Where does the money come from

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Originally posted by pcasey
What if you had something else in mind for all those unassigned pops?

You could still try to influence POP's decisions with policies. This could also reduce POP and Factory micromanagement. The player should adapt Social policies, incentives, tarifs and maybe infratructural levels to the economy demands.

Furthermore you could still let the State build government owned Factories or nationalize/privatize factories, even call for foreign investments for example.

I am pretty confident with e more realistic econoic/social model the player would still have things to do.

Obviuosly I am going a bit off track and it might not be feasable with Victoria + patches. Not commenting on the complexities to build the model and an adequate AI for it.

But still it would be very cool.

 

[Alexander Seil]

Originally posted by pcasey
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?

My actual suggestion is not to limit the capacity of the player to direct construction, but the financing. For purposes of constructing factories, the "cash pool" should be equal to a certain part of combined cash reserves of clerks and capitalists, instead of being equal to the state budget - that would make sense economically, for industrialization is impossible when your middle class is out of money to invest. Similar system could be applied to RGO expansion, with aristocrats' money acting as the pool.

 

[DGuller]

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.

Agree entirely, and you can even extend that partially to Imp II. In Imp I, you get a colony so that you could buy 8 coal, 8 iron, and 16 timber from it per turn, and sell it 100 pieces of furniture every four or so turns. See a bit of disbalance there? At the end, you were flooded with millions upon millions, and didn't know where you could put it. Imp II was more moderate, but same thing applied. Instead of furniture, you sold lumber. Also, colonies that were conquered didn't buy anymore, so the flood of money was somewhat tempered, but that didn't make the economic model any more sound.

 

[Keynes]

Nice,

The player is taking the role of the government and the private production sector simultaneously. The "taxes" represent both actualy government taxation + private savings that can be used for investment purposes. Thus a raise in "taxes" is actually just a decrease in private consumption; it could represent increased savings. Expdenitures are both governmental and private, the player represents the the totality of actors in the production sector. Its not necessarily "Stalinist" - its just an abstraction for playability, though one inconsistent with e.g. an Austrian view of economic dynamics.

 

[Alexander Seil]

But the player has a choice to neglect investment and dump the money into adopting an autocratic political standing. Since autocracy makes most POPs unhappy, I don't see why they would spend money on it, if, as you say, the player's budget represents the spare cash in the private sector as well.

 

[Zander]

Originally posted by IEX Totalview
As I see it, there something 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:

I would definitely like to see us come to some kind of consensus, so that the devs will have more to work with.

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.

That would be nice. Though I'd give the world market a little leeway to hold a "stockpile" in each good, those stockpiles shouldn't be infinite.
I'm a little concerned, though, that the model may not be robust enough to handle this - some goods simply may not be "demanded enough". While I'd like to see this true demand-supply model, I think it's more important to make sure that the money isn't being generated from nowhere.

2) A gradually increasing money supply

As I said before, this is a necessity. It should increase faster than the population - ideally, slightly faster than world productivity, so that there is a natural inflationary effect.
I don't think it would be too hard to model this. Just feed a little "extra money" into the world market each day. They could have (if they don't already) a variable that tracked total world production, and then increment it by a further 0.01% a day.

3) An end to money sinks

pcasey raises a good point here about the problem with social spending. Having it all go back to the POPs would be too good for you, and having it all go back to the world market would be too bad.
I'd suggest, rather than making a whole new class of POP, that they just set a ratio. For example, "50% of your social spending is distributed among your POPs, the other 50% goes to the world market." That could represent how your administrative class was spending some of your money locally, and some elsewhere.

4) Realistic borrowing

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

Yes. I'd suggest that it should come from the world market, but I have some concern that the WM just wouldn't have enough money for all the vast borrowing that goes on in the game. So borrowing mostly from your own POPs, with a smaller amount coming from the WM or other nation's POPs, might be the way to go.

 

[Olaf the Unsure]

Originally posted by DGuller
Agree entirely, and you can even extend that partially to Imp II. In Imp I, you get a colony so that you could buy 8 coal, 8 iron, and 16 timber from it per turn, and sell it 100 pieces of furniture every four or so turns. See a bit of disbalance there? At the end, you were flooded with millions upon millions, and didn't know where you could put it. Imp II was more moderate, but same thing applied. Instead of furniture, you sold lumber. Also, colonies that were conquered didn't buy anymore, so the flood of money was somewhat tempered, but that didn't make the economic model any more sound.

The model in Imp2 was superior to Imp, but both did a reasonably good job of simulating a coherent economy. In the competition between major powers, the handful of minor powers were simply an abstraction for the rest of the civilized world. So self-sustaining trades within that framework made sense.

Imp2 nicely modeled the interdependency between the various resources and the labor supply. It was highly abstract and simplified - and had its limits - but it was very nicely balanced and coherent.

 

[Alexander Seil]

Concerning money sinks...50% of spending should be distributed among the POPs, but with a high bias towards clerks (as they represent the government employees, really). Anyway, I think we could turn that summary into a petition .

 

[DGuller]

Originally posted by Olaf the Unsure
The model in Imp2 was superior to Imp, but both did a reasonably good job of simulating a coherent economy. In the competition between major powers, the handful of minor powers were simply an abstraction for the rest of the civilized world. So self-sustaining trades within that framework made sense.

Imp2 nicely modeled the interdependency between the various resources and the labor supply. It was highly abstract and simplified - and had its limits - but it was very nicely balanced and coherent.

I can agree with you, at least in Imp II the fudged economy was balanced in gameplay terms. Also, unlike in Victoria, Imp II's model actually forced you to colonize, you couldn't just buy every raw material you need for cheap and as much as you want. Scarcity is the number 1 engine of any economy, in fact the distribution of scarce resources is one of the definitions of economics. There is no scarcity in Victoria, and there is no pressure to colonize, other than harvesting enough warm bodies to put in soldier's uniform. You can just buy anything you need, there is no point in overextending yourself all over the globe for a couple of bananas and a rubber tree.

 

[IEX Totalview]

Originally posted by Alexander Seil
Concerning money sinks...50% of spending should be distributed among the POPs, but with a high bias towards clerks (as they represent the government employees, really). Anyway, I think we could turn that summary into a petition .

Originally posted by Zander
pcasey raises a good point here about the problem with social spending. Having it all go back to the POPs would be too good for you, and having it all go back to the world market would be too bad.
I'd suggest, rather than making a whole new class of POP, that they just set a ratio. For example, "50% of your social spending is distributed among your POPs, the other 50% goes to the world market." That could represent how your administrative class was spending some of your money locally, and some elsewhere.

Now that is something I have not thought of. To handle the money sink, make 50 percent go to various pops and 50 percent go to a WM slush fund that can purchase a certain amount of excess goods. This slush fund could also be increased with extra money each month to effectively increase the money supply at a set pace.

That would end the "free social spending" while at the same time give the WM some leverage to buy goods in low demand and keep the WM viable.

 

[Alexander Seil]

BTW, I've noticed some issues with POPs gaining money out of thin air - unassigned craftsmen that is. With no unemployment subsidies. At the same time, cash reserves for employed labourers keep decreasing (my tax rates are quite low, with only medium tariffs).

 

[IEX Totalview]

Originally posted by Alexander Seil
BTW, I've noticed some issues with POPs gaining money out of thin air - unassigned craftsmen that is. With no unemployment subsidies. At the same time, cash reserves for employed labourers keep decreasing (my tax rates are quite low, with only medium tariffs).

See this thread:

http://forum.paradoxplaza.com/forum/showthread.php?s=&threadid=116185

Seems it is WAD.

I would assume that would need to be modified along with the other changes.

 

[M@ni@c]

This discussion seems to be ignoring the role of credit and loans in expanding the money supply. As soon as you have a banking system, then it tends to multiply the money supply manyfold. A rich man with lots of gold keeps in the bank (where it is safe and perhaps earns interest). The banker lends someone the money. The person or business who receives the loan tends to put it into his account in his own bank rather than carry round a sack of gold. So, much of the wealth consists of entries in the banks' ledgers rather than actual pieces of gold. The bankers don't keep a piece of gold corresponding to every entry because they find that they usually only need as much to hand as required for the settling of accounts. But, if there is a crisis of confidence, you get a run on the bank and, in this era, the bank would often then fail. The money supply thus rises and falls, based upon what people are thinking.

Can this be represented by letting loan money come from your capitalists (and thus not letting it come out of thin air like now), but allow them to loan more to other pops than they own themselves at that moment (and thus going into the negative), thereby increasing the money supply for the rest of the world?

 

[Alexander Seil]

Originally posted by IEX Totalview
See this thread:

http://forum.paradoxplaza.com/forum/showthread.php?s=&threadid=116185

Seems it is WAD.

I would assume that would need to be modified along with the other changes.

Well, what Patric said does make sense, though.

 

[IEX Totalview]

Originally posted by Alexander Seil
Well, what Patric said does make sense, though.

Maybe, but the cash would have to come from somewhere - maybe other pops that are working?

 

[DGuller]

Originally posted by IEX Totalview
Maybe, but the cash would have to come from somewhere - maybe other pops that are working?

He he, that's certainly one form of private enterprise.

 

[Alexander Seil]

Originally posted by IEX Totalview
Maybe, but the cash would have to come from somewhere - maybe other pops that are working?

Not in the world of Paradox . In any case, I don't think it's much of an issue. The gains aren't really that big to justify spending time to deal with the issue of where the money comes from.

 

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I agree with Alexander Seil that no new POPs are necessarily needed. The old ones can be used with new functions.

 

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Pcasey, you have an exceptional skill to describe difficult matters in a simple and understandale way (I don’t have that trait, at least in English, as You’ll see). Thank You! I think that this thread is the most important one at the moment (and Alexander, your agriculture thread is close second).

I don’t think I’m straying too far OT, if I start a discussion about production costs. After all, you are talking about WM as a whole and not just the monetary issues.

I feel that the prices in WM should reflect also real production costs for each commodity produced. It wouldn’t be good to have the prices vary based solely on supply and demand. If it based only on supply and demand, it would be logical for high end products be sometimes much cheaper than raw materials. Therefore we must include the production costs too.

Production costs consist of fixed and variable costs. Fixed costs come mostly from the initial investment. Once the investment is made, the minimum cost of a product should be its variable production cost. (I’m not an economist, so bear with me). So we can skip the fixed cost as it doesn´t determine market prices.

The variable cost consists of salaries and the cost of raw materials (or products that are needed to produce high end commodities). So, we need to define minimum salaries for each POP. As the player’s role is both the state and private investors, there is no need to separate profit and taxes as they both go to player’s pockets. Therefore the minimum salary is the net income of a POP. So, instead of taxation, the player decides the minimum wages.

Then we add the material costs and the program calculates the true variable production cost of a commodity. Then we can determine the price we ask for that particular product. That should give some sort of framework for realistic prices in the WM and remove the need for fixed price levels.

It should be possible to sell below production costs though. That would mean state subsidies to industry.

To further complicate things, it should be possible to determine where to buy raw materials. Do we always use domestic materials first or do we always buy the cheapest from WM? Do we buy from United Kingdom or from France? Is it smart to run some industries at a loss, if we can create domestic market for our own raw materials and keep POPs fully employed? And that brings yet another aspect – unemployment.

And, if a factory is closed down, starting it again should take time and money, so that it isn’t possible to switch production on/off. Some sort of gearing is needed.

Unemployment, trade policies and minimum wages should be affected by political system and ruling parties. It should be very difficult to lower minimum wages, perhaps only in a recession and even then it should create much dissent.

That’s all folks!

 

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Originally posted by Zander


As I said before, this is a necessity. It should increase faster than the population - ideally, slightly faster than world productivity, so that there is a natural inflationary effect.
I don't think it would be too hard to model this. Just feed a little "extra money" into the world market each day. They could have (if they don't already) a variable that tracked total world production, and then increment it by a further 0.01% a day.

A rapidly increasing money supply would be completely ahistorical. This would mean nearly constant rises in prices as expressed in sterling pound, and this did not happen. As can be seen here:

http://www.parliament.uk/commons/lib/research/rp99/rp99-020.pdf

although rises did occur, deflation was at least as common, if not more common. The price index was 5 in 1750 (1974=100), it peaked at 16 in 1813 then went back to the 8.5-10 range shortly after the end of the Napoleonic wars, where it stayed for the duration of the XIX century. It was 9.6 in 1914, and peaked at 24.8 in 1920, once Britain had partially gone out of the gold standard, before declining again to 15.5. When Britain abandonned the gold standard entirely (1930s), prices were only three times higher than they had been 180 years ago.

Inflation only appeared on a massive scale during and after WW2.

The gold standard had big advantages, not the least of which was the fact that there was virtually no exchange risk (and hence all countries in Vicky can happily, and quite historically, use the same currency for their international trade) but it had also major shortcommings, such as deflation, and this was one major economic element of the Vicky era. Why jettison that for a post-1974 style monetary system?