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

[benis1996]

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

orrrrr subtracting input costs. It makes no sense to double count production like this. The purpose is to measure the size of the country's production, which is measured by... GDP

 

[benis1996]

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

For imports/exports you could probably just use the market price, the result would not be drastically different in most cases.


But anyways, measuring GDP using production does not require adjustment for imports/exports. That is only necessary if you are measuring GDP by counting expenditure (e.g. if your pops are spending 1 million per week and you import 300k of goods more than you export, your gdp would be 700k... but if you count up your factory production it would add to 700k as well).

 

[Amtep]

For imports/exports you could probably just use the market price, the result would not be drastically different in most cases.


But anyways, measuring GDP using production does not require adjustment for imports/exports. That is only necessary if you are measuring GDP by counting expenditure (e.g. if your pops are spending 1 million per week and you import 300k of goods more than you export, your gdp would be 700k... but if you count up your factory production it would add to 700k as well).

That equality won't hold in vic 3 because buy and sell orders don't have to match. Your pops can consume 60 liquor while you only produce 30 liquor. You could even export 60 liquor while only producing 30.

 

[shoebird]

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.

I think I haven’t seen demand decreasing to the point to make previously profitable buildings unprofitable, when raising taxes to the highest level. Demand seem to be very high everywhere, at least of finished goods. But I guess I have been lucky.

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

Yes, but I don’t think it taxes the money that goes to the cash reserves. It doesn’t tax the money assigned to the investment pool either. It’s just another tax to pops.

 

[Broetchenholer]

This seems to be simulating quite well, that economies that were creating complex supply chains and refining goods became much more powerful in that period compared to countries that simply produced raw resources and exported those. It is a nerf to resource exporters and I feel this fits real life quite well. Without it, we could see plantation countries at the same sol level as the big indudtrializing countries.

 

[hermithill]

Of course the way GDP is calculated is not the one used in "real life", but

1) What makes you think that "prestige" should depend on final output and not on total output? It's just a gameplay choice. And to me it makes sense. We could just as well have made prestige depend directly on total production without calling it GDP.

2) The game is centered on industrialization, so having prestige depend on the ability to get out of a subsistence economy seems reasonable. To generate double counting, you also need to use twice your building capacity (to build mines and then factories for example). The current problem is not that GDP is calculated in a way that doesn't correspond to real life, but the fact that large nations with little industrialization at the beginning of the game don't know how to industrialize. I played with Russia: with a little colonization (for rubber and ports), Russia has everything: resources and population - that the AI can't make it one of the #1 powers at the end of the game is the problem, not the GDP calculation.

3) The credit limit seems to depend on two factors (the "GDP" in Victoria 3 and the cash reserves of companies) - do we know what the respective shares are? Maybe the weights need to be revised for balance purposes, but it seems like a second order thing to me.

4) Regarding minting: the contribution seems to be about 0.04% of GDP (a bit more at the end of the game with technologies) - sure, it's nice to have them, but frankly, I don't see how it would change the game much if it were calculated on a "real GDP" rather than on the measure used by Victoria 3.

5) Finally, on this count, don't forget that not only standard raw inputs are double counted, all military goods are too since they count via production and via power projection. So all military goods should also be eliminated from the calculation of prestige.

 

[Searry]

In the end money doesn't matter since defaults gives you free economic growth.

 

[yurcick]

4) Regarding minting: the contribution seems to be about 0.04% of GDP (a bit more at the end of the game with technologies) - sure, it's nice to have them, but frankly, I don't see how it would change the game much if it were calculated on a "real GDP" rather than on the measure used by Victoria 3.

What's worth looking at is not the share of GDP, but rather the share of income that comes from minting (proportional to GDP). The current incorrect calculation can easily turn 5% into 15% of all state income to come from minting. These 10% is really a lot.

 

[benis1996]

That equality won't hold in vic 3 because buy and sell orders don't have to match. Your pops can consume 60 liquor while you only produce 30 liquor. You could even export 60 liquor while only producing 30.

True. Which is why the current method of counting production is optimal... But inputs need to be subtracted.

 

[hermithill]

What's worth looking at is not the share of GDP, but rather the share of income that comes from minting (proportional to GDP). The current incorrect calculation can easily turn 5% into 15% of all state income to come from minting. These 10% is really a lot.

I don't disagree, it might be too high - but it's not directly related to the way the "GDP" is measured. Just change the 0.04% into a 0.02% or less. I suppose that some testings have been made and that the parameter has been chosen for balance reasons. You could also have a decreasing share of the "GDP" in order to somehow limit the snowball effects and still help boosting the economy at the beginning of the game.

 

[benis1996]

I don't disagree, it might be too high - but it's not directly related to the way the "GDP" is measured. Just change the 0.04% into a 0.02% or less. I suppose that some testings have been made and that the parameter has been chosen for balance reasons. You could also have a decreasing share of the "GDP" in order to somehow limit the snowball effects and still help boosting the economy at the beginning of the game.

.04 percent was probably chosen because if annualized this leads to 2% . However, this math is nonsensical since minting does not really represent growth in money supply in the game and there is no compounding. Honestly in a Victorian Era game, minting shouldn't really exist as a source of income especially since gold is already represented in the game as a resource. Most countries experienced on average very little inflation during this era.

 

[benis1996]

Of course the way GDP is calculated is not the one used in "real life", but

1) What makes you think that "prestige" should depend on final output and not on total output? It's just a gameplay choice. And to me it makes sense. We could just as well have made prestige depend directly on total production without calling it GDP.

2) The game is centered on industrialization, so having prestige depend on the ability to get out of a subsistence economy seems reasonable. To generate double counting, you also need to use twice your building capacity (to build mines and then factories for example). The current problem is not that GDP is calculated in a way that doesn't correspond to real life, but the fact that large nations with little industrialization at the beginning of the game don't know how to industrialize. I played with Russia: with a little colonization (for rubber and ports), Russia has everything: resources and population - that the AI can't make it one of the #1 powers at the end of the game is the problem, not the GDP calculation.

3) The credit limit seems to depend on two factors (the "GDP" in Victoria 3 and the cash reserves of companies) - do we know what the respective shares are? Maybe the weights need to be revised for balance purposes, but it seems like a second order thing to me.

4) Regarding minting: the contribution seems to be about 0.04% of GDP (a bit more at the end of the game with technologies) - sure, it's nice to have them, but frankly, I don't see how it would change the game much if it were calculated on a "real GDP" rather than on the measure used by Victoria 3.

5) Finally, on this count, don't forget that not only standard raw inputs are double counted, all military goods are too since they count via production and via power projection. So all military goods should also be eliminated from the calculation of prestige.

I disagree with your first 2 points.
1) This is really not a "gameplay choice". Imagine I have 100 workers producing good X and then 1 worker converting good X into good Y and both goods are the same price. Should GDP really double?

2) this is related to the first, but industrialization should be important because it leads to greater production, not because you think factories are cool or whatever. Subsistence farms are super inefficient and will lead to a lower GDP under either calculation method. If you really want prestige to be higher for industrialized countries, give a weighting to factories. But GDP as a statistic in the game needs to represent production.

 

[Eswahrt]

What's worth looking at is not the share of GDP, but rather the share of income that comes from minting (proportional to GDP). The current incorrect calculation can easily turn 5% into 15% of all state income to come from minting. These 10% is really a lot.

It depends on what you use as a base and how much expenses you have. This should not be compared with your income but with the size of the economy, for this reason its correctly calculated as % of GDP. How you calculate the GDP and whether there is double counting involved or not is irrelevant if the % itself is balanced.

Minnting is an ingame represenation of an effect of monetary policy and things like banking multiplier. And this represnetation works quite well given the limitations of any game. The amount also looks quite balanced, so if you change the base of its calculation (GDP) the % should change as well.

That said, the figure of GDP should not matter if you change the dependants in line with the change of how GDP is calculated.

As for the GDP given how economy is modelled in the game the approach to show the "real world" technically correct figure is the income approach and not substracting input costs (that would be incorrect). To get and approximation you simply divide income and dividend taxes you see in the budget tab by related percent and sum the figures.

 

[benis1996]

Also, here is why (for me at least) it is really important for GDP to be calculated correctly....

In my game, I use the GDP indicator to gauge the income of my populace. GDP per capita tells me roughly how much the average worker earns in my country. HOWEVER, this is only true if inputs are subtracted. Otherwise, the number will be significantly higher than the true value and totally useless to me as a player.

 

[benis1996]

It depends on what you use as a base and how much expenses you have. This should not be compared with your income but with the size of the economy, for this reason its correctly calculated as % of GDP. How you calculate the GDP and whether there is double counting involved or not is irrelevant if the % itself is balanced.

Minnting is an ingame represenation of an effect of monetary policy and things like banking multiplier. And this represnetation works quite well given the limitations of any game. The amount also looks quite balanced, so if you change the base of its calculation (GDP) the % should change as well.

That said, the figure of GDP should not matter if you change the dependants in line with the change of how GDP is calculated.

As for the GDP given how economy is modelled in the game the approach to show the "real world" technically correct figure is the income approach and not substracting input costs (that would be incorrect). To get and approximation you simply divide income and dividend taxes you see in the budget tab by related percent and sum the figures.

Dude the income approach will give you the same result as subtracting the inputs as long as money is not disappearing from factories (afaik it's not).

 

[Majokarp]

Could someone provide the formula for GDP calculation in Victoria? I would like to run some tests but can't find it.

EDIT

I saw that there was a link to an older thread talking about GDP and also pointing out this exact issue, in there I found this and i quote from wizzington (26/07/22) (I'm not directly quoting as I think that I can't in an edit)

"Interesting observations. We're actually going to try this out (subtracting building inputs from GDP) and see how it ends up in-game. We might go back to the simpler model we're using if it ends up poorly balanced though."

So i guess they already tried it out and determined that the game is better as it is.

 

[hermithill]

1) This is really not a "gameplay choice". Imagine I have 100 workers producing good X and then 1 worker converting good X into good Y and both goods are the same price. Should GDP really double?

2) this is related to the first, but industrialization should be important because it leads to greater production, not because you think factories are cool or whatever. Subsistence farms are super inefficient and will lead to a lower GDP under either calculation method. If you really want prestige to be higher for industrialized countries, give a weighting to factories. But GDP as a statistic in the game needs to represent production.

But it's a game - a statistic is useful only in how it's used. In your example, whether the GDP doubles or not is not very important - it does with Victoria 3 measure, it doesn't with the "real life" measure. What is important is how it affects the game - I believe (but I might change my mind) that prestige should increase in your example, you don't, fair enough, but I consider that is just a "gameplay choice". BTW, I also think that prestige should depend on average SoL and literacy. But it's just an opinion.

 

[hermithill]

Could someone provide the formula for GDP calculation in Victoria? I would like to run some tests but can't find it

As far as I understand, it's just the sum of Price*Quantity of goods produced in your economy.

 

[Majokarp]

As far as I understand, it's just the sum of Price*Quantity of goods produced in your economy.

So "Price" should be the market price after trade is considered, however I'm not very clear about quantities, are those sell orders (good produced + export) - import or only the good produced side of the sell orders?

 

[Eswahrt]

Dude the income approach will give you the same result as subtracting the inputs as long as money is not disappearing from factories (afaik it's not).

Does not seem so in a situation when you have any amount of an input good and can at the same time produce any amount of the output + price changes are not linear. You can end up with negative GDP in some weird scenarios

And, obviously, income approach is much easier as all info is available on the budget tab.