Tuesday, October 14, 2014

Another Shot At It

I'm going to be failing to explain this post for the rest of my life.  You'll need to read that post to follow this one.  This is nothing but another attempt to offer a clearer example - but I will be covering all this in further detail with later videos.

Let's say we have these numbers:

Total amount of grain: 7,800 tons
Total amount of gold (regardless of the number of references): 2,000 oz.

Number of references for grain or gold: whatever number we say.

Let's use these numbers to start:

Number of grain references: 6
Number of gold references: 1

Total value of both grain & gold = 14,000 oz. gold.

Total grain tonnage per grain reference: 7,800/6 = 1,300 tons

Total value of grain in gold per ton:

1,300 tons = 2,000 oz. of gold.

We do NOT divide the total grain into the total gold.

Now, IF we add another gold reference, WE DO NOT increase the total amount of the gold.

IF we add another grain reference, we DO increase the total amount of gold.

That is because gold is the standard.

1 more grain reference would create an additional value of 2,000 gold oz, but would not in fact create any more gold in the world. Moreover, a 7th grain reference would reduce the total amount of tonnage per reference.

7 grain references, not 6, would mean:

7,800 tons of grain/7 references = 1,114 tons per references.

Which in turn would mean,

1,114 tons = 2,000 oz. of gold.

On the other hand, IF we add that second gold reference, then:

Each gold reference = 1,000 oz. of gold.

Each grain reference would then equal 1,000 oz. of gold.

The more gold references you add, the more the whole system declines in price.

More gold references means that the gold is more widespread, or 'moves faster' in the system, so despite the actual total amount of gold NOT increasing, the total value of all other commodities apart from gold DROPS in value.

Let's go with the new numbers:

Number of grain references: 7
Number of gold references: 2 (*sorry about the typo)

Total amount of grain and gold has NOT changed. Total gold is still 2,000 oz. Total grain is still 7,800 tons.

NEW total value of both grain & gold: nine references multiplied against the total amount of oz. of gold per gold reference:

9,000 oz. gold.

Let me be as clear as possible:

The value of 7 references of grain (regardless of the actual tonnage of grain produced) equals:

The total amount of gold produced divided by the number of gold references multiplied by 7 = 7,000 oz. gold.

The other 2 gold references are then equal to 2,000 additional oz. of gold, the actual gold in existence.

I know it sounds strange and weird to twist the value of gold versus other things in this way, but BELIEVE me, where it comes to making the system work, it is freaking brilliant.  The backwards perspective of "more gold references makes everything cheaper" took a long, long time to hit on - but when viewed from the perspective of tens of thousands of references, where only a few hundred are gold, it really works.  Remember for the future, keep control of your gold references!  Don't add dozens of them.  It will only wreck your economy.  I recommend that only 1-3% of your total references be actual gold.


Alexis Smolensk said...

I had made a mistake on this post, putting the wrong number where the noted '2' appears above. I apologize for the trouble this may have caused.

I also received a private note regarding the counter-intuitive (that means 'wrong') principle behind 'references.'

It seems to most people that more references ought to mean more abundance, and therefore a lowering in price - where in fact the opposite plainly occurs. The more references for a product, the more expensive it becomes.

The key here is that REFERENCES do not indicate 'abundance.' They indicate 'importance' or 'value.' Once this is thoroughly understood the logic begins to fit. The more often the designer designates the existence of a reference, the greater increase in the general importance of that item.

After all, why would people extensively mine, plant, raise or otherwise fashion something unless it was more valuable? The purpose is to establish that value by deciding how many references to place. Remember always, however, that gold references - and gold alone - decreases the value of everything else.

Issara Booncharoen said...

This is where I can't have an economy like yours. Which is a pity because at the crux it makes sense (even if I have to read it a few times). The problem is that, while I desgined an economy on your model, I had the stupid idea that it should be able to change year on IG year...

Ok scratch all that, I just realised what an idiot I've been being. From what I understand it doesn't matter if the total tonnage of something changes so long as that change is not directly linked to the number of references associated with it correct? So I could say correlate the tonnage of total food with current population without a problem?

Thanks very much for going over this again.

Giordanisti said...

When i first got my head around this, the key to my understanding was simply that one reference of ANYTHING was exactly equivalent in value to one reference of anything else. Really, a reference is the standard unit by which things are measured, you just convert something's "value in references" into "value in gold". How ever many pounds of wood there are in one reference must be exactly equal in value to how ever many fluid ounces of quicksilver there are in a quicksilver reference. You decide these values.

Alexis Smolensk said...

Getting my head around this also, Giordanisti, that was definitely the hard part.

That is correct, Issara. That is, I think you understand what I'm saying.

Eric said...

Here's the key line for me after 3-4 readings: "1 more grain reference would create an additional value of 2,000 gold oz, but would not in fact create any more gold in the world. "

It's a question of physical gold vs. abstract value measured in gold. I think the "ounces" language may make it harder for people to make that leap.

Ozymandias said...

What does a reference represent?

I think I understand: this economic system does not represent the ability of a given area to produce and consume products internally. Instead, it measures production for export, to be consumed by outside areas.

References represent the exports of a commodity for a given region. By assigning a reference to a region (ex. quality swords are produced in Hothior), we're saying that that region is exporting that product because it is of value to neighboring regions.

Giordanisti said...

Ozymandias, if Alexis will permit me a shot at clarifying: a reference is a marker of value. It is a container that always holds the same amount of intrinsic value. If you fill it with wood, gold, or swords, the individual amounts will be different, but the value stays the same. When we say an area has x references of a product, it means that area is producing x amount of value in the form of that product, both for internal use and export (hothior swords are cheapest in hothior, and get more expensive as they are exported).

If gold is intrinsically more valuable by weight than, say, pewter, then it will take less gold to fill a reference's worth of value.

Please correct me if i've only muddied the waters, Alexis.

Alexis Smolensk said...

I think you're both more or less accurate, looking at it from different angles. The important thing here is that the cost of the item is influenced not only by the total mass produced of that item, but also that item's importance.

With TWO inherently disconnected factors to begin with (total amount of good produces + total number of references), costs of items can then be affected by a third factor, distance.

Jhandar said...

I have been mulling this over in an attempt to make sure that my head is appropriately wrapped, so if I may, I would like to do a bullet point summary to ensure that every aspect is understood and concise.
1) A reference indicates the presence of a good that is both valuable and exportable. This means it is produced beyond the amount required to sate local demand.
2) Absence of a reference does not indicate and absence of local production of the goods, just their unavailability for sale. To attempt an illustration to ensure I have the right concepts in mind I will reference Ken Follett’s ‘Pillars of the Earth’. Kingsbridge had a wool market and a quarry located there, creating four references: Market, Wool, Building Stone, and Trade Guilds (theoretically you could also place a reference for the cathedral, but for simplicity sake let us look at the town prior to the completion of the cathedral).
2a) (Continuing ‘Pillars’ references) Kingsbridge has the presence of other services such as a blacksmith, apothecary, architect, etc. These would not be considered references since they met local demand and were not ‘exported’. This would mean that should the players, passing through Kingsbridge, need a new sword, they would be able to pick one us, since the town has a Market reference, but the price would be determined by the closest references for Iron and/or Swords.
2b) (Continuing ‘Pillars’ references) If we assume that the same players in 2a travel through the town but that there is no reference for a Market that they would not be able to obtain the desired sword because of the lack of the Market or the reference for Swords as exportable. Meaning that the local blacksmith is too busy making the needs of the town to have extra swords lying about for sale.
3) The total amount of weight that the aggregate of references that is produced is DM determined and specific per world. Your example of the total grain produced as 7,800 tons is pulled from a hat, although potentially a historically/scientifically well-defined hat, along with every other resource tonnage (I am using tonnage instead of value to clarify concept).
4) To obtain the “total value” of a commodity in reference to your ‘economic standard’ (the tonnage of which ever commodity acts as the unit of currency, this term is separate from ‘value’ due to its similarity to economic price for purposes of clarification) you sum the total number of references of each commodity and multiply by the tonnage of the economic standard per reference. I.e. 6 references for grain + 1 reference for gold = 7 * (2,000 oz. of gold tonnage / 1 gold reference) = 14,000 oz. of gold. Later when you increase the number of commodities the mathematics changed to 7 references of grain + 2 references of gold = 9 * (2,000 oz. of gold tonnage / 2 gold references) = 9,000 oz. of gold.
4a) The goal of finding the “total value” of a commodity is to determine the actual cost in cash for all of the resource. Meaning what we determined for the total value of grain is the gp cost. Since in your world a gold coin is a quarter of an oz. in weight the ‘cost’ of all of the grain references is 36,000 gp?
4b) This can be used to measure the wealth/effluence of an area based on the value of references present. While the garnet miners may not be rich, their company/overlord/baron/etc. may be fabulously wealthy (assuming garnets are in limited supply) where as a fishing village may not be as prosperous (assuming fish are in more abundant supply).
4c If you are using a non-standard fantasy world where precious metals are not the currency of the realm, or ‘economic standard’ as I called it earlier, whatever choice you as the DM make replaces gold for the purposes of calculations. For example, in a desert game people may trade in water, and gold references would be superseded by oasis references. Or the value of dirt in the ‘Waterworld’ movie, etc.

Alexis Smolensk said...

Seems correct to me, Jhandar.

One small point:

A gold coin need not be pure gold. The coin may weigh a quarter of an ounce, but the amount of gold actually in the coin may be 45% - so the number of gold coins per ounce of actual gold may vary depending upon the purity of the metal.