Where does the money come from

[Keynes]

Originally posted by Notger
Now, let's say the US is importing more goods from Britain than it is exporting there. As was shown by Sir David Hume in 1752 . . .

Historically, the gold standard didnt work as Hume's specie-flow mechanism suggested it ought to, because countries did things like sterilize inflows. In practice it worked rather different from the theory. Just a historical note . . .

On the substance I agree with pcasey that (a) there is a problem, and (b) the analysis and solution should be kept as simple as possible.

The basic problem as I understand it stems from the fact that pricing can diverge significantly from supply and demand conditions. This is because commodities are assigned "target" prices from which significant divergences are "discouraged" by the WM model. That means if you mass build eg luxury furniture factories, the massive influx of supply will only decrease prices a small amount. Essentially that means that something along the lines of pcaseys "ether" has to generate the missing the demand. (Says Law is not an option because it assues a competitive pricing mechanism is functioning).

Having market pricing follow actual supply and demand conditions without this kind of commodity price stickiness would not only be more accurate from a theoretical standpoint, but it arguably would de a better job of recreating the Victorian Age market dynamics whereby industrial investment booms in new capacity resulted in recessionary and deflationary busts.

Now I think it is fair to assume that the developers and betas probably thought about this issue, and there is some good reason why a stricter supply-demand model of pricing was not followed. In a separate thread when this topic was raised, Peter Ebbeson raisied "stability" and playability as issues. I assume that means that absent some stickiness, price movements over time would be so random and indeterminate, and that any attempt to plan production rationally by the player would them prove fruitless. Which while perhaps capturing something of the reality of 19th century industrial life, doesnt make a very engaging game experience.

However, it is also clear that the pendulum has swung too far to sticky prices, with unbalancing results. In the other thread I suggested movement to some middle ground. However, absent playing a couple hundred games and running some sims, its hard for me to get a handle on the interaction of the pricing dynamics. The developers and betas are in a far better position now to do this kind of analysis or suggest possible tweaks and it is my hope that they will help do so.

 

[unmerged(10486)]

Originally posted by redawn

So, even if you have a gold standard, there will be different technical measures of the money supply (M0, M1, M2, etc) and economic modelling is correspondingly complex and uncertain.

Yes, yes, yes but the basic problems with Vicky as it is now is that:

a) Money comes out of nowhere, not from any banks or merchants, and if/when it gets repaid it also just vanishes into thin air and doesn't go back to those who lent it in the first place

b) Money spent in some circumstances (education, health care, crime fighting) just vanishes into thin air. True, pcasey, the game already has equations to make those investments pay off in terms of pop hapiness and militancy - but this is just a case of what you call "faking it". The reason people are happier with good public services is that it means income to them (or more precisely income that they do not need to spend on getting the same service), not "just because".

c) goods put up for sale are always bought, no matter whether anyone buys them. So I can very well industrialize my country by producing exclusively rubber ducks. No matter if nobody wants them ducks, I'll just get fake money for producing it from "the WM" (seemingly some guy with a big note printer in his backyard). And the best part of it is that the extra money that is appearing so fast that the ink wouldn't even have time to dry on the notes doesn't even produce an inkling of inflation.

Nobody's saying that it should take a PhD in economics to play the game - I don't have one. But if it is important for lots of players to know that Afghanistan had some obscure political crisis in 1848 - and you will see that sort of thing popping up in VIP, and I think that is a good thing too - then it is also important that the game obbeys one single simple principle: money that appears here must come from somewhere, and money that goes there should no longer be here. The player doesn't have to be Samuelson to understand that, I think it makes pretty good sense.

I mean, come on, the game is all about industrializing your country and making it grow economically, so you can afford more guns to conquer the world, right? Well how about a very very very simple economic model?

 

[Keynes]

What IMO is most important is to restore some kind of strategic balance to the econ-industrial system, so that a major industrial country is incented to build a diversified industrial base.

It should not be a viable strategic option for a 19th century nation to disband every single one of its farmers and miners and turn them all into factory workers.

It should not be a viable strategic option for a singificant 19th century industrial nation to focus heavily on the production of high end arms and luxury goods (which were artisinal in nature BTW), at the expense of developing basic industries producing mass consumer goods and inputs.

If these imbalances can be redressed by kludge solutions or "faking it" that is fine by me. What matters is the ultimate output, not the elegance of the model behind it.

 

[unmerged(10486)]

Originally posted by Keynes
What IMO is most important is to restore some kind of strategic balance to the econ-industrial system, so that a major industrial country is incented to build a diversified industrial base.

It should not be a viable strategic option for a 19th century nation to disband every single one of its farmers and miners and turn them all into factory workers.

It should not be a viable strategic option for a singificant 19th century industrial nation to focus heavily on the production of high end arms and luxury goods (which were artisinal in nature BTW), at the expense of developing basic industries producing mass consumer goods and inputs.

If these imbalances can be redressed by kludge solutions or "faking it" that is fine by me. What matters is the ultimate output, not the elegance of the model behind it.

I agree completely. But maybe the best, and easiest, way to ensure that a country does need a diversified production is to make sure that it has to actually sell the stuff it produces. If all the countries in the world end up making steamers because that's the most profitable good in the game, there is a problem. It doesn't seem like an impossible thing to achieve. Again, we are only talking of a very simple market, Adam Smith style. No transportation costs, perfect information about prices and availability, no exchange risk, complete rationality of the buyers and sellers... I may be missing something, but I believe the game is arleady calculating what a good costs the player to produce (otherwise where does the "profit" come from?). Hence, all it needs is a price at which anyone would be willing to buy the goods, and you can match supply and demand. Voila! No country will be able to make a decent living out of selling only clippers unless nobody else starts building them (and if they do make money with it, you can bet your bottom dollar pretty soon there will be new entrants into that market)...

And point two: make the money from loans come from somewhere, be it your own pops, foreign governments or foreign pops, and you suppress the second major money well. Limitless money does not make for good strategic balance.

I'm talking about gameplay here, not just realism for the sake of it (although I do admit to thinking more realism means more fun - if I didn't I'd get a first-person-shooter with unlimited ammo and go on a zombie safari: lots of fun too, but a different kind of fun).

 

[unmerged(14393)]

Personally I´m not at all in to economics. I am however very fascinated by this discussion, and I´m thrilled that everyone seem to agree that a good economical gameplay model is the way to go, and not necessarily a uber realistic one (that would take quite some interest and knowledge in economics to handle, and would of course be impossible to create).

 

[unmerged(5110)]

I love this discussion as well, but I feel I must reiterate something;

we cannot expect that the dev team to have political science, economics, military and strategic, population ecology AND history degrees in addition to their programming skills...

and the betas are very busy doing the things that are important; like going to their jobs and such (as betas don't get paid)

so there are some limits as to how much a beta can contribute to the game, and there are limits as to how much the dev can contribute to the game.

Having an economic discussion and talking about the failings of Victoria's economic model is fine, IMHO. But saying that somehow Johan should have had the economical knowhow and the means to apply this in a video game is getting to be unrealistic. And while nobody has actually said this, I can see that this discussion can potentially go that way. And I don't agree with that.

 

[unmerged(14393)]

Originally posted by XieChengnuo
But saying that somehow Johan should have had the economical knowhow and the means to apply this in a video game is getting to be unrealistic. And while nobody has actually said this, I can see that this discussion can potentially go that way. And I don't agree with that.

I am also glad no one has said that Johan should be able to recreate something as complicated as an economical system to a video game. It would be donwright naive to think that the game would manage that.

And I don´t think the discussion will go that away...it´s just too absurd. *lol*

But, it´s not absurd to expect an economical system that doesn´t generate billions of pounds without any real effort from the player.

And one shouldn´t be able to industrialize the entire country 100 %...surely the farmers would be pissed if you forced them all to work in factories.

 

[unmerged(3902)]

XieChengnuo:

Once again, we're in raging agreement .

I don't expect the dev team to be economists. It'd be *nice* mind you, but I, like you, don't think it's a reasonable thing to expect of them.

To their credit, however, Paradox has a long history of patching their games. In my own experience at least, most of their games improve dramatically up until patch 1.05 or 1.06 and then sort of degrade a bit as the developers bodge in more and more awkward rules to address specific, exploitive, strategies.

So now that Victoria is out there, I'd like to see the economic model get cleaned up. Perhaps I'm wrong about this, but I don't think one needs a PHD, or even a lot of under-graduate economics courses to *follow* this particular discussion. Perhaps some of the original analysis might not have sprung to every reader's mind, but now that it's out there, I suspect it's relatively clear to most readers where the problem lies.

Which leads me to think that the dev team can take threads like this and use them to help improve the game. *They* may not be economists, but some of us are, and many of the rest of us are at least well enough educated in the field to make some rough macroeconomic models. We've done the leg work of identifying the problem and suggesting a solution so they won't have too .

I'm certainly aware that the actual implementation of a solution is never as easy as it seems from out here. Likewise, I'm aware that changing the game over to a true market system would have huge ripple effects throughout the game. I am, however, of the belief that it's better to bite the bullet now and get the economic model right, than to be bodging rule after rule after rule into the game for the next 10 patches to try to address every specific exploitive strategy.

Ultimately, that was one of the things that frustrated me about EU, EU2, and HOI. There were core engine faults, such as the HOI combat and production model which encouraged massing huge stacks of low quality "chaff" units and throwing them at your opponent. Time and time again, when faced with a problem like this, Paradox's solution was to emblace an arbitrary game rule against abusing that fault in the system, rather than fixing the system in the first place.

Victoria ultimately has tremendous potential, and I'd like to see it done right this time .

 

[unmerged(10486)]

Well said pcasey. This isn't meant to be a destructive criticism thread. Only to build on Paradox's excellent tradition of constantly trying to improve their games long after most if not all other companies would have just moved on to other projects. And if only for that, I am sure I am not the only one out there who will continue to give Paradox most of his computer gaming buck.

The thing about trying to work things out in a would-be economic way is that it mainly implies changing equations - not GUI text, which would be much harder for Paradox to do, if only for translation problems.

 

[IEX Totalview]

This thread keeps getting more interesting...

As I see it, there sometihng of a general agreement as to what must be done. Let me see if I can summarize, assuming best case scenario, what we would like:

1) End to free money for selling goods on WM

Go for a true supply-demand world market, where if nobody wants it, you can't sell it. All goods must be purchased either by other nations or their pops.

2) A gradually increasing money supply

Instead of the WM printing unlimited notes, have it print enough to keep prices somewhat stable based on the amount of overall world production - avoid the deflationary effect of having a static money supply. How to implement this, I don't have a clue.

3) An end to money sinks

All spent money goes back to the class of pops who logically worked on the project, be it healthcare or factory building. Would need some way to reduce efficiency of doing so to avoid "free social spending" without losing actual money.

4) Realistic borrowing

Money borrowed must either come from your pops or another nation's pops, instead of ether.

This list is not exhaustive, just what I picked up as the main points that need fixing. If I missed something or you disagree entirely, please let me know, but I think we need to focus on a limited number of things to rationalize the economy in Victoria.

 

[unmerged(10486)]

Originally posted by IEX Totalview

2) A gradually increasing money supply

Instead of the WM printing unlimited notes, have it print enough to keep prices somewhat stable based on the amount of overall world production - avoid the deflationary effect of having a static money supply. How to implement this, I don't have a clue.

But this would mean abandoning the gold standard, save for a very small increase of money supply due to gold mining...

3) An end to money sinks

All spent money goes back to the class of pops who logically worked on the project, be it healthcare or factory building. Would need some way to reduce efficiency of doing so to avoid "free social spending" without losing actual money.

No doubt the more elegant way to go, but you would need to create new kinds of pops (policement, teachers, doctors...). Unlikely, if only for translation reasons.

 

[IEX Totalview]

Originally posted by Notger
But this would mean abandoning the gold standard, save for a very small increase of money supply due to gold mining...

I was thinking a bigger increase, to balance increased world production. If money stays static, prices will plummet as production increases.

No doubt the more elegant way to go, but you would need to create new kinds of pops (policement, teachers, doctors...). Unlikely, if only for translation reasons.

I think it has to be done. One idea is to have all "government spending" reduce the production efficiency of your factories, to represent government workers, teachers, doctors etc. who are taken from the factories. I think that might be a workable solution for #3.

 

[Keynes]

Originally posted by XieChengnuo
Having an economic discussion and talking about the failings of Victoria's economic model is fine, IMHO. But saying that somehow Johan should have had the economical knowhow and the means to apply this in a video game is getting to be unrealistic. And while nobody has actually said this, I can see that this discussion can potentially go that way. And I don't agree with that.

To avoid any potential misunderstanding, let me just say that I think Victoria as it currently stands is an impressive game with probably the most extraordinary depth and sophistication I have ever seen in a computer game, or for that matter, even in social science models in the non-gaming world. It's quite an achievement and the developers should be proud. Indeed, I suspect that to the extent there are certain issues that players are identifying as problems, these arise not from lack of attention by the developers, but from the fact that the overall game model contains so many interactive elements that it is very difficult to tweak without creating unanticipated problems elsewhere.

But that same compexity makes it very hard for the new players to diagnose (or through modding attempt to correct) what they perceive as problems. Thus, the hope would be (and I emphasize *hope*, not "expectation" or "demand") that the developers and/or the betas that have more experience and greater insight into the development and workings of the game model could contribute to the discussion and possible solution. And there is the further subtext that given the reality of limited time and resources, that the issues that arise in this thread and similar threads be considered for an appropriate level of prioritization when deciding what improvements to make in future patches (which based on Paradox history, are likely to be forthcoming).

 

[unmerged(6935)]

Originally posted by pcasey

What most more modern games do though is try to accurately model the system you want to portray. Get you model right and the gameplay will follow. It's *hard* to get a model right; far harder than just making a quick and dirty "lets fake it" model, but in the long run it pays off. Put together a good enough model and the game balances itself in most cases, supply and demand take care of themselves, stupid historical ideas stay stupid, army strengths stay about right, etc, etc, etc.

In a word: Realistic incentives to act realistically. Very much what I would want to see. Rock on!

 

[Olaf the Unsure]

No game soon is likely to replicate a fully "realistic" world economy - in part because no one can agree exactly what that is. The most we can expect is a reasonably plausible abstraction. Prices should fluctuate to reflect supply and demand. Different resources and products should have distinct economic attributes. Financial success should be attainable by a variety of means, but each should be internally plausible.

I again nominate Imperialism and Imperialism II as examples of games that got it right. Victoria is far more complex and succeeds quite well as is. There are things that need fixing, but that can only happen consistent with the real-world constraints on the game developers.

I'm neither an economist nor a programmer; just a game player. I hope that those of you who are wiser than I can come up with realistic, attainable ways to improve what is, out of the box, an already great game.

 

[unmerged(2928)]

I am not really strong in macroeconomics so I would like to make a question.
Wouldn't the suggestions that emerge from this discussion also have to cope with the fact that infrastructural and social models in Victoria are absolutly stalinist.
What I mean by this is that POP's just "spend" money and can not "invest" money building Factories, expanding RGO's and constructing railroads. So Capitalists and Aristocrats never loose money on private initiatives. Shouldn't the social model follow these macroeconomics issues. Social mobility should not be state controlled (unless you go socialist, but even then...).

Things might get really complicated but interesting.

 

[Alexander Seil]

There's no need to create new POPs, but functionality of the old ones is in dire need of modification (however utopian that might be). To start with (and this is unrelated to money supply), rate of industrialization should be heavily dependent on the actual cash reserves of your capitalists (and less so of clerks and aristocrats) - otherwise you can live off loans and construct an impressive state-run industial machine in a country that's 99% agricultural, whose products can then be used to extract the "virtual money" from the WM. Moreover, there should be a certain number of clerks that you must have for each pound you spend on crime fighting, education and social servies, say, 500 or 1000. They wouldn't be employed in any factory, rather being assigned to government duties. Most of the cash that you actually pay for social services should be distributed between clerks and, to a lesser degree, aristocrats (upper bureaucracy). Part of the money spent on defense should go to officers' pockets. These measures would solve the issue of simulating government spending and preventing small agriculture-dependent economies from collapsing one or two years into the game. However, as an added balance, loaning should be reduced severely - right now you can just build an impressive industrial economy entirely from loans. Apparently there are investors, but no such thing as investor confidence...

 

[Keynes]

Originally posted by Olaf the Unsure
I again nominate Imperialism and Imperialism II as examples of games that got it right.

Dont agree at least w/r/t Imperialism I. That game was far too biased towards neo-mercantalistic approach; grabbing colonial territories to secure quasi-monopolistic supply and distribution of goods. Trade between the major powers was poorly modelled.

 

[unmerged(3902)]

Nice:

In answer to your question, yes, the current industrialization model is absolutely a planned economy. From a gameplay standpoint though, they pretty much had to do this imho, because it gives the player something to do.

A more realistic economy in which factories were built largely by private finance with a few state run munitions works and whatnot, would basically require the player to sit and watch the game for fifty years doing pretty much nothing except checking to see what his little AI capitalists had built.

From a money supply standpoint though, it doesn't really matter if an economy is planned like Stalinist Russia or as Laissez-Faire as old British Hong Kong. Money in the system still has to equal productivity.

As for capitalists being treated as merely expensive consumers, rather than producers, of wealth, I agree, it's not particularly accurate. There have been suggestions to use their "personal" wealth as the basis for the state's borrowing capacity, for example, in order to give them some function.

Realistically though, I'm not sure if a gameplay mechanism that let your capitalistst in Berlin decide to open their own cloth factory and convert all your farmers to crafstmen to staff it is all that good an idea from a *gameplay* standpoint. What if you had something else in mind for all those unassigned pops?

 

[unmerged(3902)]

Originally posted by Keynes
Dont agree at least w/r/t Imperialism I. That game was far too biased towards neo-mercantalistic approach; grabbing colonial territories to secure quasi-monopolistic supply and distribution of goods. Trade between the major powers was poorly modelled.

Yeah, but we're all basically doing the same thing in the current incarnation of Victoria, only we don't even need bother grabbing a colonial territory first. We have our friend the WM to buy all our goods and sell us anything we don't make ourselves.

The problem with Imperialism in my mind wasn't the bad inter-power trade model, but rather the infinite colonial demand. A one province colony would buy 100 units of furniture every turn, letting me finance my whole empire by selling to, say, Switzerland.

I was willing to accept the mercantilist economic system. The infinite demand issue though was something else entirely.