The real problem with trade

A lot of people have made suggestions trying to solve the problem where trade seems to be dead, and most are blaming lack of sufficiently large trade centers, travel time, inability to determine the value of resource types, etc.

That last one is close, but still not quite it.  It's the value of gold itself.

The basis of currency is that some resource have a stable value against which all other fluctuating values can be compared and traded.  Gold intuitively makes sense but is actually utterly useless as a base of trade.  All the resources are infinitely renewable, but gold is the fastest growing of them.  Gold income increases almost exponentially compared to the other resources as population rises, putting "inflation" through the roof.

In order for trade to have a base currency, that currency needs to be limited to a maximum quantity based on total world population.  It can't be something that as many players as wish it can just endlessly accrue faster than they can throw it away on blow and hookers.  For gold to have value, it must have constraints that conform it to the traditional 0-sum game, where one man's success must be connected to another's failure.  To establish that, spent gold has to go somewhere, and that somewhere has to be able to run dry when its supposed to come back.

Such a system would not be computationally cheap, I know.  Everyone's gold income would have to be capped or scaled according to availability, and availability would be a calculation based upon the town's percentage of world population, the world-total military/diplomatic upkeep, and the (possibly negative) global stockpile size when not all gold is in circulation.  "All gold" would itself be a periodically changing number based on population, and therefore the stockpile amount could be negative when population drops and gold in circulation is already over-extended.

To be a little more specific with a very simple (and of course untested) model:
wpop = world's aggregate population
wgold = sum of all saved gold in the world
wkeep = world's aggregate upkeep // should be updated at least hourly, and cascade to updating all town incomes
tcut = town's population / wpop
stockpile = 100 * wpop - wgold // could be just updated daily, can be negative, which means negative inflation
town income = min(tpop * taxation * wkeep, current income calculation) + tpop * stockpile

In theory the above will put the gold in circulation through a negative feedback loop trending toward the population-based limit, and at the most expense to players with the highest spending (upkeep).  It could instead cause the stockpile size to flip daily (or however often the stockpile is recalculated) by ever larger numbers causing wild fluctuation and break the whole system, or have some other balance issue.  But if so, it's just a matter of finding some altered version that maintains the balance properly (and could be as simple as making world upkeep and world stockpile always update at the same time).  This formula only serves as a theoretical starting point.

At any rate, such a system properly tuned would create a much more realistic economic balance where inflation is bound to the actual growth of the game, and the ability to keep gold will no longer be more valuable than its usefulness in trade.  The amount of gold in circulation could even be manually controlled based on market analysis by the devs to help maintain that balance and foster trade.  If they were to publish the total amount of gold, or tie it automatically to population, players chart out the actual global inflation themselves, lend their expertise as economists to the devs, and start more advanced financial operations such as investing in shares/stock and venture capital.

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Once the currency problem is fixed, many other noted problems would solve themselves within the existing mechanics.  Gold would more meaningfully limit war operations without rich backing by non-militaristic support.  The herald could start publishing meaningful economic information based upon the "daily close" of trading and state of the new metrics being used/managed.  People who wish to run shops could set up regular supply lines, invest in futures, sell stock/shares to fund startup, etc.  As a direct result of the increase in middle men, the "insurmountable" distance problem would dissolve.  It would then be prudent to allow offering "perpetual trade offers," by which I mean a trader puts up an offer which when accepted is automatically replaced with another identical offer so long as the caravans and resources being sold are available.  When the potential profit in running trade operations becomes realizable, the people who then devote themselves to trade will finally gain enough experience to start establishing market pricing.  When gold starts to hold its value, it becomes worthwhile to run banks and offer loans for wars or venture capital for startups.  People will start trying to stockpile gold for something other than saving it for a rainy day (the eventual short-term growth of armies to upkeep well beyond reasonable taxation).

Fix the currency, and trade will become the rich and rewarding facet of the game as it should be, finally able to rival war as a meaningful first-class mechanic within the game.

I disagree - the problem with trade is simply that is hands down less effective than making your own items. Construction Infrastructure is cheap and relatively quick - trade is expensive and extremely long.

A very interesting post, HM.

Here's what we're thinking, currently:

Illyriad's Economy Needs To Be Monetised
Illyriad's Economy is currently a barter system.

We're looking to monetise the economy, where everything is bought and sold (for Gold) at Trade Hubs spaced around the kingdom, replacing the current barter system entirely - which will cease to be supported via ingame mechanisms (though players can always trade directly with one another, ofc).

We're examining all sorts of additional options around this; from crafting (bonus-giving items to equip commanders, divisions, armies and possibly even towns with) to directly selling units and/or hiring units as mercenaries - all to be conducted at these hubs.

There will be *many* new skills, new caravans, new caravan upgrades, new units and all manner of wonderments including new items (and item classes), including crafting components.

We believe there will be considerable price differentials between the hubs, and we will therefore provide various mechanisms for players to take up the lifestyle of being a trader/hauler/market manipulator.

We also believe that NPC Factions will have a strong role to play in these Trade Hubs.

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Just thought I should mention the above as it will have some serious ramifications on, well, the whole game; and it'd be wrong to look at Trade as it currently is without some forewarning of where we're going to take it.

Regards,

SC

GlyphGryph wrote: I disagree - the problem with trade is simply that is hands down less effective than making your own items. Construction Infrastructure is cheap and relatively quick - trade is expensive and extremely long.

And why is it less effective?

I posit that it is because all of the previously identified issues with trade, and that those issues are symptoms of lacking a stable currency.

"cheap" and "relatively quick" are in fact both very relative, and constrained enough that a healthy market would change that tune.

I have 7 cities (one of which at max possible food production and unable to grow further) and I can tell you there is actually great need for trade, but everyone is a buyer and not a seller.  Population is limited by food upkeep, which in turn limits advanced resource production well below what one city can consume in unit production.  It takes around 2 cities to supply one for constant war production, and needs change with unit queues (diplo/military/siege).  Every powerful player would love that second support city to be someone else's so that as many barracks as possible can be kept in constant production.

But one of the symptomatic problems is that everyone is interested only in advanced resources, unwilling to trade away the ones they have as they need all they can produce and more besides.  Level 20 buildings still don't bring a city to within self-supplying that resource, let alone overage for trade.  Population limits prevent having level 20 buildings for resources outside of the city's specialization, except maybe on the 7-food-plot tiles.  Merchant players can't ask for gold because they can't use gold to re-stock when it's not a valued resource, especially for the smaller players who are more likely to be willing to produce equipment for others.

If gold held value, militaristic players would spend it even long distance for equipment, and possibly trade resources locally for gold to fund that spending and upkeep instead of supplying growth to new cities, but there's currently way too much variance between resources and equipment for players on both sides to believe they're getting a fair deal.  Currently no one will trade base resources for equipment until they cannot expand their empire any more, and that's a long way off for everyone.

waylander69 wrote: I think this one might prove hard to put out to everyone, for instance what happens if some people just hoard the gold, this would create a shortage therefore would increase its value, people who have 2 accounts running with a large number of cities would not need gold as much for trade as they would just trade between their own cities for the resources.

I'm pretty sure hoarding gold cannot be a problem for several reasons:
 - No matter now much gold is hoarded, every city gets its cut of the steady flow back into the system from military and diplomatic upkeep (and gold cost of resource/unit production should also go back into the global stockpile).  Growing famine hits the hoarder harder than the spender, who must keep reducing his upkeep to maintain positive income else allow the system to re-distribute some of his wealth.  The spender on the other hand built his army when gold was worth less, and though he has fewer liquid assets, he has greater wealth in military assets.
 - Hoarders will find that gold sitting in stockpiles only increases military cost.  The longer and harder you hoard gold, even without attracting attacks, the further behind you will find yourself against those who invested it wisely in either business ventures or putting troops in the field to earn their upkeep.
 - When gold becomes truly valuable, hoarding it and the requisite limits put upon upkeep makes you a juicy target, as that big gold stockpile is now worth the costly effort to thoroughly plunder.  Military spenders gain the advantage but by upkeep are the biggest re-distributors of wealth, and their exploits of opportunity will limit the ability for gold to stockpile.
 - High taxation for hoarding means low resource production which should also limit equipment production.  If it does not, the solution is to start increasing secondary resource production time according to taxation, further forcing the tradeoff between military and economics.  Thus handled, gathering more gold requires spending more gold to build a protecting army and the value of equipment also stabilizes and forces the hoarder to spend.
 - Trade score can switch to measuring wealth/income like real economic markets, rather than focusing entirely on the somewhat meaningless metrics it follows now.  As a result it will help identify player stockpiles and targets of opportunity.


Bottom line, if it's a zero-sum game, it works precisely like all the real-world currency does, and must by necessity actually work like real-world economics which are well established and understood.  Wealth will not distribute evenly, but it will continue to redistribute and no one is safe from losing it by military OR economic means.  Everyone's income comes out of everyone's expense, and on a global scale that's actually a very hard balance to tip.  He who succeeds only makes an enemy of the entire impoverished world, but he really CAN'T succeed.  His ability to gain and maintain a lead is constrained by his GDP (gross domestic product, in this case population) and every other player in the game can eventually match that, especially as players start hitting practical growth limits.

waylander69 wrote: A base system needs to be put in place where people cant ask for thousands of resources by offering just 1 gold as we see almost every day. Not an easy one to work out by any means.....

Except as a mechanism for asking mates for a handout, I find this behavior reprehensible, but not problematic.  It has no impact if people don't fill the requests, and if they do so accidentally, they can recover their losses in blood...a fair risk to the people using this to exploit carelessness and therefore unwilling to return the resources.

"directly selling units and/or hiring units as mercenaries"

It may seem odd, but you don't know how much I've wanted something like this! Especially if you can "rent" them instead of just "selling" them (like actual mercenaries)