Money sources

[Spiff]

Should the game have a source of money other than the starting funds?

Extracting resources and making things doesn’t add money. Each day we produce, we add more stuff. But not more money.

Well, there’s a little more money. Players leave, or re-start, so there’s more added into the pool; there are also some market-maker purchases of goods. But neither look like big factors, compared to the steady increase in the amount of goods.

So: more goods yet no more money. In the real world, the main risk there is deflation, but in the real world, there are banks and barter, so when money is limited, you can still engage in trade. Here, a limited supply means limited trade, which seems contrary to the aims of the game.

An appropriate influx of cash encourages trade and allows the effort players put in to be seen in their accounts. How about increasing the supply? There are a range of ways to do it.

[molp]

The second big money influx, besides company founding, are the market makers. Right now their balance is decreasing, effectively putting money into circulation:

If we sum up all existing money and divide it by the number of companies (active or inactive, but not COLIQ’d) we see that the money per company is currently slowly rising.

To sum it up, I don’t think we need another money source at the time being.

[Prdgi]

Can market maker balances go negative?

[Mjeno]

Yup! It is negative for many individual ressources right now, but the overall balance is positive because the MMs are selling more than they are buying in total.

[Prdgi]

Can we test what happens when the overall balance is negative? Would you pull the rug out from under us?

[Mjeno]

I’m not sure I understand the question … The MM having negative money wouldn’t have any noticeable impact. And in order to get it to negative, we would have to sell a bunch of stuff to the MM and stop buying from them. (Apart from hard-coding it into the ongoing game, of course, which is probably also possible. )

[Prdgi]

I want to settle a T3 gas giant with NE, it could have the potential, if we run long enough and player NE demand is low enough, to provide a large drain on the MM. The NE on this planet would just be a welcome bonus, the other resource is very important.

[Spiff]

Molp, thanks for the reply.

That’s interesting data, but please be careful about concluding “we [don’t] need another money source at the time being.” If you get this wrong and restrict money excessively, you may lose players and decrease the satisfaction of those who stay. The real trouble here is how limited money can choke trade.

The second chart you posted has a useful figure of the money supply compared to the number of companies. If it’s increasing at 1% a week, as best I can read in the chart, that’s 67% annually. After a year of play, companies can grow, on average, from 30,000 NCC (or whatever currency) to 50,100. That feels slow to me, and since I want the game to succeed, I worry about players losing, ah, interest.

But the bigger question isn’t addressed at all by this data. The growth of the money supply should match the growth in production, else the money supply throttles trade - and trade is the lifeblood of this game.

As players accumulate more goods, added to the game from extraction and production, they can trade for more things they want - but without appropriate growth in the money supply, less freely than either party might like. A company could have enough Consumables, say, to trade for goods that can make a new building (fun!), while another company would trade those building inputs for the Consumables, but they can’t actually swap goods without comparable currency. Limited money means they have to do that exchange over multiple trades, slowing the process.

People see this limitation in the developed world when selling houses. Two people swapping houses - one downsizing, say, and one upgrading - each have the assets for a trade but usually not the liquidity to make such a purchase until their own sale is complete. Loans bridge the gap, just as in developing nations where banking is limited, barter enables daily exchange. Apex doesn’t allow loans or barter, as far I as I know.

If the money supply grows more slowly than the stock of goods, money will limit how often players can trade. Just as more trade can be more fun, less trade is a problem.

[molp]

Thanks for sharing your thoughts Spiff!

I agree with you, that in order for trade to happen and keep happening a certain liquidity is necessary. I think your estimate about how big companies can grow over the course of a year is too conservative though.

Right now the number of companies contains active as well as inactive companies. We have 1360 companies and ~550 monthly players. There are a lot of players that check the game out and stop playing after a while. When they do they usually have spent quite a amount of their initial money on the markets. So the real total currency / number of players is probably much higher. I tend to see the value we measure in the statistics as a lower boundary and general indicator.

We are only getting started on implementing statistics of economic key figures. I guess one important one in this context would be inflation, would you agree?

[Spiff]

Molp, that makes sense. Currency/active corporation is the key figure.

@molp

We are only getting started on implementing statistics of economic key figures. I guess one important one in this context would be inflation, would you agree?

Ah, you’re asking about my field. Let me put on my economist hat for a moment. I write mostly about trade, but inflation is closely related.

Most people think more money in the system means more inflation, but that’s true only when more money affects supply vs demand. If people suddenly had another 20K - say all active corporations find an alien treasure chest buried on their base (mysteriously filled with whatever currency they use) - some items might not see any rise in prices. If players spent all that money to fund ship travel between exchanges, there isn’t any increase in demand for workers, and therefore no further demand for Basic Consumables.

More likely, people would buy building materials, and expanded bases add more workers and therefore more demand for Basic Consumables. But demand vs supply is the limiting factor on price, not the amount of money in the system. If players are restricted to a single small base, then the price of building components plummets (since no one can use the materials), no matter how much money they have.

We see this in the real world where sky-high inflation accompanies limited supply. Lots of countries “print money” to pay for government projects (or graft), but inflation is over 50% in only two, both with squeezed supply/ trade: Venezuela (which has ill-advised price caps), and South Sudan (with supply chains broken by war).

So how you introduce more money matters a whole lot. Milton Friedman wrote about central banks dropping money into economies “by helicopter,” but he didn’t detail how that would actually be done. In this game, if you do it with more market-maker purchases, those goods will be the first to see prices rise, of course. The extent to which the price increase spreads depends on pent-up demand for each product.

People have strong feelings about government debt, printing money, and inflation. Even economists still debate (to some extent) monetarist vs Keynesian models. We don’t need to wade into those. This game has giant economic levers that can be pulled to affect prices and production as desired. More market-maker purchases reduce supply while sales increase them. Worker consumption rates do the same. Demand even responds to the requirements for buildings and the limits on base size, etc.

tl;dr? Currency/active corporation is a key figure, whatever else you track.
For inflation, it’ll help to follow the relative prices of different production lines: inflation here can hurt when a Metallurgist sees rising prices but a Victualler doesn’t.

[Prdgi]

There are market maker orders in place for high tier electronic systems and ship components. These have long, complicated supply chains which should help to spread the injected cash.

I have suggested in the past that factions could place buy orders for products on a rotating basis to simulate infrastructure development and government tenders. In combination with a removal of market maker requests for unfinished goods, the addition of mid-level consumer goods (T2, T3 electronic systems and ship components), and dynamic market maker pricing, this should provide a way for funds to enter the economy in a more natural way. This will also provide a more even spread over the players who receive the funds.

[Esabab]

Would be interesting to see the Marketmaker balance graph for Katoa. I imagine the Ne is very negative.

[Mjeno]

You’re right, it’s not fair if I only show you one of them. Here’s Katoa and Montem as well:

[Air]

In every functioning economy, banks play an important role. Especially with larger investments there is often the need for a loan.

Otherwise, a normal development takes a long time. Hardly any company in the real economy starts larger investments purely from equity capital. Here, creditworthiness and solvency are the more important factors.

Controlling the money supply via key interest rates can slow down too fast a growth. A credible economic simulation without banks I find difficult.

[Prdgi]

The main argument against doing that is the ability to COLIQ. You could take out a large loan, waste the money, and COLIQ with the MM bearing the cost of it all.

To counter this, a credit system could be instigated. Everyone starts with a particular credit score, which gives you the ability to get a loan for x amount. As you meet the weekly repayments for your loans, you can slowly increase your credit score - which in turn allows you to gain a loan for higher amounts. This would limit the amount of damage a COLIQ can do to the system.

When a player does COLIQ, their base should be demolished and all materials they own returned to the MM to offset some of this.

However, I feel that this function is better suited to Corporations. That is, in conjunction with expanded Corporation capabilities, Corporations can issue loans with designated interest rates. Each week, contracts are generated which only have a ‘pay x by y’ qualifier.

I feel that changes to Corporations requires a substantial post on its own, and GDP will likely do so a bit later in this test.

[Esabab]

Would be interesting to see an updated version of these!

[Prdgi]

I agree. We’ve come a long way since these charts were published.