Sunday, May 10, 2009

Why It's Called A Float

Last post I threw out a figure for the total number of gold coins in my world: 12,958,333. One of the nice things about being a DM and having a simulation world is that this figure isn’t necessarily an estimate. I can say for all practical purposes that this is the exact number.

But it isn’t. My world is in constant flux, as not all of the world is mapped an added to the economic system. At the moment, having included two thirds of Asia and half of Europe (working on Italy at the moment), my population is an estimated 178 million. It covers just over 10,500 20-mile-diameter hexes. The world GDP would be 231,543,624 gold pieces.

The Earth is a big place.

As I said, all the gold produced in the world equals only 0.6% of the GDP. For the record, silver and copper coins represent 0.36% and 0.5% respectively. Total coinage represents a mere 1.5% of the world’s wealth. The rest is made up with minerals, metals, building materials, cloth, foodstuffs, crops, livestock, fish and so on.

It must therefore be that most transactions which occur would be the result of barter, right? Given that coinage is comparatively rare.

Money has a condition which is different from any other form of wealth. A single gold coin can change hands upwards of twenty times a day quite easily. It is the fluid that makes all other transactions possible – merely because, except for a few incomprehensible souls, it is never the item which is meant to be kept. A chicken is bought and then eaten. It does not change hands repeatedly day after day. The same is true for every other item from gems to castles – once purchased, they tend to remain with the possessor until circumstances makes this no longer practical.

Money, on the other hand, will be gotten rid of as a medium for exchange with almost universal frequency. And every transaction, no matter how often or for what reason, is counted as part of the GDP. Therefore, for all practical purposes, the total amount of coinage floating through the system is in fact equivalent to the total wealth, no matter what minor percentage of that wealth it represents. A coin is worth many times its worth.

(As an aside, the total ‘coin flow’ through the system must be said to be much greater than the GDP, since it includes resale of assets and failed financial ventures – the spoilage I made reference to in the previous post. Coin pays for spoilage, but spoilage is not included in the GDP).

The removal of a single coin from the overall system is not the merely the removal of the coin, but the removal of the means of many, many coins which can no longer be used to grease the economic system. This is why, in the present climate, though there is still plenty of money around, the withholding of vast funds by the whole population causes deep wounds in the success of the economic system.

Occasionally it happens that a party will stumble across a vast, long lost treasure, as mine did recently after the destruction of a large polar worm dwelling in an abandoned castle in the Ural mountains north of the Arctic Circle. It happened that the party had recently befriended a mastodon, with monk and druid able to communicate and ranger able to control the beast. As such, the matter of moving several mastodon tusks, a considerable store in coin and other large pieces of treasure (including a remorhaz egg), proved to be quite reasonable. The mastodon itself is five tons in weight; this allows it a payload of at least two tons.

As such, the party stumbled down out of the vast taiga and into the Dwarven kingdom of Hoth after a four month absence from civilization (long story), in mid-November, and proceeded to winter there until May. During which time, in feeding the mastodon, the paladin’s warhorse and themselves, re-equipping and so on, they proceeded to drop upwards of 10,000 gold coins on the local population.

In all likelihood this would shatter the local economy ... which is how I played it. The party became, for all intents and purposes, a recently discovered ‘gold mine,’ which the locals worked for all they were worth. Since for those five months everyone is virtually snowed in, the party were treated with complete deference, regardless of how inconvenient it might be to suddenly have a 700-person town saddled with the maintenance and feeding of a mastodon (crews were hired to leave town and help clear snow to allow the mastodon to feed on surrounding moss or grass). No one complained.

It is not merely that 10,000 coins were spent – it is that the daily exchange of this coin spurs on the motivation of the community to produce labour throughout the winter. It may seem to you that people do all they can during the winter months, but this is not so. The tendency is to loaf. Suddenly there are thousands of coins to change hands over and over, encouraging people to brave brutally cold weather or to express themselves. A winter festival, for example, as there is now a motivation to ice sculpt, produce plays for pleasure, wrestle or box for the purpose of gambling and so on.

Once the party has returned with its vast, previously lost haul, prices should be doubled or trebled once their arrival becomes known – not just for the party, but because the innkeeper is wealthier, the local prostitutes are wealthier, the tax collectors are wealthier and so on. The party arriving in town is exactly like a movie crew who has suddenly decided to film in Nowheresville, Hick County.

Which brings us back to the sort of question I asked months ago: somewhere, a thief rolls over someone in a tavern. How much coin does that person have in his pocket?

The standard is to presume that if the individual is rich, there’s a lot in his pocket, and if the individual is poor, very little. In truth, the answer should depend more on whether the individual just got paid for services rendered, if there’s been time to spend it, or whether the individual is the sort that carries around their own money at all or merely buys on credit. It is exactly the point I made several posts ago. If you hit a castle in early April, not only are you not going to find coin (since the castle earns very little until the summer fairs), but you won’t find any food either. It’s all been eaten. The populace is largely living off the land until the crops fruit in July or August.

So, are you going to hit the wealthy tradesman in the morning or the afternoon? Do you roll the prostitute as the sun is going down, or four hours later? Should you be robbing from the nobleman, or from the quiet, tall grunt standing on his left? Those are new questions.

UPDATE: the previous number for the world GDP is an error. That should have read 480,067,114 g.p.


Chgowiz said...

"In all likelihood this would shatter the local economy ... which is how I played it."

Shatter or reshape? I think the "shattering" would happen once the party leaves town or runs out of gold.

Alexis said...

That's a misunderstanding of Medieval economics. Once the coin is introduced into the system, it dissipates slowly over time. Unlike the present, in a society where everyone is in debt and the servicing of that debt demands a continued level of income, very few would be in debt in that period - therefore, less impetus to resist the lowering of prices again, steadily, as the additional coin fell out of the system.

We often fail to recognize how many international or governmental organizations exist in the present which compel an ordinary businessman to continue to try to sell his product at an extraordinary price. The so-called free market was more free when virtually all conducted business was local, organized by a guild with a stake in the immediate community, as opposed to vast conglomerates who can spend a community's economic integrity in favor of profit.

Chgowiz said...

That's an interesting analysis I've never heard of before - but I'm not that learned on medieval economics beyond normal high school/college history and some readings here and there. I may have to pick up my copy of Year 1000 again.

Alexis said...

I confess it is not my analysis. It belongs to Lewis Mumford, discussed at length in his book, Culture and Cities. Mumford was one of the early founders of urban planning.

Perrin Rynning said...

I chalk the posting as well as the discussion thereupon as yet another example of how insidiously... educational RPGs can get. Consider: how often do players or little kids stop to think, "Gee, now that I've found my thousand pieces of gold, what effect will spending them all on candy, or soda, or comic books have on the rest of the town?" I suspect that most gamers think of money in very unrealistic terms: "When I have money, it's in my hand. When I spend it, it's gone, like yesterday's sunrise." This kind of post very handily serves to remind readers that, to paraphrase Herbert, "The money must flow."

Simon said...

"A winter festival, for example, as there is now a motivation to ice sculpt, produce plays for pleasure, wrestle or box for the purpose of gambling and so on."

I think you're a exaggerating a bit there. Since ice, wrestling etc. have essentially the same price as being bored, people are going to do it anyway to entertain themselves, with or without coins. What the coin influx will do in the town is increase utilization of resource reserves until inflation catches up. Given that it is a small community that has a closed economy half of the year, they are well aware of resource constraints, so that may happen pretty soon. I reckon there will be a lot more trips to the nearby market when weather allows it, though.

Alexis said...


I can only recommend that you read more accounts of non-Inuit life in Arctic settings. Ship captains were forced to invent activities for the winter, else their crews would do nothing, grow morose and increasingly apathetic. Surprisingly, people do not pursue actions as an alternative to boredom unless compelled. Might I suggest The Arctic Grail by Pierre Berton. It is later than the time in question, but more accessible and thorough than 17th century diaries.

Seth said...

I think the behavior of people on ships and in military situations will be different from people in ordinary situations in regards to their motivation. And besides, if everyone did not pursue actions unless compelled wouldn't you end up with a possible death point where everyone is not acting? Anyway, speaking only as myself, in the military down time was precious not only for laziness but because you weren't likely to be shot or have to deal with a high stress item. So you would perpetuate it. In ordinary life, I play video games which might be doing nothing but its not boredom and look for ways to tinker with electronics and software. Occasionally, I get paid. And also, whenever someone needs a piano moved, it is not the piano that moves, it is me. Leaving me with two points: motivation has an unexplained source in the context of this your post and comments, and that I am a non-player who is reading your blog. Oddly enough, I was compelled to comment.

My 2 cents only, so please do not overvalue my comments.