Economics Discussion

[Logi]

This thread is for the discussion of the economics system in N3 and changes that could be applied to it to make for a better player experience.

Please keep in mind that any changes suggested here should be limited to the economics system alone and not a whole-sale ruleset change from N3.

The N3 rules in question:

The economy of each country is described by three numbers:

- Population (unit of measure:  one million people)
- Industrial Capacity (unit of measure:  one IC)
- Build Points (unit of measure: one BP

If a country consists of more than one geographic area - such as a homeland and colonies - each is described individually within sim reports.  A country can be split into adjecent regions if it is not considered to be completely integrated (due to geographic, infrastructure, or cultural reasons).

Population

The population of a nation can increase over time.  This is typically determined by the Moderators every two sim-years.  A nation can improve the likelihood of significant population increases through sound political and economic policy, or through specific immigration/family planning measures (which may cost money). 

A nation's policies - especially if prone to engage in war - can also cause population to grow at reduced rates, or perhaps even decline.

Industrial Capacity (IC)

Industrial Capacity is just that - the size of economy.  It abstractly represents a wide variety of industrial activity ranging from mining to banking to tourism. 

A player increases his industrial capacity by purchasing units of its in-game representation, IC.  Each IC costs $75, and produces income in the half-year following its completion.  Players may also earn IC through role-play.

The ratio of IC to population gives a general sense of how developed a region is.  Where population (in millions) exceeds IC, the region is under-developed.  Where the two are equal, the region probably has either a modern resource-extraction or agricultural sector or (rarely) a modern service sector (such as tourism or large religious pilgrimages).  Where the IC exceeds the population (in millions), it is likely that the region is heavily industrialized, with large manufacturing and service sectors.

IC can be damaged or destroyed.  Damaged IC requires $37.50 to repair, and produces no revenue in its damaged state.  Destroyed IC is simply lost, although new IC can replace it.

Revenue

Revenue is generated in two six-month turns each year.  Revenue comes from each region's population and IC. 

Each IC produces $1 per half year. 

The population of the region produces $1 per million people, with a limit equal to the number of IC in the region. 

For every million people in excess of the number of IC in the region, only $0.20 is produced. 

Since populaton figures are rarely exact multiples of one million, revenue is likely to be rounded to the nearest hundredth of a dollar.

Example:  an underdeveloped country with a population of twenty-seven million people and five IC would generate $5 from the IC, $5 from five million people with corresponding IC, and (22 * $0.2 =) $4.40 from the twenty-two million people without corresponding IC.  Total revenue is then $14.40.

In peacetime, a nation can spend no more than 50% of its revenue on military projects or civil projects for which there is likely no immediate economic justification.  The remainder may be spent on economic development projects, most typically new IC or BP.  If a nation is mobilized to a war economy, this restriction is lifted.

Revenue can be carried over from the first half of a year to the second half, but not between years.  Unused revenue at the end of a year is lost (which is to say - taken by the government's finance department and put to uses other than those we have here).

Build Points (BP)

Build Points represent the portion of an economy's capacity to produce capital assets (such as infrastructure or military equipment) that your nation's government has access to.  It is likely that additional capacity exists in your nation but is being used for more menial things such as building houses, paving roads, building civilian shipping, and so forth.

A player increases his Build Points by purchasing units of its in-game representation, BP.  A player can buy increments of either 0.5 or 1.0 BP depending on the needs of his economy.  A half BP costs $150, and a full BP costs $300, and each becomes functional in the half-year following completion.

No region can have more than 1 BP per 4 functional IC.  Any BP in excess of this ratio is inoperable.

In rare cases where a region initially enters active play with some fractional amount of BP other than 0.5 or 1.0, the player's first effort at adding BP in this region must be to "round up" the BP to the nearest half or whole BP.

BP can be damaged or destroyed; when damaged, 1 BP is simply reduced to 0.5 BP and remains functional as such.  A half BP, if damaged, becomes non-functional and requires $75 to restore to working order.

Players may earn new BP as a result of significantly enhancing gameplay, such as introducing new, partiicpating players.  This is at the discretion of the Moderators.

Using Build Points

Build Points are not, themselves, a tradeable commodity, nor can they produce a generic tradeable commodity.  As noted above, they instead represent capacity to produce specific items - specifically, those items for which a BP cost is noted in addition to a cash cost.

When making use of his nation's own BP, a player simply notes in his sim report how much BP is being used in each project (ship, army unit, etc) purchased or under construction, or for specific items being stockpiled.  A player can carry-over unused BP originating in his own nation from the first half of a year to the second half of the year, but not between years. 

When making use of another nation's BP, a player must declare what those specific items he is purchasing.  The second nation may charge the player for the right to make use of that BP - but this does not count against the cash price of whatever item the player is building.  It is strictly a surcharge for the second nation's profit.

Example:

Gran Colombia is building a 4,000 t cruiser locally, at a cost of $4. As its own BP is already completely in use, Gran Colombia orders 2,000 t of parts from the Hapsburgers. The Hapsburgers charge $3 for the right to make use of their industry. This $3 is strictly profit for the Hapsburgers - the Colombians must still pay the full $4 cost of the cruiser just as if the parts were all coming from their own BP.

Specific items may be stockpiled indefinitely, without cost, but their future usage is restricted:

-Infrastructure components (Hangers, Airstrips, Ports, Slips, Docks, Railways, Undersea Telegraph Cable, Radio Towers) can only be used to build or repair those specific types of infrastructure. Railway gauge must be specified at purchase.

Example: Gran Colombia stockpiles 2,000 t of undersea telegraph cable.

-Army, Ammunition, and Airship components can only be used for a specific nationality, generation (and type, for armies) of unit.

Example: Gran Colombia stockpiles 500 t of ammunition for a baseline GC infantry Corps.

-With respect to ships: specific machinery, armament (plus mountings and their armour) and functional miscellaneous weight (fire control, wireless) may be stockpiled and used where the player sees fit, provided the player is willing to accept that the equipment may not be "current" when installed. Armor and hull components may only be used to build or repair a specific type and class of ship.

Example: Gran Colombia stockpiles a coal-fired 1905 vintage 4000 hp turbine powerplant, and 1,500 t of hull components for a Puerta Espana class protected cruiser.

Specific items may be removed from stockpile and scrapped, per warship scrapping rules, at any time.

[snip]

Transposing from earlyer.

Goal: Make a simple, but flexible system to replace the current ruleset as the economic driver of a game.

Currencies: There should be two types of currency, one representing "How much can this nation afford?" and one representing "How much can this nation build?". The goal of this is the split apart a nation's ability to build and afford military hardware to allow for more flexibility with more national development based on the game conditions as opposed to a locked-growth system with a single currency that does not allow for flexibility in national strength.

The "Build?" Currency: The "Build?" currency is called Production. This currency is meant to cover the nations ability to manufacture military equipment such as warships, tanks, bombers etc. In game, it is used to pay for sea, land, and air forces. A nation produces a number of points per turn that are allocated to these projects. A nation gains more points by investing "Afford?" currency.

Using Production during a game turn: Each military project has a point requirement. An amount of that requirement may be spent each turn from the pool of "Build?" the nation has. "Build?" unused at the end of the turn rolls over the next, and then is lost if unused.

Gaining more Production Points: A nation may invest Budget into gaining more Production points. Each point has a fixed cost which is modified by the ratio of Production to Budget. The Budget investment is multiplied by this figure to determine the increase in Production for the next turn. [math]First we have a base value for improving the Production value by 1 full point, for now call this S. This is a fixed value for all nations. Next, take the ratio of Production to Budget, P/B, where P represents the number of Production points available this turn and B the same for Budget. This creates a modifier that is directly effected by the current status of the nation. The cost for adding a full Production point in a given turn S*[P/B], call this C. Then the value invested in the turn, I, is multiplied by C, and the resultant value is added to the Production pool [P] for the next turn's value [P_n]. To fill it out in one equation, P_n = {I * [S * [P/B]]} + P[/math]

How is the starting Production value determined?: The starting Production value is related to the Pig Iron production of the nation in question adjusted by its Steel production.

The "Afford?" currency: This currency, called Budget, is meant to represent a number of features of a real-world economy, such as political will, GDP, taxation, deficit spending, etc. In game, it is used to pay for everything, ranging from Production development projects, to battlecruisers. Each nation has a base value that they use for each turn, tho they can go as far over, or under, this total as they like, up to 200% of the base value. How much a nation over or underspends affects the growth of the base value for the next turn.

Using Budget during a game turn: Each project has a point requirement. An amount of that requirement may be spent each turn from the Budget the nation has. The nation's used budget can vary from the base pool by up to 200%.

Adjusting the Budget base: Each turn, the afford base is adjusted by a percentage of the total spent less the base value from the previous turn. Note this adjustment can be positive or negative depending on how much the player under or overspent. 10% of the previous turns surplus (or deficit) is used to adjust the afford base. Supplemental: The growth value as previously calculated is multiplied by [World Average Budget]/[National Base Budget]. This is to help spur growth in smaller economies.

How is the starting Budget determined?: The starting budget is 1/100th of the 1870 GDP per Capita of the nation in question, adjusted for starting year and by relative economic strength based on GDP and population.

[Logi]

Ignoring Snip's proposal for the moment (since Darman hasn't given his input on why he sees a problem with it), I think the main issues with the economic system is as follows:

IC is way too expensive. For an undeveloped nation it takes 37.5 years for a ROCI. For a developed nation it takes 187.5 years for a ROCI. Given our past pace in the sim as well as historical trends, this is extremely slow and frankly makes IC investment not worthwhile. Figures from the 1860 census shows us that light industry typically requires 1/4 the capital of heavy industry, hence the $75-$75 cost of IC and BP is not reflective of reality.

In fact the only reason anyone would invest in IC is so they can invest in more BP. This relationship is not only ahistorical and non-realistic, it's also a weak reason to even bother keeping IC around. In effect the role of IC is so diminished that there might as well be only 1 currency.

There is absolutely no reason for foreign investment in BP, which is the crucial currency of the game. Again this is ahistorical, given foreign nations tended to invest in heavy industry to produce the materials desired. IC, on the other hand, can be thought of as light industry and was the thing foreign nations sold to developing nations, not the other way around.



Suggestions:
1) The removal of IC-BP limits. There's no good reason to keep it.
2) Reduction in the cost of IC to roughly a fifth ($15) which gives a ROCI of 7.5 years for undeveloped nations and 37.5 years for developed nations. This brings the growth rate of an undeveloped  nation with 30 IC and 33.33% investment in IC capacity to an amortized 0.45% per year. Which is quite frankly not good enough at all. Hence..
3) An increase in revenue produced by IC-pop from $1 for undeveloped and $0.2 for developed to $7 and $1.4 respectively. Which brings the growth rate of the mentioned undeveloped nation to ~3.2% per year. Which is far closer to the global growth rate of ~3.5% in reality.
4) Tie down BP somehow so that foreign investment is encouraged.

But in reality, the IC-BC costs and return are on a whole broken so I would be amenable to the direction Snip is heading.

[snip]

I agree on the main issues that Logi presents. In addition, I would add that the systems as presented are very inflexible. I would further argue that the population item is unnecessary if the system is reworked, and could be removed to reduce complexity.

[Darman]

I'm actually in favor of something more along these lines (meaning Logi's proposal) towards revamping the existing system. 

There is absolutely no reason for foreign investment in BP, which is the crucial currency of the game. Again this is ahistorical, given foreign nations tended to invest in heavy industry to produce the materials desired. IC, on the other hand, can be thought of as light industry and was the thing foreign nations sold to developing nations, not the other way around.


4) Tie down BP somehow so that foreign investment is encouraged.

Place a hard cap on BP within the home countries and possibly a smaller cap on individual colonies.  Ahistorical I know, but if you wanted to encourage foreign investment this would help.  Also add a brief mention that if say England invests in a project with Argentina and Argentina nationalizes the project after its completed (and refuses to compensate the British), then there is some penalty (50% reduction in efficiency because of the loss of foreign advisers, etc). 

Edit in Italics

[snip]

Ok, a simplified version of my proposal

The Pop-IC system for Cash is replaced with a strait value. You can spend up to 200% of this value a turn. The base value is adjusted each turn as follows. Each turn, you take the base from the previous turn, subtract the amount you spent, and multiply the result by .1. Then add that result (will be subtracting if negative) to the previous turn's base to get the current turn's base. [(PrevTurnBase-PrevTurnSpent)*.1]+PrevTurnBase=TurnBase

The BP system is retained, with the growth changed to a formula that allows for investment to be utalised immediately while making it difficult for nations to run away with an advantage. First we have a base value for improving the BP value by 1 full point, for now call this S. This is a fixed value for all nations. Next, take the ratio of BP to Cash, P/B, where P represents the number of BP available this turn and B the same for Cash. The cost for adding a full Production point in a given turn is S*[P/B]. Then the value invested in the turn, I, is multiplied by S*[P/B], and the resultant value is added to the BP pool for the next turn's value [P_n]. To fill it out in one equation, P_n = {I * [S * [P/B]]} + P

[Nobody]

Each turn, you take the previous amount you spent and multiply it by .1. Then add that result (will be subtracting if negative) to the previous turn's base to get the current turn's base. [PrevTurnSpent*.1]+PrevTurnBase=TurnBase

Excuse me for popping in so suddenly, but a see a flaw - although it might be in the explanation rather than the concept. That is, even though you mention that the result is supposed to be negative sometimes, in the formula you present that can never happen!
On a side note, where is the disadvantage in spending the full 200% (aka twice the money you have)?
And don't you think, that a 10% growth (per Turn no less) is a bit much, even for the late 19^th early 20^th century?

[snip]

It was late and I was distracted (DANM YOU WARGAME: RED DRAGON!), that should read [(PrevTurnBase-PrevTurnSpent)*.1]+PrevTurnBase=TurnBase. This has been edited into the OP.

The disadvantage to spending 200% is that is will shrink your base for the next turn by a significant amount. Sustainable in wartime, maybe. Sustainable outside a motive, not likely. The key, IMO, is that it places a part of the players economy directly into there hands where it is not bound up by complicated rules.

It is only 10% on the surplus or deficit. I chose 10% because it means the operation remains easy to do without a calculator. Whereas a more historical figure would mandate that a calculator/spreadsheet be used for the majority of players. The inital idea was to make it so the baseline econ stuff could be done without any sort of complex calculator (ie, up to a simple one like you find on most every phone/PC), but the exact % amount is not critical and could be changed.

[Nobody]

Ah, well that changes everything! Before it was something like a "Keynesian" growth theory, now it's basically the opposite.

If I had to develop an economic system, it would probably contain something like this:

Code Select Expand

Base = (PrevBase + PrevSpent*x)*y
Turnover = PrevIncome - PrevSpent
Income = Base*z + Turnover
With x being some modifier, y being the growth rate and z another modifier (which drops if your country is suffering from bribery or general unhappiness and increases with enthusiasm (like people spending all their money for the war effort as in WW1)).

Maybe these calculations shouldn't be done by the player in the first place. Instead they should be calculated by the mods, who add some semi-random number to balance the game. In that case the player would just receive 1 number to use for the next year.

EDIT
Since I'm at it:
y (the growth rate) would consist of Player Actions, World Economy and other Admin input like so

Code Select Expand

y = Direct_Player_Influence + Indirect_Player_Influence + World_Economy_Trend + Local_Trend + Trade_Influence + ...

[Logi]

I'm thinking of something like this:

Core Proposal

Pop --> $0.1 / Pop
IC ----> $2/$1/$0.5 / Pop with the breaks being IC < Pop, .... Pop <= IC < 2*Pop, .... 2*Pop <= IC
BP ----> 1,000t War Materials or 10,000t Civil Goods. Declare fixed in first half of year for bonus 500t War Materials or 5,000t Civil Goods collected in first half of next year.
Research limited by region population with 2*IC/Pop. (Only $ produced there can be used for research)

Player usable Revenue is usually 50%. Like N3, but Admin can adjust up or down due to tax/tariff and other fluff. During wartime, Player can use above their % limit, but that is equiv. to nationalizing. Subject to admin-induced malus, something like -10% IC next half.

Every Pop w/o 1,000t Civil Goods is +0.5% revolt risk which is rolled by Admins at the end of each sim year. If the roll is for a revolt, 1% of all Pop without Civil Goods becomes armed. The level of arms the rebels spawn with is dependent on the land tech in the nation. Every half-year with an active revolt increases the base revolt risk by 5%. Admin can add % revolt risk as deemed necessary as well (Ex: Too High IC/Pop in some region whilst too low IC/Pop in another region). At 1%, 5 Pop without Civil Goods revolting will spawn 1 Corp of rebel forces.

When the nation is at peace, it gets a revolt risk modifier of -50%. During early stages of war (1st year) this is changes to -25%. Afterwards, this helpful modifier is lost. It will be regained once the nation is at peace.
China gets a special modifier called "Mandate of Heaven" which reduces it's revolt risk by 10 if it hasn't lost a war or conceded historical lands/rights to a foreign power in the last 5 years.

IC costs $10 base, without increase in capital cost.
BP costs $50 base. Every 10 BP in existence increases base cost of BP by $10 (stacking). Every 100 BP in existence increase base cost of BP by $50 (stacking).
Population growth increases in increments: 2%/1%/0.5% for IC < Pop, .... Pop <= IC < 2*Pop, .... 2*Pop <= IC. Increases by 0.5% if there are no Pops without Civil Goods.

Possible random Admin-induced bonuses, malus, etc. like increased enthusiasm is a factor as well.




Interesting side-notes

An easy way to estimate wealth of nation via GDPpc --> IC/Pop * 10,000 ~ GDPpc in USD. For example: 100 IC, 300 Pop would be $3,333 and 300 IC, 100 Pop would be $30,000. This I discovered while messing with the figures, would seem to be a good way to gauge the progress of your nation. From this we can use the semi-log scale as proposed by Angus Deaton et al for mean life satisfaction estimation (0-10 scale):
3.5 ($625), 4.5 ($1,250), 4.5 ($2,500), 5.0 ($6,000), 5.5 ($10,000), 6.5 ($20,000), 7.5 ($40,000)

Another note is the return and capital cost of IC is much more realistic: 20%, 10%, and 5% ROIC which is in accordance to both present and historical trends (average 10%, ranges from 5% to 20%). It also complies with the historical and present day trends in GDP growth (as expected!). With 30% of total revenue invested in IC construction, revenue growth is 6%, 3.5%, and 1.5% for 100/300, 100/100, and 300/100 nations respectively. It also softens the marginal "cliff" on IC operating profit as well as make 1 IC over the 2*Pop limit better than just 1 Pop by itself, which has been historically true. Also ROIC shows no need for capital cost increase in IC construction.

Manufacturing Capital cost from US 1860 Census, indicate a light vs heavy industry capital cost divide of ~5x. Hence 1,000t War material or 5,000t Civil Goods produced. The stepped increase in capital cost for BP is reflective of reality and makes foreign investment more attractive.

The modified population growth rates follows historical trends and you can derive very good estimates of present day populations from national populations in 1900. However, it does not account for population drop/stalemate during war or bad social policies. This should be realm of Admin-induced population cuts.

An easier way to think about Pop-IC-BP in N3 would be to have Pop ~ Agriculture, IC ~ Services, BP ~ Industry. Agriculture is low value, labour intensive but never decreases in volume. Services is high value, conductive to capital formation (think Finance sec. in Services). Industry is light and heavy industry, where light can also be called consumer.

The attachment of research limit to developed regions rather than BP is a great deal more plausible. At the same time it gives an actual reason besides flavor text to have overdeveloped regions and undeveloped regions rather than even spread.

Regarding overspending:
I don't think this is actually an issue if we have a working finance system. In order for this to happen, we need reasonable ROIC, investors outside of national control, publicized exchange rates.
I can see a system of nation-tied investors free from national control. That is, nations can't control the investors, but the investors can call on the nation to help them if a deal goes bad. These investors trade based on market rates and riskiness of the deal (a nation who is frequently at war, for example, would not be good to invest in). At the same time they are not bound by top-down considerations like "national security".
The publicized exchange rate (publishing all bids made after a deal is completed) would allow everyone to know what "market rate" is.
Ofc, if my suggestion above the break is followed the ROIC issue is resolved as well.

But I think the whole credit system is another issue. Whether it was broken by system or broken because no one knew how to do such things in N3 is up for debate.

[Darman]

I'm thinking of something like this:

Core Proposal

Pop --> $0.1 / Pop
IC ----> $2/$1/$0.5 / Pop with the breaks being IC < Pop, .... Pop <= IC < 2*Pop, .... 2*Pop <= IC
BP ----> 1,000t War Materials or 5,000t Civil Goods. Declare fixed in first half of year for bonus 500t War Materials or 2,500t Civil Goods collected in first half of next year.
Research limited by region population with 2*IC/Pop. (Only $ produced there can be used for research)

Player usable Revenue is usually 50%. Like N3, but Admin can adjust up or down due to tax/tariff and other fluff. During wartime, Player can use above their % limit, but that is equiv. to nationalizing. Subject to admin-induced malus, something like -10% IC next half.

Every Pop w/o 1,000t Civil Goods is +5% revolt risk which is rolled by Admins at the end of each sim year. If the roll is for a revolt, 1% of all Pop without Civil Goods becomes armed. The level of arms the rebels spawn with is dependent on the land tech in the nation. Every half-year with an active revolt increases the base revolt risk by 5%. Admin can add % revolt risk as deemed necessary as well (Ex: Too High IC/Pop in some region whilst too low IC/Pop in another region). At 1%, 5 Pop without Civil Goods revolting will spawn 1 Corp of rebel forces.

IC costs $10 base, without increase in capital cost.
BP costs $50 base. Every 10 BP in existence increases base cost of BP by $10 (stacking). Every 100 BP in existence increase base cost of BP by $50 (stacking).
Population growth increases in increments: 2%/1%/0.5% for IC < Pop, .... Pop <= IC < 2*Pop, .... 2*Pop <= IC. Increases by 0.5% if there are no Pops without Civil Goods.

Possible random Admin-induced bonuses, malus, etc. like increased enthusiasm is a factor as well.

Interesting.  I think I understand the system you're trying to create, and I do like the idea that IC income is determined relative to population.  I also like the idea of civilian goods, presumably colonies will need to have civilian goods imported (build a ship with 5,000t carrying capacity to supply a colony with a population of 5, for example). 

[Logi]

Modifications as discussed on the IRC after crunching the numbers:

Revolt risk per pop without civil good +5% ---> +0.5%
BP produces can produce 5,000t civil good with 2,500t end year bonus for fixed ---> 10,000t civil good with 5,000t end year bonus for fixed

Peacetime Revolt Risk Modifier ---> -50% Revolt Risk
Early War (1st Year) Revolt Risk Modifier ---> -25% Revolt Risk

Corresponding post is edited.

[Walter]

Looking at it a bit, I do not really like it. With 2*IC/Pop I can barely do any kind of research with China's huge population and I would probably need an insane amount of civil goods. That is not really how I want to play.

[snip]

Looking at it a bit, I do not really like it. With 2*IC/Pop I can barely do any kind of research with China's huge population and I would probably need an insane amount of civil goods. That is not really how I want to play.

Doing the math (POP*.1+IC*2), I get an income of $92. Under the modified peacetime rules you would not need very much, if any, BP dedicated to Civilian goods.

[Logi]

Well... China historically did barely any research with that huge population due to the tremendous drain on human capital that was the official examinations. In addition it was an era of revolt every five or so years, even without foreign influence due to the scale of corruption (which started in the Ming Dynasty and persisted to the Qing and was not possible to correct in any meaningful way in a short period*) as well as series of droughts and failed harvests.

China already has it relatively easy since it has the Mandate of Heaven modifier, which drops the revolt risk to ~10% for spending half China's BP in civil goods. It's also the second richest nation in the world with $92 half-annual income. The 3rd highest is US at ~$69 and the 1st highest is UK at ~$110. There's a humongous ability for China to industrialize, already beyond what was even feasible in reality due to the various conditions (no foreign influence, no war indemnity, no corruption tax modifier).

* There is a series of economics papers on this subject with calculations on the requisite income increase for officials to end the corruption. The amount needed was impossible for the Qing government to fund at all.