Taxes and Social Programs

Discussion of the Economic Model in SR2010

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BigStone
General
Posts: 1390
Joined: Dec 22 2004
Location: Holland

Post by BigStone »

Productionefficiency = subsidy.... :roll:
NO MORE NOISY FISH [unless they are green & furiously]
I HAVE STILL A FISH IN MY EAR
Il Duce
Brigadier Gen.
Posts: 577
Joined: Aug 10 2005
Location: Venice - the Doge's palace on the Pacific.

Post by Il Duce »

couple of thoughts -
First off, bigstone and I are in agreement with regard to a general policy distaste for subsidies. It's bad medicine - eventually you have to pay the piper - as we see in the real world: protectionism is a worst case scenario of denial, ain't it?.

I don't have a conceptual problem with prices going down when efficiency is increased - that's what's supposed to happen. My problem is simply with the way the efficiency and markup sliders work in conjunction with each other and the amount of micromanagement that is involved when adjusting efficiencies.

The adjustment to price that is obtained when one clicks the eff slider up should be calibrated to correspond with a single downclick of the price slider. When adjusting efficiencies, the effect on price is a crap shoot, and so you have to micromange the heck out of it until you achieve the desired effect. It's very distracting and not very edifying.

What happens now is that the investment amount is calculated as a percentage of production - if you are operating on a demand basis (a good practice) then as demand fluctuates, the eff investment amount also fluctuates, which varies the cost and price again..., which ultimately tweaks your net treasury amount on every turn (I actually like all of these resonances - remember that eff investment is an expense, and the marginal profits on markup are income)... Adjusting the eff on a complex resource like petro, coal, ore or power takes a while to stabilize as it introduces cost AND price fluctuations throughout the complex, which in turn causes another dynamic adjustment cycle, which feeds back onto investment, ad infinitum - convergence can take a few game days. Where I'm headed is that I would like to see eff adjustments limited to affecting unit cost changes - including all of the resonances - holding prices steady by recalibrating the markup sliders behind the scenes. Then come back and adjust prices. While this two phase process sounds tedious, it is actually less work than monitoring the changes when you want to be watching something else happening at the same time.

There's nothing that says - in the real world - that an infusion of cash into a business results in an immediate adjustment of retail or wholesale prices. In fact, if a business invests in a major capital upgrade, it may take a year or more for the efficiency gains to be realized at the sales end of things.

A few more policy notes....

Adjusting efficiency may be done to reduce prices OR it may be done to improve profit margin i.e. by reducing costs while holding price steady. Why would I want to do this? Let's say I am in the early years of a campaign, and I have a few immediate problems:
1. I want to get rid of my bond load,
2. I want to commence military buildup.
3. I may need to do some demand capping on c-goods, specifically to reserve i-goods to feed m-goods as I commence my buildup - so I don't mind incidental price increase here.
4. I also need to fund new development (upgrading the plant from initial conditions, and adding resources) which means cash in the treasury to start (I'm also a PAYGO kind of guy).

All of this requires a substantial immediate increase in revenues. I also do not want to kick off an immigration influx just yet (by lowering prices to increase sales volume), as I have an adequate reserve pool. I am willing to tolerate a bit of inflation now, as later on I will be able to absorb some of the immigrant influx into the reserve pool which I will have drained, and I will want the rest of my future immigrants to be unemployed to force a recessionary cycle to counter the inflation I introduce today. Got that?

All right - I would then want to tick efficiencies up on a few selected commodities while at the same time holding the prices constant. This would increase my net margin - and at the same time would hold demand constant. Raising the prices to obtain revenues will just hurt DAR, as well as hitting GDP, and ultimately would restrict my ability to raise taxes later (which I will need to do to control the inflation that I am about to cause). Likewise, raising taxes from the git-go will also just reduce DAR and cause populate to emigrate.

Will this strategy be effective? sometimes. It assumes that the improvement to margins will be greater that the investment expense. This is the risk, as there is no guarantee of that - but what's investment without risk?

Alternatively - the eff slider could just represent a fixed investment amount - this would also adequately reflect diminshing returns.

The econ engine is very sensitive and changes can introduce wild oscillations. Sometimes it takes a month of game-time to stabilize after adjusting efficiencies. This is why I enumerated the resonances of adjusting petro efficiency in such detail.

Bigstone's sig references my old sig, which is highly applicable to this discussion -

"Running a large empire is like cooking a small fish" [that is, you can only turn it once].
Colorless green ideas sleep furiously [but otherwise, they do not worry and are happy].
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