The game's miscalculation of GDP and the side effects of it

[durbal]

I first saw this issue pointed out on a thread on Reddit (shudder). GDP calculation is supposed to only factor in the value of finished goods, but instead V3 treats all outputs as finished goods even if they act as an input in another factory. So a coal mine makes $50 of coal all of which goes into an iron mine which makes $100 of iron all of which goes into a steel mill which makes $200 worth of steel all of which goes into a shipyard which makes $400 of ships -- to use a simple example.

In the real world this amount to a GDP of $400 (i.e. only the market value of the finished goods).

In V3 this amount to a GDP of $50 + $100 + $200 + $400 = $750.

Ok, but it's just a number used in ranking and everyone uses the same formula so it doesn't matter, right? Well, no. There are at least two side effects I could think of from this miscalculation:

1. Industrialization greatly inflates GDP and allows a much higher credit limit than is possible otherwise. By using the same amount of construction points (or trowel mana if you wanna call it that), if it's used for industrialization you can effectively keep raising your credit limit to keep building because of the much higher GDP increases under this miscalculation. If you were to use the same construction points on resources, agriculture, etc. your GDP won't raise as much and you'll hit the credit limit much sooner.

2. Prestige/ranking calculations, diplomacy, etc. Industrialized nations will simply have an inflated GDP and will benefit from that inflated number in all those calculations that use it. Constructing basic resources for immediate consumption/trade or short chains is simply worse than longer chains for the same amount of workers/construction points.

 

[benis1996]

Thanks a lot for pointing this out! I really hope they address this... Input values should be subtracted!

 

[brainiac1530]

Another one for the list of knock-on effects -- minting income. It's a fraction of GDP, so an inflated GDP calculation results in extra government income.

This likely contributes to the whole "moar construction is always better" meta, where you can build deep into a deficit and debt and not only manage, but be heavily rewarded for it.

 

[Juanvito]

I had pointed this out during development, hopefully it gets addressed in a future update.

How is GDP calculated?

I saw on Reddit that it is the sum of the values of everything produced in each country at a moment in time. It may be a smaller detail, but it's gonna grind my gears a lot. It doesn't substract the value of inputs.

forum.paradoxplaza.com

 

[benis1996]

Honestly, given the state of HOI4, the devs will probably give us none of these fixes we ask for and add something no one wants

 

[Amtep]

I don't think GDP affects the credit limit though. There's a tooltip that says the credit limit is equal to the total cash reserves in all your buildings.

Edit: I was wrong, GDP affects it too

 

[Secret Master]

There are at least two side effects I could think of from this miscalculation:

Another one for the list of knock-on effects -- minting income. It's a fraction of GDP, so an inflated GDP calculation results in extra government income.

And boy does this one make a difference.

I didn't realize at first that minting came from both gold mines and GDP. So, I couldn't understand why my late game economies seemed to have ridiculous minting income despite only owning a few gold mines. I thought the relevant techs were bugged. Turns out, every bit of GDP you get boosts minting.

Which means that when growing your GDP, you can lower taxes over time even as you expand the construction sector (assuming your economy allows capitalists to invest). Lower taxes should stimulate more investment from capitalists, and the extra minting can help cover what you aren't getting in taxes.

At the 1 billion GDP mark, you're basically this guy:

I don't think GDP affects the credit limit though. There's a tooltip that says the credit limit is equal to the total cash reserves in all your buildings.

I think you're right, but with more GDP, and if you aren't taxing people in to space, your buildings should have great cash reserves. Which means more credit.

Hypothetically, there should be a sweet spot (someone with math skills could probably figure it out) where you could deficit spend in such a way that your deficit spending is slower than the rate at which your credit expands (buildings with reserves) and the extra minting from GDP keep moving the needle from negative to positive, meaning you can spend a bit more than you could before.

 

[durbal]

I don't think GDP affects the credit limit though. There's a tooltip that says the credit limit is equal to the total cash reserves in all your buildings.

 

[doubleskulls]

Hypothetically, there should be a sweet spot (someone with math skills could probably figure it out) where you could deficit spend in such a way that your deficit spending is slower than the rate at which your credit expands (buildings with reserves) and the extra minting from GDP keep moving the needle from negative to positive, meaning you can spend a bit more than you could before.

This sweet spot existing IRL too... and its is a common goal for many modern countries. Growing as fast as possible whilst decreasing your debt ratio. So the game having exactly this behaviour is a good thing.

 

[Haresus]

I'm not sure that minting income from GDP is a good mechanic. It encourages mindless "line go up" gameplay. Instead of thinking about how you are making money (taxes, investment pool, or tariffs?), you just have to build anything profitable and money magically appears in your pocket. Maybe that's realistic in some ways, but I'm not convinced it's good for the gameplay.

So if the GDP miscalculation isn't fixed by the devs, maybe it would be easier to just mod out minting income from GDP.

 

[shoebird]

I think you're right, but with more GDP, and if you aren't taxing people in to space, your buildings should have great cash reserves. Which means more credit.

Do taxes affect cash reserves? For what I have seen, there’s no corporate tax.

 

[Cymsdale]

So if the GDP miscalculation isn't fixed by the devs, maybe it would be easier to just mod out minting income from GDP.

Oh my, if you think the AI does terrible now...

 

[Sbrubbles]

I had pointed this out during development, hopefully it gets addressed in a future update.

How is GDP calculated?

I saw on Reddit that it is the sum of the values of everything produced in each country at a moment in time. It may be a smaller detail, but it's gonna grind my gears a lot. It doesn't substract the value of inputs.

forum.paradoxplaza.com

Yeah, and back then there were dev responses too. I thought they would have fixed it by launch

 

[MathyM]

I wonder if this is a bug or WAD.

If it’s the latter, then it’s quite shocking, for a game with emphasis on economy, to not know how GDP is calculated.

Either way, this deserves a sibling thread in the Bug Report section. Looks pretty critical to me.

 

[doubleskulls]

This was discussed pre-launch by Paradox, its WAD.

 

[benis1996]

This was discussed pre-launch by Paradox, its WAD.

Hilarious. Why would we expect devs of a game highly reliant on economics simulation to undersatnd how gdp is calculated?

 

[doubleskulls]

They do understand how GDP is calculated and consciously decided it was better for the game to calculate it differently.

I'm not sure if its really a significant concern myself.

 

[Secret Master]

Do taxes affect cash reserves? For what I have seen, there’s no corporate tax.

If a building has to fire employees to stay solvent thanks to input goods being too expensive, the goods it manufactures being too cheap, or POPs can't afford the goods they are making, then cash reserves will whither and die.

So, I'm not saying that you are directly taxing the reserves of the building, but high taxes can depress the buying activity of POPs and employers, resulting in cash reserves drying up in some businesses. In high tax situations, I've watched my available credit decrease real time even as I'm borrowing money with high taxes in place desperately trying to get people employed to get the line back on track to going up.

It's a pernicious problem with my railroads in the mid-game, to be perfectly honest. I need X railroads to provide infrastructure, but the buildings won't hire enough staff to provide the infrastructure and I see 20 different railroads with low to non-existent cash reserves going through a series of hiring and firing cycles. Those railroads aren't contributing to my credit even as they also fail to provide the requisite infrastructure.

 

[InvisibleBison]

They do understand how GDP is calculated and consciously decided it was better for the game to calculate it differently.

I'm not sure if its really a significant concern myself.

I agree, it seems like the issue here could be resolved by simply renaming GDP.

 

[durbal]

They do understand how GDP is calculated and consciously decided it was better for the game to calculate it differently.

I'm not sure if its really a significant concern myself.

It basically makes natural resource and agrarian economies significantly worse...

It feeds heavily into the construction-debt meta...

We already see resource-agrarian economies like Russia collapse and the AI fall behind...the fact that GDP is miscalculated factors into both of those.