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[GreatWyrmGold]

So an accurate idea of supply and demand requires getting into the dwarves heads and figuring out what they really want and need.

Decadent alcohol, waterfalls, and legendary dining rooms. Not much else they want if they get that.

I see your point, though.

[NW_Kohaku]

OK, sorry, I only skimmed the main body of this thread and read the original post, but I've seen enough of these economics threads to recognize some common practices...

One of the problems with "supply and demand" is that it's generally a more complex function than just "how much of a given material is there in the world?"  While I could go into elasticity of demand, a more important one is "substitute goods". 

Let's say I have just skinned a crundle or something.  I now have the only crundle leather in the world!  So... how is it different from the 8,000 other types of leather in the game?  Well, it's red and scaly and stinky and kinda itchy... oh...  Maybe it shouldn't be worth fantastic amounts of money?

Let's say it's dragon leather, and you have killed the only dragon the world has ever seen, thanks to the way that megabeasts were set up.  Dragons are rare, powerful, and a status symbol of power, and it was the only one that would ever exist.  A dragon leather tabbard might just be worth something at that point, yes?

Let's do something even more complex: Iron.  Let's say we have a world where iron is relatively scarce.  You can't find any in the land itself, and buy it all up as soon as you can find any on a caravan.  Now, you're buying up all the iron in the world, and it's all somehow dissapearing!  But you keep selling all this steel stuff to the merchants, and the world is flooded with steel.  Who wants steel?  It's common, while iron is rare! Iron should obviously be more expensive than steel in this situation, right?

You have to model much more complex systems than just "supply and demand" to make iron only valuable when steel isn't in enough demand.


About currency:

The thing about why currency was so important in establishing serious international trade was that currency allowed very dissimilar things to have a single, simple measurement of value for a point of comparison. 

If goats and bags of turnips are of different values on different times of the year, then how many goats or turnips do I need to bring to market to get a new plow blade?  If I started working in the city as an apprentice, how many turnips per hour would I be paid?  Can I put my turnips in the bank, and be able to collect them later without having to worry about spoilage or insects eating them?

Currently, we have a common currency that measures everything perfectly as a point of comparison - the dwarfbuck, which is an invisible, perfect currency where everyone can agree on its arbitrarily-dictated value, it never has inflation, weighs nothing, cannot be stolen or counterfeited, and is accepted everywhere.  You can even tell at a glance what your entire fortress is worth in dwarfbucks.

The problem is not that we aren't using enough currency, the problem is that we're trying to ram an imperfect currency into a niche already occupied by a perfect currency.  The entire purpose that currency serves is already solved by the use of the dwarfbuck value system.  You need to create a good reason why we shouldn't use the perfect currency, first.


Fort Significance is a fairly good idea, although I think Toady already has something in that vein in mind.

As for "everything must have a use", well, I have an old thread I've been meaning to get back to eventually on that in Class Warfare.  It's about making dwarves demand luxuries as your fortress becomes more wealthy, among other things.

[TolyK]

hey kohaku nice to see you!
I definitely agree with the problems on supply and demand. however there's also personal choice.

for example, say a noble likes mugs (which I hope will actually be drunk out of... but that's another story) and buys out some of the trade mugs. Mugs are more scarce in the fort, but not necessarily in the world. So people in the individual economy would buy from the outside world 'cause it's cheaper.
However, these mugs won't ever cost more than barrels, 'cause then you can buy one of those and it holds even more booze.

huh.

[NW_Kohaku]

Well, perhaps I should have illuminated it more thoroughly, but here's the problem:

Making some sort of value multiplier based upon being the only crundle leather mitten on the entire planet so that it's 10 times more valuable than its omnipresent dwarfbuck value counter declares it to be may be stupid, but it's really easy to program.  The formula is as simple as making a basic algebra equation with only one independent variable, the rarity of the item.

If you start having to work with substitutes, it gets really complex.  How much more than iron should steel really cost?  How much more are you willing to pay to have steel than bronze or bronze than iron?  The way that Supply and Demand works out things like this is to functionally have a bidding war, where you find out what price jump people are willing to accept to get the better item, but how are you really going to put in a formula for figuring out how much more a random NPC will value dragon leather than crundle leather, or steel versus bronze?  Especially if we start comparing modded-in items.

Even if we are talking about using substitutables, so that all things that can be used for the same thing are going to be roughly the same price, what about rating the value of stone versus wood versus coal?  Wood is generally more useful than stone, so should wood always be more valuable than stone, excepting specific ore stones?  What about the value of coal?  What about if you mod in some kind of "coal flower" plant that you can grow quickly and easily, and replaces wood or coal for charcoal use? 

How do you compare the value of alcohol to weapons?  Humans don't need alcohol, but they need weapons if they are under constant attack by marauding forces.  Dwarves need alcohol, but maybe they just use traps, and don't really need weapons.  This is based solely upon the coditions of an arbitrarily set up, raw-changeable status, though.  How do you get a computer to poll an NPC about which material is more immediately useful, and hence worth paying a premium on, a steel axe or a trained riding horse?

After all this, we have to consider item quality and worse, percieved item quality because of a brand name.  This means stuff like designer blue jeans being marked up 1000% just because of the name on the label.  One of those little things about us Americans is that we like to stick to our stereotypes of foreigners.  We want French wines and German beers because we associate those things with those countries, but if you offer us French beer, we look at you like you just grew a new head.  "Who would want a French beer?  They don't drink beer in France, they drink wine!"  German beers and French wines get marked up just because they came from those countries, and so people just assume it's better.

Yes, this leads to something like "dwarven beer and metal items should sell better, while dwarven wine and clothing should sell less well," but again, you're going to need to make this based upon the circumstances that are modded in and out of the game, as well.  What if there's a race with even better metalurgy skills than dwarves modded in?

This is ultimately the problem I have with supply and demand modeling schemes - it sounds great on paper, but falls flat on its face in execution because the actual workings don't take into account how things actually become valued.

[Demicus]

Well Supply and Demand is basically how a given economy works. A gross oversimplification, but a decent starting model, as it give a person a place to work from. Most of the problems you listed kohaku could be lumped under one of those two, though for a realistic economy system, they, and all the other component factors, would have to be extrapolated out. One advantage of basing your model on supply and demand in programmng, as it means you could have a very simple end calculation: item.econ_value = civ.Demand(item)/civ.Supply(item)

Substitutables factor into the Supply, as it effectively allows more of the object, though the impact of them would not be the same impact as having more of the given item, due to different properties. Most of the functional properties for materials are already in the game, so just need an algorithm to compare the values and determine which is better for general purposes. Some other factors of that might need to be considered to fully flesh it out

Perceived item quality doesn't seem that difficult in Dwarf Fortress. During world gen or in the raws, determine some categories and/or items that a given civilization is considered to be better at. And then assign a value and that is the number of quality levels more(or less) the item effectively has when determining item quality, which, in line with my earlier statement, would be a part of the Demand portion of the equation. To get more complex and/or accurate than that would require more detailed psychology of all the given people in the game world.

As for comparing the values and determining what to pay a premium on, could be simple to determine. One way would be to have each entity have it's own value variable for each item. This value would be determined by the entity's own Supply and Demand. This value would consider what the entity needs, what it wants, how much it has, how easily it can get more of it, about how much it's trading partners will be willing to part with, and what ever else would go into determining the base value of pig tail socks (or whatever) as a whole. Then of course that value would get modified by things like item quality for a given instance of the item.


And now a quote which may or may not be relevant:
"Everything is worth what its purchaser will pay for it." -Publilius Syrus

[NW_Kohaku]

There's something about substitutes, though...

Stone and wood can be substitutes for one another - you can make tables, chairs, most crafts out of both materials.

Wood can make beds and fuel and barrels, though, while stone can't.

Stone can make mechanisms, and wood can't.

Now then, in the example of iron and steel, iron should never be worth more than steel, because steel can do anything iron can do, but better.  But how do you deal with the value of wood and stone as substitutes for one another?  To us players, wood is always more valuable than stone just because we always have stone to spare from mining, but that shouldn't be the case for every civilization.  What makes one more valuable than the other when you have to trade for both is what you are actually going to use it for, and that means what you are going to be building in the future with it.  Now you have to make a formula for figuring out what the future mechanism-using plans of a given site will be to figure out how valuable the ability to make mechanisms will be to the traders' hometown versus their need to create additional beds, which is a function of how much population growth they expect. 

You punch in a formula where demand is just a variable, but demand itself is more than just "how many of these items does my town/city/nation already have?"  This isn't talking about the elasticity of the supply or demand, either, and it's not always a neat, smooth line or parabolic curve, for that matter, especially in groups with very low populations like the DF world's.

Yes, the value is whatever the market will bear, but the thing is, supply and demand is not something we humans follow in making our civilization, supply and demand is a way of explaining how we already behaved, which more-or-less fits our behavior patterns.  Our actions created it, but now we're talking about making it create the actions and thinking patterns of simulated shoppers.

To end on another quote, "When the map and the land disagree, you can usually assume the land is right."  There are no points awarded for making a broken system that perfectly replicates some simplified form of supply and demand.

That's not to say it's impossible, but that economics is a much more complex subject than most people give it credit for, and as such, it takes a much subtler and more complex system of competing forces to actually model it correctly.  Supply and Demand is basically just the first few weeks of your basic ECON 101 course, at that, and we're talking about modeling both macroeconomics and microeconomics with just that one model.  Maybe demanding Keynesian Economics might be a bit much for a supposedly medieval-era society, but it is, again, meant to model something that always existed, even if we didn't have the philosophical understanding of why it happened.

[Demicus]

Well I'm not an economics major, I'm taking classes for Game Design, so the only model of real world economy I know is the general Supply and Demand. With that, maybe you can suggest an economic model that could be used in Dwarf Fortress that is also somewhat efficient with computer resources?

[Andeerz]

Yes, the value is whatever the market will bear, but the thing is, supply and demand is not something we humans follow in making our civilization, supply and demand is a way of explaining how we already behaved, which more-or-less fits our behavior patterns.  Our actions created it, but now we're talking about making it create the actions and thinking patterns of simulated shoppers.

:3  Well put.

I believe the best way to go about this is to take the reverse route as much as possible, i.e. model the behaviors of the individuals and from this have the phenomena of supply and demand emerge.  Allow me to emphasize as much as possible, since I think it will be impossible to model each and every individual entity's behavior in a given DF world and their contribution to everything... so some sort of larger scale approximation of how larger social units/groups/whatever behave and influence the perception of value on the individual scale of dwarves in your fort would inevitably be needed.  I'll get to that...

In this thread me and some others have been discussing sort of how to go about this.  There are some ideas I really want to get back to and offer some concrete idea of how to model it, as in how it would look like and be in game.

One thing I would like to suggest is making value more than simply how many arbitrary dorfbux something is worth as a trade good.  I think "value" should be a bit more nuanced than that.  Instead of value referring to the explicit numerical value of an object in arbitrary units, I suggest value be looked more at as the value of making a particular decision, as in the decision of trading X amount of cows for Y amount of *microcline mugs*, or the decision of attending a party Urist McLazyass is putting on vs. doing a mandated construction job.  You could still have "value" in the sense talked about before in this, with the going price of something in a particular currency (like dorfbux or gold coins or whatever) being the average amount of dorfbux/coins/whatever most average Urists would agree to part with for it in any situation***.  So, it would be the average "value" of the trade decision more than simply the price of the object in question itself.

I hope I make sense.

***this could be something either calculated behind the scenes and reported to the player directly, or could be determined by someone in game (an economist dwarf anyone?) who would report their findings to you (which could be inaccurate or accurate!)  ...just brain farting here...***

So, how to model this idea of value... in the thread I linked earlier, I suggested looking at all facets of what would influence value.  I had some categories of value I threw out there to get the ball rolling.  This idea could really use some more discussion and development.  The categories I threw out were:

Sentimental
Utility/situational
Quality
Cultural/societal
... other motivating factors ...

A somewhat poorly thought out example of how this might play out that represents sort of what I am trying to get at:

Spoiler (click to show/hide)

Urist is hungry.  His hunger somehow influences some "value" variable in some process (in the code) that pushes the "value" value or seeking food over value of doing other things. 

Any edible object that is within view (or memory) of Urist is assessed for its general desirability (influenced by personal preferences (palatability), cultural norms, etc.).

Urist sees a Plump helmet, a lavish prepared meal of his favorite ingredient (deer meat), a sweet pod, and a moldy piece of bread.

Next, Urist assesses who owns each item.

Plump helmet: owned by an acquaintance
Lavish meal: owned by a person who hates him
Sweet pod: owned by a friend
Moldy piece of bread: owned by himself

Next, each owner is assessed for whether or not interacting with them is a good idea (social standing, distance, fear, etc.).

Next, an idea of what general prices would have to be paid is assessed (which could be influenced by social standing between the two... perhaps this could be telepathically determined for simplicity as if each had sat down and made their conditions for trade clear... this would remove having to meet with everyone individually).

Plump helmet = will trade for 2 -microcline mugs-
Lavish meal = will trade for first born or a ridiculous sum of money or something
Sweet pod = will give for free depending on social standing, outstanding debts, whatever; will trade for 1 -microcline mug-
Moldy piece of bread = free

Next, Urist decides if trading, begging, or stealing is the best way to go about things (punishment vs. reward, fear, cultural norms, available resources, personal ethics); what consequences other than getting food and losing traded resource...

Plump helmet = trading: increase in standing, loss of last 2 -microcline mugs-, one of which is needed for a mandate (which would bring its own consequences!); begging: possible decrease in standing; stealing: possible decrease in standing, punishment, guilt (goes against ethics)
Lavish meal= trading: possible increase in standing; begging: possible decrease in standing, increase in owner's spiteful happiness, loss of standing with others maybe; stealing: could get caught (depends on some other factors...), punishment undesirable (i.e. head smashed in), loss of standing, increase in happiness from stealing from enemy
Sweet pod = trading: increase in standing; begging: possible decrease in standing (unlikely); stealing: possible decrease in standing, guilt (goes against ethics)
Moldy bread = trading: wouldn't really be a trade, but would be free!; begging, stealing: N/A

All of these steps generate a series of possible decisions to make, each with a calculated value.  The decision with the highest value is the one that is executed.

In addition to the consequences listed earlier for each decision, each decision could be modified by things like distance to make trade (inconvenience) and perhaps other things.

In this case, Urist decides to trade for the sweet pod.

The above example hopefully isn't too complicated... and it does have a whole assload of interdependencies that I am not sure are feasible to account for with current computing power... but they might be.  And I am not formally educated in matters of psychology, so I might be positing a very incorrect model of decision making.  I dunno. 

Anyway...

The way I'd see it, there would be some arbitrary behind-the-scenes "value" unit for the underlying math that governs the decision making process modeled... but yeah.  Ideally, I'd like to see a value system that takes things into account like peer pressure (cultural and social norms included), urgency and utility, fear of punishment, immediate pleasure, and stuff, and from this have value procedurally emerge.  And this value system would not only work for trade matters on the individual level but could be co-opted for all value judgements (maybe not pathfinding, though).  Check out the thread I linked and the spoilered example for more info.

Ideally, this would be modeled for everyone individually.  For the fort, maaaaybe this is feasible.  For things outside the fort, not so much.  Larger social entities (villages, cities, armies, whatever) could be treated as individuals in these cases and I think it would still work.  The same underlying factors would still apply, but would be sort of averaged out in the process, reflecting the general psychology and motivations of the social entity.  I'm going to think this through some more and come up with a concrete system hopefully.   

Government could stem from this, but that is probably beyond the scope of the present discussion, though it has a huge bearing on economics and the like.  I will get into that later.

[FallingWhale]

Wouldn't it be simple to just have our current item costs and a demand scale.

In high demand situations a higher quality item gets an even larger modifier.
In very low demand situations a master work is only a little better (maybe twice) than the standard.

[Andeerz]

But what would determine the demand?  How would it be represented?

[Demicus]

Wouldn't it be simple to just have our current item costs and a demand scale.

In high demand situations a higher quality item gets an even larger modifier.
In very low demand situations a master work is only a little better (maybe twice) than the standard.

Like andeerz said, but also what about supply? What about those people that want to economically ruin the human/elven merchants by flooding the market with cheap trinkets? What if someone wanted to drive up the price of gold by sending their army out (Once we get the ability to send armies out that is) to destroy any gold mines they can? Being able to manipulate the market via the supply side is important too. Especial if you churn out a bazillon microcline mugs, the mug market is going to feel the impact in a realistic economy

[NW_Kohaku]

Actually, I think even that's somewhat shallow supply-side, as well.

Commodities investors know the best way to drive up prices of a commodity is to just buy up everything on the market, stuff it deep down in a warehouse, and refuse to sell any of it until the price goes up. 

Why should every merchant on the planet know the exact quantity of the world's supply of lapis lazuli or elk horn?

[Demicus]

They shouldn't, but the game doesn't have a good idea what goods are for trading and what is being stuffed in a crate to raise prices. Maybe an option should be added to stockpiles, that mark all goods in them as trade goods instead of fortress goods. Or maybe a by item designation like dumping and melting. Which ever would work better.

[NW_Kohaku]

Why not just subtract whatever is in the fortress from the world's supply?  If you can corner enough of the world's market to really be able to control the distribution, you could start charging monopoly-type prices.  Your fortress could become the DeBeers of your fantasy world.

[therahedwig]

Hm...

Let's try this differently.

A town has people who need mugs. Therefore, there's a high demand for mugs in the town. If the town cannot produce these mugs, it will have to take these from trade.
So in the world-market, the town becomes an entity that demands a lot of mugs. Therefore, traders will pay a lot for mugs, so they can sell it for a high price to this town(that is desperatly in need of mugs).

Simple, but let's now include the other arguements.

What items will be desired, and what items won't?
Entity town could be subdevided into seperate classes.
Low class(Food, clothes and wood is all they need)
Middle class(Food, wood, furniture, clothes)
Upper class (Food, wood, furniture, clothes and yewelry)
Nobles (Food, wood, furniture, clothes, high-end luxury items)
If entity town can not produce enough to keep up with these needs, they'll look into trade for it. Other entities that can produce these things will try to satify this demand. If a village produces mugs, they'll try to produce even more mugs because mugs sell for a lot to the traders.

But who will buy the cave-ogre mittens?
Nobles and Upper class.
If a noble or member of the high class has a preference for cave ogre leather, the entity town will mark those as important demand goods.

We could apply this system to fortress mode as well, the lower-class dwarf's needs are to be satisfied by the player, the noble just mandates stuff to be bought. Ofcourse, we can be a bit more detailed in fortress mode and give a player the exact demands of his dwarves in a seperate screen. The more a player buys of a certain product the more traders will ask for it each season and of course the player requests specific items. Combined this sets up the fortress 'entity' 's demand, to which other entities will react.

Ofcourse, a large part of this relies on entity-intelligence. A town needs to realise it wants to build a city-wall before it starts demanding blocks.
It needs to first start having people turn into a middle-class or upper-class before such demands start showing up. And there need to be limiters on local supplies. Japan has very few natural resources, which forces them to trade a lot. China in comparison can make everything themselves, which means that they mostly export stuff and import very little.

As a final note, I think it's important that traders will only know the demands of entities they have visited and are only able to convey this information to entities they visit, they should also only receive updates the moment they revisit an entity again. This means that a caravan will have a list of information availeble to them to what each town they visited supplies and demands.

Maybe it's over-simplified, maybe I'm missing the point, but I think world-economy should make use of the existing pop entities and abstract a lot.

Also, I just realise, what will a caravan do with all it's money? Because in this it's more the super-hauler of the world.