored to affect different countries differently so as to not send vietnam or someone into a permanent cycle of economic decay. This better simulates invention, innovation, changes in consumer preferences based on wealth in the economy etc. but is a big undertaking to mod & test for sure.

I wonder if Naselus, you have any thoughts? You understand the model of the game very well,

Second idea: We could just add decisions for "National Projects" if you are a Planned Economy or Interventionist economy, you could opt to say, build Hydro-electric dams or telegraph networks & other types of infrastructure improvements to say increase your transport bonus. Kinda like the Suez Canal but that this would also make you need to buy goods on yournational stockpile slider. Or things like lets build schools! or lets build bus stations! or what have you, national arms depots Something to spend all that extra $ on and use up goods in the economy w/out breaking the game.

(I also think the demand for military goods should be much higher and tied to your military spending slider somehow.. so that if you spend 100% on the military you are buying TONS of military goods...lets be honest any military on the planet with an infinite budget is going to go bananas in the acquisition process, not limit itself on its own)

The Arch Mede said:

Actually it shouldn't be able to sell at 1.20 in that case. Once there is more wine on the market than sells at the price the game sets, the game price is too high and it has to compensate in some way. Since it uses a command method to set the price, the compensation is trashing surplus product. If it used a market method for setting the price, the price would move to match supply and demand.

Click to expand...

This is the root cause of most systemic economy problems in Vicky (along with equal splitting of sold/unsold goods).
Because lots of POPs wishing for something which they can't buy crashes the economy in this command model. High demand makes the price skyrocket, so that no one can afford to buy it. Thus factories start running a loss, close down or just fire workers, decreasing supply - and the price climbs even higher.

Equal splitting of selling is a similarly serious mistake. Because if there is a high number of factories producing something, then an individual factory's profit is a linear function of produced quantity. Thus factories worldwide engage in an overproduction race until some start running a loss and close down, somewhat returning the situation to sanity.

Secret Master said:

Personally, I wouldn't mind higher POP demand across the board for everyone and all kinds of goods. I also wouldn't mind a bigger impact from CON. Vic2 isn't going to model demand in an infinite way, so we need something else to tweak the late game economy.

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Take a few hundred % out of the tech bonuses.

Add service professions.

I don't have anything to add to the topic at hand, but I'd just like to say that as an economist, this is the best thread on the board ^__^

The Arch Mede said:

Take a few hundred % out of the tech bonuses.

Add service professions.

Click to expand...

Do you know if there's a limit to POP types and Good Types? And Also does anybody know if there's a way to lower factory build times via event?

Secret Master said:

Except that's not what happens in the late game. Check out the screenshot.

The only high prices (which are green) are for goods based on rubber. And this is due to the end game rubber shortage. I'm so efficient that everything is either red or black.

If it was high prices killing the ability of POPs to buy stuff, I'd understand. Hell, I'd be making more money than I am now since I'd still be selling the same number of units, but they'd sell for more. Instead, the prices are "meh" AND I'm not selling more than half of my goods in some industries.

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If you aren't selling half your goods at red prices, I'd guess you are indeed overproducing everything. That is, supply exceeds demand by far. I don't know how is such a situation an argument against my idea/theory/opinion (which might be flawed nonetheless) that demand exceeding supply by far (the opposite of what is in the screenshot) can in some cases (e.g. very poor POPs) hurt the economy?

Also, as someone has mentioned, demand calculation might have been patched since the version I use to exclude the wishes of dirt-poor POPs.

espana33 said:

Does anybody know if there's a specific limit to the number of goods available in the game?

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There's no 'hard' limit, but increasing diversity of goods results in having to split POP needs into ever-more diverse sets of very small numbers. This in turn pushes more pops into the rounding error zone - a 250-man POP buying 10 grain won't be hit by rounding problems, but a 250-man POP buying 1 of each of 10 different goods will be. There's also a significant performance hit from adding in more goods. PDM has gone more or less as far as it's possible to go with 67 goods.

I wonder if Naselus, you have any thoughts? You understand the model of the game very well,

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I think you've pretty much just outlined the substitution factory model used by VRRP and PDM, along with tech-based input reductions which are already in AHD anyway

Marquis d Blois said:

This is the root cause of most systemic economy problems in Vicky (along with equal splitting of sold/unsold goods).
Because lots of POPs wishing for something which they can't buy crashes the economy in this command model. High demand makes the price skyrocket, so that no one can afford to buy it. Thus factories start running a loss, close down or just fire workers, decreasing supply - and the price climbs even higher.

Click to expand...

Except the desire bug was fixed in 1.2, and anyone who still believes that POPs 'bid' on items which they can't afford hasn't been paying attention for the last year or so. d=!d traps post-1.2 have been conclusively proven to be due to very small POPs receiving goods they can't actually afford, due to rounding errors on very very very small numbers; you can test this yourself by multiplying all production by 100000. All d=!d disappears. Problem is, this makes the game ball-achingly slow.

Marquis d Blois said:

Equal splitting of selling is a similarly serious mistake. Because if there is a high number of factories producing something, then an individual factory's profit is a linear function of produced quantity. Thus factories worldwide engage in an overproduction race until some start running a loss and close down, somewhat returning the situation to sanity.

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Most of what you're referring to is pretty badly out of date, as you've acknowledged; the race-to-the-bottom sea-dumping industrial model is massively reduced in AHD's scarcity economy, tho still happens late-game.