Logi's Economic Proposal

[Logi]

This is my economic reform proposal. I tried for something complex but not too difficult to implement.

I have a desire to have it run in a visual data table on the forums displaying the economic exchanges. As I will try to have it formatted so it can easily be computer-run, that will take the complexity out of it. Most of this is just standard equations that can be run even in Excel.

Understand some realism with regard to economics and finance has been fudged to keep it simple.

To understand, imagine that a nation has two national values for its GDP, one is GDPpc which is based on the $ worth of the goods produced by the average person in the nation, one is the Industrial Strength (which we shall will call GDPin).

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I.   National Budget
GDP = n*Pop * (1 – inflation*), where n = GDPpc, n can be one of several values to stand for the level of industrialization in the subject nation
GDPin = VE/5 + GC/4 +NC/3 + GDPprev, where VE/5 for the return rate of Venture Capital, GC/4 is the Growth Capital return rate, NC/3 is the National Capital Investment return rate, and GDPprev is the GDPin of the previous sim turn – initial GDPprev is just a value k to be determined at startup based on n.

NOTE: Increases in GDPin come into effect for the next sim turn, not the same turn that the investments were made in.

   a.   Federal Budget
      i.   Tax Revenue = 0.1*GDP + Vat
         Average Tax Rate of Country in the Early 20th Century was 8%-25%. The majority was at 10% for the middle class, only the rich got 25% or higher. VAT is the Value Added Tax for the industry of the nation, it stands about 10% of the GDPin. The 10% tax rate stands for corruption's influence on the real tax of 12%.

   b.   Private Budget

      i.   Civilian Economy (CE) = GDP * 0.88

         1.   Venture Capital = CE * 0.25
            Venture Capital represents the investments made by the private sector in new jobs and businesses. It typically remains as 20-25% of all private equity. Venture Capital shares high risk and as a result returns only 1/5 of the venture capital as GDPin.

         2.   Growth Capital = CE * 0.1
            Growth Capital represents the investments made by the private sector in mature businesses. It is a stable but small area of investment. It returns only ¼ of the growth capital as GDPin.

         3.   Consumption (COM) = CE * 0.35
         Consumption represents the service portion of the industries. It pays part of the way of the DI. The remaining CE cash is "lost", so to speak.

         4.   Disposable Income (DI) = n*Pop * 0.7
            The average DI ranges from 65% to 82% of the personnel income per capita. DI CAN be larger than NPin and CE. DI is the amount of consumption your national populace desires. If NPin+CE is greater than DI, the national populace is content and "Regime Popularity Level" (RPL) increases. If NPin+CE is less than DI, the nation must buy production (NPdi) from foreign nations to meet the DI value or face a lower RPL.

II.   National Production
National Production is a function of GDPin and fulfills task of producing goods. NP is divided into the Industrial Sections and the Military Sections (as in producing tanks, airplanes, etc. for the military). The Industrial Sections of NP must have the same value as COM or the case described by DI will occur. Excess NPindustry will be stockpiled or sold.

   a.   Munitions Plant / Armored Vehicle Factory / Aircraft Factory / Naval Yard
   These are factories for military production. They do not naturally expand, so expansion requires Federal spending in the specific field of factories. Munitions Plants are used to build ammunition    such as artillery shells, rifles, naval shells, and torpedoes. Armored Vehicle Factories are used to build tanks and AFVs. Aircraft Factories are used to build Blimps and Aircrafts. Naval Yards are used to produce ships. After not being used for a decent period of time, they decay. Hence, constant Federal investment is required.

   b.   Industrial Factories
   NPin = GDPin * 0.4, industrial production of the industries. This means service industries are excluded. NPin should be equal to or in excess of DI or RPL will be lowered.

* Inflation results from a negative cash flow. In the case the Federal Budget is not enough to pay for all the needed services, money spent beyond the federal budget is turned into debt. Debt accumulates. Inflation is accumulated debt as a percentage of the national budget (0.1 * AcDebt / GDP). Therefore, inflation eats away at the economy until the accumulated debt is paid off by a surplus of the federal budget. This rounds to the nearest one-hundredths.

** All other figures found to the nearest integer.


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For example:

Take a Country A, semi-industrialized:

GDP: $1000
GDPin: 600

Federal Budget: $180
CE = $880

VE = $220
GC = $88

COM = $308
DI = $700

NPin = $240

DI Deficit = $152

next Year's GPDin: 666
Inflation (if Deficit continues) = 0.02
next Year's GDP under Inflation = $980
next Year's Tax Revenue: $185

Then take Country B, industrialized:

GDP: $1000
GDPin: 1000

Federal Budget = $220
CE = $880

VE = $220
GC = $88

COM = $308
DI = $700

NPin = $400

DI Surplus = $8

next Year's GDPin: 1066
Inflation = 0
next Year's GDP: $1000
next Year's Tax Revenue: $227

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Munitions Plants / Armored Vehicle Factory / Aircraft Factory / Naval Yard

The factory works on a cash-based system. In order to build "factories" in the respective fields, you need to use it.

All plants decay at the rate of 10% per year of the industry that is not used. Expansion of industry works as a return of 10% per year in that factory field.

For Example:

A Naval yard (Shipbuilding Industry) worth $1000 will decay to one worth $900 if it was not used at all. If it $900 of the $1000 was used, then the decay will be 10% of the leftover, $10.

If you invest in the Shipbuilding Industry $200, it will grow by 10% of the investment, $20. This growth happens in the next year.

Therefore it is in the best interest on the nations with large industries to build in surplus and export the surplus in order to keep from industrial decay.

[Logi]

So there's your proposal from the neighborhood, make it complex faction. Granted if this can be computerized (and it should be able too), this would really be no more difficult to use than our current system.

[Delta Force]

I am quite confused by all of this. I know what all of the economic terms and such mean, I just have no idea what is going on with all of the various breakdowns. For a game primarily based around military matters, it also seems to be a very complex economic model. I can certainly do economics, but I already play nation simulation games set in the modern era, and those are essentially nothing but economics and politics.

[Logi]

It's not complicated.

There are two national values;

GDP which is n*Pop(1-inflation)

and

GPDin which increases every sim turn by VE/5 + GC/4 +NC/2

....

The Federal Budget is 12% of the GDP + 10% of the GDPin.

The Civilian Economy is the rest of the GDP.

VE makes up 25% of the CE, GC makes up 10% of the CE, and COM makes up 35% of the CE.

NPin is 40% of the GDPin.

DI is the satisfaction meter; NPin and COM combined should exceed the value of DI. DI is 70% of n*Pop

Inflation is 10% of the Accumulated Debt / GDP.

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Therefore, the economy grows by itself through private investment. However, the majority must be devoted to providing goods for the populace, not for military needs. Whenever the Federal government decides to take on debt, it will shrink the economy through inflation.

During wartime, you can convert VE and GC into Tax Revenue, however, the economy does not grow and gains debt at half price. Meaning if you converted $220 VE into Tax Revenue, debt would increase by $110 as if you overspent $110.

It's not a complex economic model, and in actuality, very simplified. The reason it seems more complex than it is is because I included paragraphs explaining what the value is and how I got it. If I was to go into actual economics, it would be well beyond readability.

[miketr]

We already have something in the back forum.  I have asked the mods for the OK to show it.

Michael

[Nobody]

I have made a excel document of Logi's proposal (although I used Open Office).
I think you have made two slight mistakes though (one in your first description of the DI deficit). Also I think that the deficit accumulates too fast too fast to be influence the inflation directly, so I changed that slightly.

[snip]

wile more realistic, I feel that this is way to complicated and comes with a high learning curve that will scare away new players

[Nobody]

Well, what is so complicated about it? there are very few values you actually have to choose.

[Logi]

Well, what is so complicated about it? there are very few values you actually have to choose.

Indeed, as I said. It only seems complicated, there is actually very little you can change in the values.

The CE portion and NPin portion (which are the fleshed out portions) run automatically. The thing the player gets to decide is how to spend their Tax Revenue (which is 12% of GDP and 10% of GDPin).

I have made a excel document of Logi's proposal (although I used Open Office).
I think you have made two slight mistakes though (one in your first description of the DI deficit). Also I think that the deficit accumulates too fast too fast to be influence the inflation directly, so I changed that slightly.

I did not test the inflation-accumulated debt values and it was the most handwavium of my whole proposal. I did not back up the inflation values on a historical trend, so it is no surprise that it is flawed.

What I meant to say is DI deficit accumulates like Federal deficit. Nations with excess NPin+COM can sell it to country that are in DI deficit, this would be paid by the federal budget of course. Else, let it sit and RPL lower (face a revolt sooner or later) and inflation increase.

I haven't looked in detail at the changed inflation value, but it seems to work properly.

[snip]

I understand that this can be computerized to some extent, but IMO it adds an additional layer onto the amount of work that goes into each report that I don't see being necessary for what we are trying to simulate.

[Logi]

What work? There's nothing YOU have to calculate, the computer does it for you. So unless you are feeling sorry for the computer, there is no "additional layer onto the amount of work that goes into each report".

Also, it's not computerized to some extent. It's completely computerized. I wrote the proposal such that the whole things could be computerized.

[snip]

Like I said before, I feel that this is a additional layer of complexity (the calculations in themselves are not that complex) to the sim reports, which are already almost to complex IMO, that I do not think that we need.

[TexanCowboy]

*Brain...explodes*

Yeah, that's pretty complex...like, could be even more complex than our current reports.

[Logi]

*facepalm*

It's not complex. You don't have to understand the reasoning behind it. You just need to know you have two values, one is GDP and one is GDPin.

You get to spend 12% of GDP + 10% of GDPin.

That's the equivalent complexity of me saying you have IC and BP and your revenue is 12% IC and 10% BP.

I don't understand why you guys refuse to look at the simple fact that the other values have completely nothing to do with the player. You can pretend all the other values don't exist. What I dislike and what you guys keep doing is the equvialent of me saying 1 + 1 = 2 and you're trying to find out why. There's a dozen page proof for it, but you don't need to know that.

In fact, even if I calculated the other values, generating all the values without a computer and only a calculator takes 1 minute max.

[snip]

Why do we need this instead of the current system?