Markets, Industry, Immigration and Economic Policy
Like so many people, I can’t help but open my own thread to try and give a consistent vision of how, in my humble opinion, the economic model should be revisited. I know there are threads dedicated, but I think that they do not make the complete link between markets, industry and population.
First, what are the objectives? Most of all, we want fun, so we need a model which gives the player control of the situation, even in a liberal economy. But we also want a model that gives us a feeling of reality, and with a historical flavour. Then, probably the developers don’t want to stray too far away from known game designs (that is Victoria 1 and to a lesser extent EU / HOI).
So, what were the most pressing economic issues in the 19th Century, those a history-minded player wants to cope with? Here is my own list, feel free to add something I might have forgotten:
- industrial development, based on technological breakthroughs and capitalistic accumulation;
- inflation and deflation;
- unemployment, labour shortages, immigration, rural migrations, urbanization;
- thirst for colonial markets, led by capitalists and merchants;
- the first ‘globalisation’ led by the United Kingdom, with a huge development of international trade in all kinds of goods;
- the economic shock of European and American superior industry and goods in other parts of the world, from Africa to Japan, and its dramatic consequences for these countries;
- the fight between old and new economic models, such as of course capitalism vs communism but also liberalism vs interventionism, and free trade vs protectionism.
Industrial development: Vicky Revolution’s system is already quite good at it. Building up industries and giving capitalists a say in a liberal economy was working rather well.
Inflation and deflation: Currencies were mostly linked until WWI, through the gold exchange parity, but WWI saw the explosion of European countries’ debts and the massive devaluations of their currency. Anyway, I think we should give up on this to keep the game simple. Unless someone has a better idea.
Unemployment and immigration: here, I’d say V1 and VR were very far from it. Immigration was more or less broken, and unemployment was not really an issue. And, should I say that the POP system was a micromanagement nightmare? As most of you will probably agree on, there’s no reason why 40k + 26k people should produce much more than 66k people.
Colonial markets: there was no point in conquering and colonising markets, as you would always find the goods on the World Market.
Globalisation: same point; the World Market was there from January 1st, 1836, as if container ships and air cargo already existed (but they didn’t, trust me).
Western shock: none of this.
The fight between economic models: this part was modelled with quite some detail, but the fact is that liberalism was annoying in that it deprived the player of much control over his country. It could fit some players, but not the majority.
Now, here are my proposals and ideas:
MARKETS
1/ Create Centers of Trade like those in EUIII. Big industrial countries should automatically get one (UK, USA, France…), as well as the biggest non-western countries (China, Japan, Persia…), and other countries should be people to build one for a certain amount of money / resources.
2/ For each Region (and not for each province), the buying price of resources not produced locally depends on the price of the goods in the Center of Trade plus a malus (representing the cost of transportation). This malus will decrease according to infrastructure.
The selling price depends on the price of the goods in the CoT less a malus (same logic, you need to transport your goods to the CoT).
3/ For each CoT, the evolution of the price of goods depends on the balance between demand and supply. Prices will not drop or increase suddenly, but in a more or less gradual way (grain increases quickly, luxury clothes increases slowly). This is called price elasticity, AFAIK.
4/ CoT Demand is calculated by summing up the demand of the population, factories, and States depending on this CoT (from all regions), plus some demand from linked CoTs where the price is higher (as buyers from this CoT are eager to find cheaper goods). Supply is calculated in the same way, with some supply coming from linked CoTs.
5/ Links between CoTs depend on political factors: being part of the same nation, being neighbours (having common borders), one CoT being a colony of the CoT’s metropolis, and trade agreements between countries (which gives a strong incentive to gunboat diplomacy). It also depends on infrastructure and technology (railroad, merchant navy, trading counters and coaling stations). The link level between two CoTs can stretch from 0 (no link) to 100% (at which point they might merge, to simplify things).
During the game’s lifetime, we’ll see links growing between many CoTs, simulating the development of trade through different means.
INDUSTRY
6/ Industry in a given CoT will get some profit from added value (to simplify, selling price – raw materials). Part of this profit is redistributed to the workers, and part is redistributed to the capitalists. This splitting might depend on factors such as unemployment, but basically, there should be some balance around 50% / 50% (to be finetuned, I suppose).
7/ Now, this is becoming tricky. We want production to depend on the global number of workers. We don’t want the POP splitting nightmare. So, a factory or a RGO will get part of the workforce of the Region (not the province, to minimize processing). Gradually, this factory or RGO will lose or gain part of the workforce, depending on the salaries (aka part of the profits distributed to the workers). But we don’t want to find ourselves with unemployment jumping at 50% or factories with 0 workforce. So we need flexibility. And the answer is… the law of decreasing returns! (is that how you call it in English?). Your first employee brings maximum productivity. Your second slightly lower. Your third even lower, etc, until your last employee brings 0 productivity. How can we simulate that? We won’t calculate productivity for each employee, so we need a bloody mathematical formula. For instance, we could use a formula like this: P being Production, W being Workforce, we could have P = a W – b W². W is limited to this level where the curve starts to go down.
What’s the point of this ridiculous formula? Gradually, factories will either hire or shed workers; but even if factories are turning at full capacity, they will be able to hire a bit more if unemployment is very high, and the economy will continue growing, at an albeit slower pace, if labour is scarce.
8/ I know this idea is already floating around, but I write it again to support it. One province should actually be able to produce more than one raw material: grain and coal, for instance, or grain and fruit, or grain and silk…
STANDARD OF LIVING
9/ For each Region, a Standard income is calculated for each category of POP, based on their share of the profits and their consumption needs. This is quite similar to Vicky 1. But there’s a big difference on spending and saving. Each POP spends all it needs to satisfy its survival needs (some basic food and maybe clothes / coal / things like that). If they don’t earn enough, they can spend their savings as well. Then, gradually, they will start saving more and more money, once they satisfy basic needs, standard needs and luxury needs. This money will be part of the private capital of each region. Capitalist POPs will have the biggest share of this capital from the beginning, but other POPs can accumulate capital as well – and earn interest. Interest is calculated by dividing a Region’s industrial profits by its private-owned capital.
10/ Emigration (whether national or international) is determined by two factors: economic and political. Purely economic emigration will first head towards new regions of the same country (regions with low unemployment will get part of this internal migrations), then if unemployment is high towards other countries. Political emigration will head directly towards other countries.
For these would-be emigrants, the destination is always a CoT. This way, we make sure migrants arrive in New York, London or Paris.The factors of choice will be unemployment, relative standard of living of the similar class (for instance, workers wealth), political freedom, cultural similarities (language, religion…) and maybe prestige (only when linked to economic, scientific or cultural achievements).
11/ Competitive shock.
When the Europeans open the markets of Asian or African countries, they will be able to sell their efficiently produced, cheaper goods. It means that prices will decrease for manufactured goods, and standard for living will decrease for the population. This should stir heavy social trouble, simulating all the problems that for instance China suffered at that time, with all its political consequences.
ECONOMIC POLICY
The player should have some control of the economy even in a liberal system, but each system should have its own advantages / drawbacks. This part needs some fine-tuning; in particular, I think the Leadership system from HOI3 should be re-used and adapted.
12/ Liberalism.
The State has a limited margin for action (building railroads, merchant navy, factories), that reflects its ability to subsidize some activities or to use its relations with the capitalists. Private initiative is strong, like VR, depending on which industries are the most profitable.
Technological innovation works in a same way, with a Liberal society being able to research more fields at the same time, with the State directing only a limited number of research projects.
To summarise in a HOI3 fashion, the liberals get more leadership, but can control a small part of it.
13/ Interventionism and State economy.
Depending on interventionism level, the effects of liberalism will gradually phase out. There is less private initiative, less private research, more public research. Public intervention in some fields is cheaper (building railroads and factories, for instance).
In HOI3 words: with increasing interventionism, you control more of your leadership but with lower total leadership.
14/ Communism.
There is no private initiative and the player controls everything, but the number of research projects is more limited, as well as the number of factories / railroads that can be built at the same time. The State gets all private savings from the Capitalists, and gets all profit from Industry.
15/ Free trade and protectionism.
This one is obvious. Free trade allows to increase the links between your CoT and those of your trading partners. If both countries are free traders, the link should be very strong, giving you access to a wider array of products and helping you selling your goods. On the other hand, protectionism allows you to limit the impact of competition if foreign goods are cheaper (since, as we said, a decreasing Standard of Living is a source of social trouble).
For the purpose of these humble ideas, I assumed that like V1 and HOI3, there will be regions containing many provinces. I think it’s a safe bet.
So, to the (very few) people who might have had the courage to read my awfully long post to the end, many thanks! :rofl: And again, good luck to Johan and the team!