Arr...ye have another economist on board, now, and one with more than just a passin' familarity with market economics, which is really what we be dealin' with 'ere. <img src="http://www.piratesahoy.com/forum/style_emoticons/<#EMO_DIR#>/wink.gif" style="vertical-align:middle" emoid="
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I've sketched down a set o' rules an' assumptions fer how an economic model could be forged just from supply and demand, so I'll run it up the flagpole and see who shouts 'Avast!'. Plus, so's not to cause confusion, I'll get the local governer's daughter ter write it down, so ye don't have ter translate my nautical tongue. Arrrrr!
Economic Model: Carribean Colonies
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First of all, this isn't necessarily going to be a perfect, exact replica of economics in the 1630s, not least because the important thing is that this must not detract from game balancing. What I'm writing will have two purposes: a) to make the economic situation more realistic, and b) to attempt to make interaction with the economic system more fun for the player.
Throughout, rates are described in terms of, for example, 1 gold per 10 population. Obviously, the matematical figure of the rate would be 0.1, but its far more easier to discuss the rates in context.
Fundamental Economics
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Rule 1:
The underlying law of market economics is the supply-demand relationship. As the price of a good falls, demand for it increases (e.g, cheaper rum = people drink more rum) - vice versa, as the price of a good increases, demand for it falls.
Rule 2:
The market always seeks equilibrium. Price will always change to a level where demand and supply equal each other (e.g, the supplier always wants to sell everything they make, so if they make too much they will lower the price)
For the purposes of this model, price change to equilibrium can be assumed to be instantaneous.
Rule 3:
Demand is changeable. Supply is fixed (e.g. once you've planted your harvest, that is how much you will reap. You can't realistically increase it in the short-term). As a result, price changes only affect demand.
In reality, increased prices would lead, in time, to an increased supply as more entrepreneurs would be attracted to the industry. For simplicity's sake, this model ignores the impact of supply change due to competition.
Supply is also dependant upon population. This will be covered in greater detail in Rule 9.
Rule 4:
The change in demand due to a price change is not the same for all goods: this is called price elasticity. The general rule is that essential goods are price inelastic (demand is fairly static) and luxury goods are price inelastic (demand varies wildly with price).
An example of this is the difference between food and wine. The average person needs to consume a certain amount of food. If the price rises, they still need to eat the same (ie, demand doesn't change much). Likewise, even if it falls, they aren't driven to eat much more. Wine, on the other hand, if its price falls will cause much revelry in the governor's palace (demand rises significantly), but should its price rise, the governor will throw far less wild parties (demand falls significantly).
Elasticity is represented as the difference in ratios between the price change and the demand change. If the price rises by 10% and the demand falls by 1%, the good is price inelastic (ie, a necessity such as food). If the price rises by 1% and demand falls by 10%, the good is price elastic (ie, a luxury such as chocolate).
Rule 5:
All goods are consumables (at least, in this game they are), meaning that demand signifies the rate of depletion of that good from the town's stores (e.g, per week).
Supply represents the amount of the good that is produced (e.g, per week). It is NOT the amount of the good at the merchant's store - that is a separate amount which also takes into account the natural level of trade in the Caribbean.
If you wanted to be *really* technical, some of these goods would have a varied supply depending on the season. Using a weekly rate is not realistic, but is simpler for coding purposes. It could also be considered at a daily or monthly rate - the longer the time period, the more relative impact the player would have on trade.
A per week rate is assumed to be an average for the entire year. Again, unrealistic, but avoids the need to implement seasonal variations in supply and demand.
Rule 6:
There is no rule 6.
Rule 7:
For simplicity's sake, normal demand levels are assumed to be the same in every Caribbean town. Temporary demand shifts could occur as a result of random events. A demand shift is where demand rises or falls to a new level INDEPENDENTLY of price change. As a result, the return to equilibrium will cause the price to rise or drop sharply, depending on which way the shift went. This will then be the new equilibrium point for that colony.
For example, it becomes a fad amongst Portuguese high society to offer four different wines for every course in a meal. As a result, demand for wine increases dramatically in the Portuguese colonies. Because supply is unchanged, the price for wine will also increase dramatically. The new point reached, however, will be stable - and that will become the new 'normal' price for wine at that colony.
Rule 8:
Different towns have different supply capabilities, which are fixed (e.g. particuarly good sugar-growing terrain) and cannot be replicated as effectively elsewhere. These towns will have a comparative advantage over their rivals, being able to produce selected goods more efficiently. Likewise, towns may have naturally negative supply conditions (e.g. a lack of nearby forests = less efficient planks production).
These supply conditions are unlikely to change much, if at all, over time. For the purposes of this model, quality is assumed to be irrelevant.
Rule 9:
Larger populations create a greater supply. The total population (e.g. 100 men) is divided amongst the goods being produced by the colony. The weighting of that division (ie, what ratio produces sugar, what ratio produces grain) can be assumed to be static, although it will likely differ for different colonies for luxuries production. Essentials such as food, planks, etc. will probably be identical, or at least highly similar.
Each good's supply is defined by the production rate for that colony multiplied by the number of citizens producing the good. For example, both Redmond and Oxbay are capable of producing 2 Wheat for every 1 man (production rate of 2)assigned to wheat production. If 100 men work as farmers, both produce 200 Wheat per week (if that is the given time period).
However, if Redmond has a set of particularly good distillers, they would be capable of producing 5 Rum for every 1 man, compared to Oxbay's rather meagre 1 Rum for every 1 man. As a result, Redmond will always be a more efficient rum producer.
Also, Redmond will have a cheaper price for rum. Both Redmond and Oxbay demand rum in the same quantities (Rule 7: demand across all colonies is static). However, because Redmond's supply is greater, its demand-supply equilibrium will be at a lower price level than Oxbay's. No matter how depopulated Redmond gets, it will always produce cheaper rum (random factors ignored), therefore it will ALWAYS be a viable trading proposition, although perhaps not for large ships.
Rule 10:
Surprise surprise, larger populations also create larger demand. The ratio of demand is, again, weighted by the different goods in exactly the same way as supply.
For example, the demand for food is 1 Wheat for every 1 man. Note that if taken with the example in Rule 9, this would mean that the colony is producing twice as much food as it needs. As a result, the price of food would be VERY low, as food is an necessity (ie, price inelastic) and so it takes a proportionately larger decrease in price to increase demand.
These figures are, naturally, rather extreme - but serve to illustrate the workings of the economic model clearly.
Finally, and briefly, here is a division of the tradable goods in POTC to reflect Essential vs Luxury status:
Essentials:
Balls
Grapes
Knippels
Bombs
Sailcloth
Planks
Wheat
Rum
Luxuries:
Ebony
Chocolate
Sugar
Wine
Linen (?)
Tobacco
Coffee
Mahogany
Cinnamon
Copra
Paprika
Fruits
Ale
Silk
Clothes (?)
Cotton
Sandal
Leather
Oil
Due to the reliance on the navies (and for game balancing) all naval goods are assumed to be treated as essentials. Cheaper rum would not, for example, result in Captains giving much larger amounts of rum to their crew - nor would it cause the production of more ships!
Goods such as Linen and Clothes could be argued to be treated as essentials, although it depends on what 'kind' of clothes, for example. Its important to note that, as the description of trade will point out later on, that essentials with their low price elasticity generally make poor choices for trade goods. Therefore all goods that were meant to be 'traded' rather than used are considered luxuries.
The only essentials are essentials to the player. The only essential of a town is Wheat.
The Unique Price Role of Essentials (particularly Wheat)
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If a town is starving, its population can realistically be assumed to be paying hand over fist for food. When a colony is suffering from starvation, the price of Wheat would be expected to at least treble.
If it is desriable to have governor's be far sighted, as Wheat storage falls below a certain threshold of distance between stored vs. demanded, the governor might offer to temporarily pay a higher than normal price to ensure that the stores of wheat in the town are kept at a safe level. This, if implemented, would stand true for all other essentials, as well.
This price rise would be caused by the governor, on behalf of the town, buying food (ie, a demand shift). As a result, the price would rise to form a new equilibrium point. When enough food had been bought, the governor would stop, the price would return to normal.
From a coding point of view, it is important that this demand shift doesn't cause the governor to then say "Arrgh! Now demand-supply is even closer to the danger levels! I'd better buy even MORE food..." and cause a vicious circle that would lead swiftly to starvation.
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The above set of rules deals with the natural economic interaction of supply and demand in an individual colony. The following section deals with linking market economics to population growth, population wealth and trade.
Rule 11:
Population growth is a set rate of population increase/decrease for every colony. Its natural level will be positive, representing the fact that a) birth rate is likely to be higher than death rate, and b) immigration to the area is steady.
Population growth rate may be affected by several factors:
a) A colony suffering from disease will lower the rate of growth as death rate rises.
b) Less immigrants / more immigrants in a particular time period will affect population growth. For example, a particularly good Jesuit preacher might attract immigrants to the town, where rumours about a repressive, uncaring governor might lower the amount of wealth-seeking immigrants.
c) A wealthy colony will attract a larger number of immigrants than a poorer one. One way of representing this would be to have a set number of immigrants per month and distribute them according to the different ratios of wealth of the different towns, with a flat 2% to each town irrespective of wealth.
Note that the effect of c) will be small, as the majority of 'wealth' is held by the merchant and noble classes. The average peasant will be no more nor less wealthy - indeed, they might view their opportunities as being better in a poorer town.
d) A colony's stored Wheat is less than demand. A portion of the colony's population will starve: this is calculated by the shortfall in supply multiplied by the rate of demand for Wheat. For example, if Oxbay demands 1 Wheat per 1 man and has a shortfall of 50 Wheat, then 50 men would starve.
In addition, a colony suffering from starvation would have NO population increase. No new immigrants would arrive, and the population growth rate may be temporarily set to negative to represent emigration from the colony. Also, the demand for luxuries would most likely shift down (ie, fall) and not return back to normal until starvation had ended. This would result in lower prices for all goods.
Rule 12:
Population wealth is defined as the amount of gold that a colony possesses. This is a representation of the colony's total potential buying power, including all peasants, merchants and nobility. The proportions would, naturally, be weighted in favour of nobility, then merchants, then peasants, but these are largely irrelevant for this model, which assumes that the ratio between the three classes' sizes remains static.
To a certain extent, population wealth also includes the goods stored in a colony, and the capital investment of that colony (buildings, infrastructure, etc.). This will be considered in Rule 15.
Population wealth naturally rises over time. This is determined by four major factors: a) the creation of wealth and items of value by the colony population, b) trade and other economic activities - e.g. governor, blacksmith, shipwright, loan shark, tailor, tattooist, etc.
The next three rules deal with a) and b) in greater detail.
Rule 13:
Internal wealth creation a) is a variable rate. This represents that colonists, left to their own devices, will attempt to better themselves. They will earn money, acquire possessions and add to the value of the colony through taxes, labour, etc. No matter how rich or poor the colony, these activities will continue.
This represents the return of investment into the colony by its inhabitants, its mother country, etc. As a result, it may never fall below a certain level (e.g. 1 gold per 10 population).
The rate may increase above this level as a result of increased investment in the colony, whether directly or indirectly. Sensibly, an upper limit on the rate should be defined as well to prevent the creation of runaway boom towns.
The amount of gold added to the population wealth is defined by population size. For example, the rate may be 1 gold per 10 population, therefore a larger town will generate more internal wealth than a smaller one.
Rule 14:
b) represents the added wealth that is generated through successful trade. The situation up to this point describes several colonies who are self-sufficient in all essential goods, produce a notable excess of some luxury goods and have a notable shortfall of others.
When a player sells an item or a good in the town, the gold is transferred from the town's wealth to the player's wealth. In order to prevent 'cleaning out' of a town's wealth, and to represent that the merchants don't own have the rights to all the gold in the town, the town's wealth should be divided between the street merchant, the storeowner, the shipwright, the loan shark and the governor (ie, those who give the player money from what could ultimately be considered the town's wealth)
NB: This would need quite a few lines of code to 'check' whether or not the town can afford to allow the player to sell (x) to them. It would also create the interesting and amusing situation of, for example, a governor delaying payment to the player until a more convenient time...cheeky bugger!
In reverse, all gold given by the player to anyone in the town (except illegal types, such as the smugglers!) is added to the town's wealth.
Also, to represent the knock-on effect of commission on sales, import duties and the generation of wealth along the supply chain from the producer to the merchant and from the merchant to the end buyer who consumes the object, 10% of the value of everything bought or sold is added to the town's wealth.
For example, if the player buys silks worth 600 gold, the town has generated 60 gold of wealth in the production and sale of those silks. Likewise, if another town buys those silks for 1000 gold, they can expect to gain at least a further 100 gold from their resale and use.
The money added to the town's wealth in this manner (ie, through selling things to the town) should not be added instantaneously, to avoid the eerie situation of a merchant magically creating more money in his pockets as you're selling to him. It should wait until the next economic 'cycle' is calculated to be added.
Its a long rule, but its purpose is to ensure that the player's trading makes a town more wealthy in the long term. Also, the more valuable a good is, generally the more valuable the associated industry; hence trading diamonds or wine will bring greater wealth to a town than trading rum, which stands to reason. Also, trading in larger volumes will generate greater wealth.
Rule 15:
To represent that not all of the gold available in the colony is in circulation, 20% of the town's wealth is completely untouchable for any purpose (including if the town is plundered). This should prevent any economy from every becoming destroyed.
In implementation terms, this means that 20% is ignored, and then the remainder is divided between the governor, merchants, etc.
Rule 16:
Exceptions to the above rule include the provision of services. The governor pays the player for privateering work, etc. out of the town's wealth and no 10% is added to wealth. The loan shark, likewise, does not gain 10% by loaning money to the player. The loan shark's profit for the town is represented by the additional money given back by the player as interest.
The governor is an interesting exception. As privateering work makes the trade lanes safer and increases the colony's strategic position, the rate of wealth increase, a), goes up slightly.
It would also be sensible to ensure that there were ways implemented of lowering the rate of increase as well.
Rule 17:
As a side note, the rate of wealth increase a) is also, as you might have worked out, the rate of inflation. In this model, the effect of inflation on the prices of goods is ignored for simplicity. However, to stop colonies amassing truly vast sums of money over time, some means of removing money from the system needs to be included.
One method would be to introduce the idea of ships returning to the mother country with taxes. Depending on the wealthiness of the colony, different amounts would be removed every so often (six months, perhaps?). At the wealthiest level a colony will be allowed to reach, the colony should send everything above (x) figure of wealth as tax, to cap a sensible maximum on the amount of gold available in the Caribbean.
Rule 18:
Stealing shamelessly from Sid Meier, colonies are divided into discrete categories of wealthiness depending on their wealth. As their wealth passes certain lines, the colony will change its status. The effect of piracy on incoming / outgoing trade, of colonies being sacked, disease and disaster, etc. could result in large amounts of wealth being lost (ie, lowering the status of the colony).
Wealthier colonies would be expected to pay higher prices for luxury goods (representing the fact that the richer classes would have the money to pay the far higher prices to import goods from Europe, etc.) As a result, colonies above an arbitrary average would have positive demand shifts for luxuries for every level. Vice versa, colonies poorer than average wouuld have negative demand shifts and consequently lower prices for luxuries due to lack of free income.
Rule 19:
Related to wealthiness, poorer colonies would have a proportionately larger number of potential pirates lurking in their taverns, eager to risk anything to get away from their current situation. Richer colonies, with a wider set of opportunities, would have proportionately less men willing to turn to piracy.
Population size is also a major influence on recruitment, with a fixed percentage of the population being the maximum amount recruitable (e.g. 2%), then modified by the town's wealth.
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Offhand, I think that be a darn straight outline o' how ye could write in a true market economy model into POTC. All the remainder would be yer random factors. Maths no' bein' my strongest point, I've not a given ye any actual equations for relatin' demand to supply, or used too many hard-and-fast figures in my examples.
I think its all fair' straightfor'ard, and ye can at least see where I'm a' comin' from. Just don' ask me ter try ter implement that into th' code!
This certainly isn't a completely workin' model - Jim Hawkins' suggestion is a good 'un - this model assumes that every colony consumes all the goods itself, where in reality some would have been exported to Europe.
Again, the self-sufficiency of the colonies is very robust in this model. Starvation would only last for a single economic cycle, as would depletion of any essential good. Good? Bad? Hard to say...
Finally, this model was based primarily on the original mapset, with each country only having one colony which must, at all costs, be kept in working order. Again, that could be good or bad.
Comments, thoughts, criticisms...all 'll be 'ppreciated.
" border="0" alt="ohmy.gif" /> not had the best time of my life since i was last busy posting here... hopefully this summer will be like the last one where i spent 99% of my free time modding <img src="http://www.piratesahoy.com/forum/style_emoticons/<#EMO_DIR#>/happy.gif" style="vertical-align:middle" emoid="^_^" border="0" alt="happy.gif" />
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bility ratios were far different from Europe proper, and to a certain extent there _wasn't_ really a class of traditional nobility because the land was not in the title of the nobility (or at least not controlled that way).
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