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I didn’t want to create a newspaper for nothing, I wanted to wait till I had something to say. At over 2000 words long… I guess I finally had something to say.

We have seen a number of shouts about the economy. It is cratering, it is definitely in trouble. Should we raise taxes and become more protectionist? Should we print more money?

This rather simple simulation has in fact enough variables to make the question of the economy a suitably complex one. The challenges and variables are thus: NPC workers, a productivity formula, a declining player base, a singular outlet for production.

To be dynamic an economy needs three things: production, consumption and velocity. The wealth of a nation is actually going to be generated by this third point. Let’s discuss.

Production.

To anyone who has been paying attention and to nobody’s surprise, the trouble starts with the productivity formula. It is linear. Meaning there is no fluctuation in the output other than that caused by the active population working or not. There are only two real variables, both of which are maximized almost immediately, raw vs. manufacturing, high vs. non-high regions. Raw production benefits from a 25% boost which in and of itself wouldn’t be problematic. Where it becomes so is in the fact that the conversion from raw to finished manufacturing output is also linear. So suddenly that 25% boost becomes a de facto subsidy.

Workers will not accept a 25% pay cut just so that you can produce manufacturing goods at a profit. At least, the volume of players willing to do that is too small. You also can’t base your company in a country where there are no raw high regions because productivity is tied to those regions implicitly. Therefore, manufacturing companies will always have to deal with this 25% bias wherever they go. There is only one tool provided by the game to alleviate this, the work tax. You could even the playing field by elevating the work tax on raw production but virtually nobody does this. Why? Taxes are hated. One high region being exactly the same as the next high region, the player will migrate to the high region without the taxes. Yes this could balance out with substantially higher wages and publicity but none do this and no government would take the risk of their workers all fleeing the country because of a perceived (or real) tax bias. So manufacturing lives with its productivity bias.

Enter NPCs. NPCs can bridge that gap for manufacturing companies and will, by and large, work for much lower salaries than the market can support (with the exception of course of high regions). NPCs are high efficiency workers, operating at 97% work presence. Their flaw is that they contribute only to one side of the ledge, the production side. Currently in the US there are 120 NPCs, 100 of which are generally expected to be working in manufacturing companies. Because they take nothing out of the economy that means that before any company can sell their own production, the US market has to consume 100 workers/day worth of food, guns and gifts. Is this a lot of production to absorb? Well consider the last presidential election, which isn’t a perfect measure but at least a workable ballpark figure, 121 active citizens voted. See the problem? Because on top of that pool being the market, they are also contributing production to the tune of 121 workers/day.

So now that we’ve looked at the systemic problem with linear production and the current mechanics in effect, let’s look at consumption.

Consumption.

Manufacturing companies consumes raw production. Governments, local populations and foreign deal seekers consume the finished products. Now because there is a “robotic” manufacturing base and because high regions are limited and the NPCs in those regions tend to work at much closer to market wage level, a greater proportion of raw production will be absorbed by the market fairly efficiently. This is true as long as an economy maintains its hold on a high region. Just ask any US based diamond producers what the loss of our Mexican regions has done for us. There is a very good argument to be made that we should have found a way to negotiate a settlement where we kept the regions and that it likely would have paid for itself. This also means that unless we find another source of diamonds and secure it that it will be a permanent crippling blow.

A short note on the manufacturing of infrastructure (hospitals and defense systems) and limit increasing structures (houses and estates). The first two at least have an expiry condition which means that as slow as the market for them may be, there remains a market. Houses and estates on the other hand have one life cycle… that is the progression from a Q1 to a Q5 but no expiry. A player who can afford a Q5 of either is set for life. So the new markets comes only from new players signing up. From a design point of view you can see why they have made this choice but eventually the mechanic renders that product significantly less valuable or in demand with little chance of resurgence. Design balance is fiendishly difficult.

What are the other manufacturing goods used for? Food? War. Gifts? War. Guns? War. So there is a direct correlation between the amount of war, the importance of the battles at hand and consumption. The answer is not to just have war all the time but to have significant wars regularly. Here the US suffers because it is both perceived as a selfish military power and a lazy one. We appear not to make an effort to have a war strategy in a war strategy mechanics system, and we also have inadequate levels of alliance involvement and support. Battle fatigue is a real thing and so the importance of international cooperation and strategy here is magnified. Without war, we cripple consumption because the consumers have no incentive to purchase. Who are those consumers?

Governments are the single largest contributor to an economy. By their choices, whether to buy on domestic or foreign markets, whether to buy from domestic or foreign producers, Governments are the single biggest player in the economy and can regulate the health and wealth of its business class. Last month when we lost our colonies, the Government of the time had also simultaneously decided to hire away as many NPCs as it could. This had a cascading effect… it deprived many companies (foreign and domestic it must be noted) of cheap labour, it also deprived producers of their single biggest customer. Once Governments produce for themselves they must then sell to recoup to expenditure or distribute to the population. Distribution is a good program but it disproportionally benefits those within the inner circle of a given administration or those that have the time and place to camp out on communication channels like IRC. The market is the only fair, equal opportunity distributor and when Governments intervene in such a manner it completes disrupts and breaks down the system. When the NPCs were recently released there was a small boost in wages across the board and some of the market glut was consumed.

Domestic and foreign players are the same. They want to get the maximum bang for their buck. The difference between the two lies in effort. If intuitively local markets offer products that are fairly priced, the player will buy them. He won’t go to the effort of calculating conversion rates and unit prices unless things appear completely unbalanced. The foreign buyer is just min/maxing his cost per units. The older the citizen, the more likely he is to seek this saving mechanism. To be successful a market has to have a good base of domestic buyers, their anchor so to speak, and competitive prices internationally to attract those converters. Because a given population that is active (100% work rate) will mechanically overproduce, it is imperative that a market promote and cater to that foreign element. Enter import taxes. Make it too low and you have a flood of cheap products that can undercut local supplies so substantially as to render that market obsolete. Make it too high and the savvy shopper will simply take their business elsewhere. Unfortunately, the biggest victim of a shrinking player base is the shrinking of viable markets. The US market is virtually alone when it comes to open, competitive products and prices.

Velocity of money.

Wealth is generated by the velocity of money. Translated that is the cycle that sees money invested in production, products put on sale, buyers acquiring those products. The faster that cycle goes, the higher the economic ceiling rises, the more wealth there is to distribute around.

If a company produces 100 units of something a day and sells everything that same day, it means that it has 100 units worth of wealth (including any profit) to spend the following day change to increase production or wages or dividends. If it doesn’t sell all its production it then start building stock. Unsold stock is money that is locked in and not available to be distributed or re-invested. Stock in itself is not bad as it can be used to exploit a market inefficiency but again remember… a dwindling player base means that market inefficiencies are few and far between (in active markets!).

When a country loses a high region and that market closes, it slows down the velocity of money. When a domestic market is vulnerable to foreign dumping, it slows down the velocity of money. When Governments monopolizes too many NPCs and reduces their purchasing, it bring the velocity of money to a screeching halt. When there is no war to incentivize players to spend… you get the picture. Even new players would have a limited impact in this linear economy because as a population matures and their base economic skill rises, the number of new players needed to absorb that production and stimulate the markets rises also.


Next article:
No Way Out of this Economy, part 2 (8 years ago)