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

[Cymsdale]

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.

In my opinion just subsidize railroads and then never think about them again beyond "do I need more railroads for market access". Fortunately this is allowed even in Laissez-faire.

 

[yurcick]

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

Source on that?

 

[Secret Master]

In my opinion just subsidize railroads and then never think about them again beyond "do I need more railroads for market access". Fortunately this is allowed even in Laissez-faire.

GagaExtreme mentioned this approach as well. What I discovered, though, is that blanket subsidies on railroads really becomes a drag after awhile. Plenty of railroads are profitable. But it's those weird ones in the mid-game that can't decide how to be profitable. Those get subsidies if they are behaving in a way I don't like.

 

[MJAnderson]

I think the issues is that in the real world GDP is +/- export/imports, so coal going into your factory would need to be excluded from GDP but coal being exported would be included and on the flip side coal you import would need to be subtracted from your final GDP. So every factory would need to track what % of its inputs were import vs. domestic and follow it up and down the chain --- coal to iron to steel to autos for example. Can't do it in total because insufficient infrastructure impacts prices, so it's not uniform across the country

 

[MathyM]

I think the issues is that in the real world GDP is +/- export/imports, so coal going into your factory would need to be excluded from GDP but coal being exported would be included and on the flip side coal you import would need to be subtracted from your final GDP. So every factory would need to track what % of its inputs were import vs. domestic and follow it up and down the chain --- coal to iron to steel to autos for example. Can't do it in total because insufficient infrastructure impacts prices, so it's not uniform across the country

Yes. Whether a good is imported, or produced domestically but consumed by the domestic industry, it should not be part of your GDP.

Only goods produced and consumed by the population, or exported to other nations, should be added to the GDP calculation.

In the current implementation, any Iron and Coal you produce domestically and use to produce Steel, which you then use to produce Engines, which you then export, is being counted three times:

once when it’s extracted
again when it’s turned into Steel
once more when it’s spent producing an Engine

In reality, the GDP of that nation should only count the value of Iron and Coal once, as part of the final product (the Engine).

The current model is not only wrong, it’s favoring nations that produce their own input goods by double or triple-counting them, whereas nations that produce input goods that are then exported are being punished by only having the value of their goods counted once.

 

[jaredstanko]

If it's a problem with making the math work, maybe instead of not counting the value of raw goods that get consumed by your industry, you could subtract the value of input goods from your endpoints?

Regardless, it doesn't seem like a huge problem to me.

 

[MatthewP]

I read the OP, which basically says “this is a problem because it favors industrialized nations.” Then I read that this is WAD, and think “I’m not surprised, this is a game about how industrialized nations were favored by history.”

In Victoria 2 btw production of raw resources counted exactly zero towards your great power ranking; only factories “counted” as far as your economy. Vic3 seems to have a more restrained skewing technique. I really think the outcome of giving an advantage to nations with a lot of factories pumping out industrial goods is intended and very consistent with the theme of the game and the period.

I do get the annoyance with the technical term GDP being misused. GDP also has a neatness to it and is a more faithful representation of an economy’s size. But this is a game about industrialization. Maybe as others said the term can be changed to something like “Total Domestic Product.” The words mean the same thing but it has no technical definition so paradox can give it their own. I’m not sure if this brings more or less clarity though. GDP may be technically inaccurate but everyone knows roughly what it means, and it works in the game in the expected way.

 

[MathyM]

If it's a problem with making the math work, maybe instead of not counting the value of raw goods that get consumed by your industry, you could subtract the value of input goods from your endpoints?

Regardless, it doesn't seem like a huge problem to me.

It’s not a problem getting the math to work. There are at least 3 ways to aggregate values in the real world and get the same number, and they are all very simple for a computer to do.

It is a huge problem because it will always double (and often triple) the impact of raw resources that a country produces, so long as they become an industrialized consumer good in the end. This doesn’t favor rural production, nor urban production. It favors domestic rural production funneled into domestic industry. It causes a value to be counted twice (or thrice, as it’s often the case). It affects Prestige, Minting, and Reserves/Credit.

 

[Cymsdale]

It is a huge problem because it will always double (and often triple) the impact of raw resources that a country produces, so long as they become an industrialized consumer good in the end. This doesn’t favor rural production, nor urban production. It favors domestic rural production funneled into domestic industry. It causes a value to be counted twice (or thrice, as it’s often the case). It affects Prestige, Minting, and Reserves/Credit.

I'm not sure why just saying it is a problem makes it a problem. Yes, countries with both raw resources AND industry will have a higher GDP than those that don't.

... so?

 

[MathyM]

I'm not sure why just saying it is a problem makes it a problem. Yes, countries with both raw resources AND industry will have a higher GDP than those that don't.

... so?

The margin by which their GDP is higher is inflated because the raw resources are being counted multiple times.

If you produce 100 dollars-worth of Wood, and consume all this Wood to produce 300 dollars-worth of Tools, then your GDP is 300 dollars, not 400 dollars, because the 100 dollars of Wood were destroyed in the process of adding 200 dollars of value on top of them.

Obviously a country making 300 dollars of Tools will have higher GDP than one making 100 dollars of Wood, but the margin is different.

In my example, this may seem small, but consider the scale of an industry with multiple steps (Iron, Coal, Steel, Engine, Electricity, Telephone), and how many times the value of the Iron that is consumed/destroyed by the Steel industry is being recounted, therefore inflating the GDP.

 

[GrafKeks]

The margin by which their GDP is higher is inflated because the raw resources are being counted multiple times.

If you produce 100 dollars-worth of Wood, and consume all this Wood to produce 300 dollars-worth of Tools, then your GDP is 300 dollars, not 400 dollars, because the 100 dollars of Wood were destroyed in the process of adding 200 dollars of value on top of them.

Obviously a country making 300 dollars of Tools will have higher GDP than one making 100 dollars of Wood, but the margin is different.

In my example, this may seem small, but consider the scale of an industry with multiple steps (Iron, Coal, Steel, Engine, Electricity, Telephone), and how many times the value of the Iron that is consumed/destroyed by the Steel industry is being recounted, therefore inflating the GDP.

I produce 1000$ iron, of which 500$ are used to create 1000$ steel and the 500$ remaining iron and the 1000$ steel are then used to create 2000$ tools: Since I mint with lets say with 20% I get 800$ mint (I actuall had to reduce tools because I feel into the trap of substracting and I want my arbitrary numbers to be clean) Only double as much, as I shpudl be able to mint ohh and the iron mine uses tools, bit I forgot that.

This escalates quickly when it comes to minting.

 

[MathyM]

I don’t think this is right. It does appear to favor urban production regardless of production chains. For example a factory which takes $100 worth of input goods to produce $200 is worth $200 in this model, where in “real” GDP calculations it would be worth only $100. This is true regardless of where input good are produced. Producing a raw material is always worth the value of the material; this is consistent with real GDP and again does not matter whether the input good is exported or used locally. So, yes, the calculation does favor factories.

Ah, that’s right. It’s not subtracting the value of input goods, even if they are imported, so anything past the first production stage is already being inflated, regardless of the country that the input good is being sourced from. So it favors any production method that takes input goods, no matter the origin.

 

[SchwarzKatze]

I'm not sure why just saying it is a problem makes it a problem. Yes, countries with both raw resources AND industry will have a higher GDP than those that don't.

... so?

So imagine you have an industry where $1 million of cattle yields $1.1 million of beef which in turn yields $1.2 million of steak.

In real life this industry contributes $1.2 million to GDP because only the final product is counted

In the game this industry contributes $3.3 million to GDP because every step is counted

Even if you increase the margin and change the number of $1 million, $2 million, and $3 million, you still end up with $3 million vs $6 million.

For an even more extreme example, imagine a "busy work" industry where each step only increases the product value relative to the raw material by 1%. Starting with $100 of raw material, you get $110 of product after 10 steps.

In real life this yields of $110 of GDP, and doubling the original resource harvesting building instead of building 10 steps of factories will most likely make more GDP instead

In the game this yields 100 + 101 + ... + 110 = $1055 of GDP which beats harvesting more resources hands down.

Hell you can even make industries that do nothing to the raw resource and your GDP still increases.

With this faulty logic, the length of the supply chain almost singlehandedly determines the GDP of an industry, even though in real life it has zero bearing on it.

And GDP in this game determines your credit limit and minting income so it is very important.

 

[belechannas]

The analysis is formally correct, but based on thinking about actual goods. As has been discussed many times, there are no goods as such in this game just (typically unbalanced) buy and sell orders.

So a realistic calculation of GDP seems impossible even in principle.

The name "GDP" should probably just be considered an immersion-enhancing label for an abstract game score used to calculate other game quantities. It incorporates aspects of GDP as well as the velocity of money.

 

[durbal]

The analysis is formally correct, but based on thinking about actual goods. As has been discussed many times, there are no goods as such in this game just (typically unbalanced) buy and sell orders.

So a realistic calculation of GDP seems impossible even in principle.

The name "GDP" should probably just be considered an immersion-enhancing label for an abstract game score used to calculate other game quantities. It incorporates aspects of GDP as well as the velocity of money.

There are quantities with pricing. The game uses those quantities and their price. It just uses them wrong.

 

[brainiac1530]

Giving factories larger margins to reach the same gdp results doesn’t have anywhere near the same effects on the game as this approach.

I mean, if you're purely concerned with making funni number go up, or inflating the free minting money, then yes. Increasing actual added value would have other effects on the rest of the economy, like paying out wages and/or dividends. Thus, the government could see some extra income if those things are taxed, or more indirectly for consumption taxes.

So a realistic calculation of GDP seems impossible even in principle.

Nah, there's the income method, even if production is a big shell game. Add up personal incomes from all sources (wages, dividends, etc.) and you have a different means of calculating GDP. (I'm not super familiar with the particulars of the method, but it should be doable. Wikipedia knowledge should suffice; this is Econ 101 level stuff.) In a real world economy, they'll come out the same. They wouldn't in this game, due to the fudging. I'm assuming that wages/dividends aren't fudged somewhere or other.

They ... they aren't, right!? I'm afraid to check ...

 

[Amtep]

They ... they aren't, right!? I'm afraid to check ...

They are. A factory that's losing money will still pay out wages even if its cash reserves are zero. It will gradually reduce wages in that scenario, but not instantly.

 

[Thaetre]

I don't know why you guys think this is a economy simulating game, its an economy-political train simulating game... Abstract the warfare and abstract the economy and be happy with Ctrl clicking buildings on the menu and look at the pretty trains on the map as "GDP mana" go up. /s

But seriously, 140hrs on the game and wanting to love it but there are some serious flaws like numerous typo's in defines and overflow calculations that can't be ignored. Seems to be a serious cash flow problem in the game with no implementation of inflation, and people who don't understand the problem with GDP being correct are missing the issue of how a proper economic model is affected by numerous indirect effects.

 

[PedroLuiz]

Lower taxes should stimulate more investment from capitalists,

Lol
Lmao

 

[JamesJameson]

This is one of those times were gameplay overrides real world sim. It happens.
I think your mistaking bad building AI with agricultural nations. Some nations in this game have more resources than others, but that doesn't mean any nation should go "agriculture build".
Or are you asking for this?
What is it you're wanting to happen in the end?
What kind of meta were you hoping for?
Are you wanting an agriculture Russia to stay in line with an urban building focused UK?

BTW when I play Russia, I don't go agriculture. IMO resources/agriculture is just to feed the factories and maybe for some lower turmoil, higher SOL and a bit of an income tax boost along with trade.

Also, the tax laws in this game can change, GDP isn't exactly = to money in the player's pockets, but it tends to raise in line with it, but so does lots of other things. Progression ....

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

Dividends tax is as close as it comes. Which is basically only on pops with ownership shares in a building.