Fantasy World Economics

[fusangite]

I posted this to another thread that alsih2o put up a while ago but I think it bears repeating here: D&D does not make sense if you use economics. Indeed, the rules are pretty clear that value, in D&D, is largely impervious to supply and demand.

I offer the following evidence in support of this:

Fixed Magic Item Costs
As is clearly stated in the PHB item creation feat descriptions, the DMG sections on magic item creation and the DMG magic item descriptions, magic items have fixed GP values that exist in a fixed relationship to the XP costs for making the items. It seems clear to me from this text that item GP costs are absolutely fixed. It seems improbable to me that the laws of supply and demand would apply to low-cost commodities like staple foods, tools and the like if they do not apply to essentially luxury items whose only market would be the top 1% wealthiest individuals.

Appraise
The description of the appraise skill makes it pretty clear that when someone evaluates an object, they are given a single universal value for the object. Nothing in the appraisal mechanic indicates that its results vary based on localized conditions.

D&D Physics
As I often note, D&D physics are not Newtonian; they are Aristotelian. Falling damage increases arithmetically, not geometrically; there are 4 elements not 100+; there is no evidence of natural selection in the biology of the world, etc.

Based on these three considerations, I would argue that D&D economics should not be understood through the ideas of supply and demand that developed between 1350 and 1850. They should instead be understood through medieval economic theories.

In medieval Aristotelian economics, value was objective not subjective. In other words, value inhered in the objects being traded, not in their value to the buyer or seller. Value was absolute not situational. This is why for medievals, it was a sin to charge interest; this is why it was viewed as sinful for commodity prices to rise during shortages. Just because there was less barley didn't mean that the value of a pound of barley was greater.

I know that I have a content-reader credit on MMS:WE and this was not an objection I raised with Suzi and Joe; and I apologize for that. But, in my opinion, there are real problems in applying modern economic theory to game worlds when, if these principles are universally applied, they will come into direct conflict with the rules of the game/physics of the world.

 

[fusangite]

So, according to the rules, we have one armor smith working continuously to sell a chainmail suit for 150GP. 100 GP is profit which goes to the armorsmith. He’s making about 2 GP per day off this chainmail suit. 50 GP went to the foundry worker, of which 33 GP is profit. He’s making about 5 SP per day if the armor smith is his only customer. He could be making about a gold and a half a day if he is constantly working.

I think there is an error here in assuming that most economic actors are (a) profiting or (b) conscious of profit. Before the advent of ciphering (Arabic-style mathematics), there was little or no effective bookkeeping in Europe. People judged the success of their business based on how busy they were (hence the name); many businesses that deemed themselves successful were actually losing money constantly but were shielded from it for reasons such as: (a) a credit-based economy where key artisans were increasinly mutually indebted to eachother for materials and the like, (b) the absorption of production or materials costs by other profitable businesses, (c) the absorption of costs/losses through the use of common goods shared by a collective group or borrowed from an aristocrat, (d) the siting of production on manors or the like where taxation or warfare effectively subsidized all enterprises.

Just how much does it cost to ship things across the country? Our armorsmith makes his chain mail, a merchant buys it and he carries it across the land to sell in another place. How much does the merchant have to increase the price to break even?

Actually, shipping and handling costs, in the past were often either charged separately or understood to be a hidden tax or surcharge. So, based on my assumptions about the fixity of costs, I would be inclined to assume that item costs, as listed in the core rules, do not include shipping and handling.

EDIT: Although I could have sworn I saw a post about this when I first read the thread, I cannot now find it for the life of me. So forgive me if I'm repeating something that has already been addressed. Merchants have an additional cost in that they are the only people who maintain an inventory. Virtually all purchases from primary producers are going to be for commissioned items-- artisans need not maintain and are not expected to maintain inventories. Only merchants must do that.

 

[fusangite]

Determining crop results

Crops aren’t a sure thing. A late frost or a rainstorm in the wrong time can mean failure for a crop. To find out how a crop harvest turns out for the year, figure at harvest time the amount of seed crop by the crop multiplier.

(Base+Skill+Weather)/10 = crop multiplier

Base: 20
Skill: 1d20+ranks (always take 10 when dealing with large groups)
Weather result: 3d6

The multiplier is used to figure how much the crop produces out of the crop seed. Figure the number of GP worth of seed used and multiply it by the multiplier to find the crop harvest for the year. Typical usage is 3GP per acre. If using Plant growth to increase the harvest multiply the crop harvest by 1.3. Having a wizard who can cast Control Weather available to cast the occasional spell allows the change of one of the weather dice to a 4 instead of what was rolled.

Tempestarii were an important part of the early medieval economy. One of the expected duties of priests was to provide insurance against weather wizards who might sabhotage crops. Farmers also often paid-off local tempestarii in advance so that they would not call down hail and other disasters on fields.

I would therefore suggest that most spending on magic should not be understood as improving crop conditions. Rather, most spending should be understood as defensive. Wizards casting Control Weather, druids casting Plant Growth should be doing what they are doing to fight or prevent crop sabhotage by malicious weather wizards.

Thus the majority of the wealth left over, that can be freely circulated through the economy anyway, will be made of precious metals.

How much of it is out there? Historically, countries have dealt in tons of gold for large projects, with one ton of gold being equal to 100,000 GP. A failed invasion of Africa cost the failing Roman empire 65 tons of gold and “left the treasury bankrupt for years”. Attila the Hun received 9 tons from Byzantium in a few years through the bribes they paid him to leave them alone. If our kingdom produces the equivalent of 130 tons of gold a year, how much is probably actually laying around as gold or precious metals at the end of the year, so to speak? Of hand, I’d guess about 10%. Probably less.

There is a really sharp difference between how money worked at the large scale between the late antique, early medieval and high medieval worlds. It is my view that while D&D is usually simulating an approximation of high medieval society, when it comes to money, it is the early medieval world that is being represented. This was the world inhabited by dragons with their hoards -- dragon hoards were not a strange thing because coin hoarding was often a response to turbulent economic and political conditions. So, unlike modern society where the largest concentrations of money are more likely to be recirculated; in early medieval Europe, if too much money got accumulated, it was more likely to be removed from the economy and placed in a hoard or, more likely, converted into ornamental objects.

I think your above paragraph is a fair representation of state economics of late antiquity but does not really fit with the treatment of money in the eras of Alfred the Great and Charlemagne. This is a problem you address, of course, in the paragraph below:

One of the main troubles is that the more money that the lords stash away, the harder it becomes to conduct trade. Hoard too much money and the economy slows because it becomes hard to conduct trade. Without coins, trade is reduced back to barter for material goods that degrade or may not be as useful to you as they are others. Yet, if the kingdom releases too much of the money, then they can’t store that wealth to use later. Worse yet, if they release too much, a neighboring country may horde it and thus prevent our kingdom from getting richer. Even a lack of one type of money over another can cause troubles.

This is true but the way you write this paragraph, you seem to be assuming too strong a link between a cash economy and the majority of the population. Even in the high medieval period, a minority of transactions outside of cities involved cash. While urban economies could be quite adversely impacted by changes in money supply, rural economies were much less so. While those with feudal title to rural land were affected by money supply issues, their tenants generally were not. Also, too heavy a reliance on data from Byzantium and the brief episodes of economic coherence in early medieval Western Europe obscures the fact that feudalism was a pretty direct and effective response to the kinds of problems you were describing above.

While your inflation model is not wholly inaccurate -- indeed there were pretty obvious episodes of inflation in early medieval Europe (though I would argue that they tended to cluster around the Byzantine Empire and other areas that escaped the development of vassalage), it simply cannot function in game terms. It collides directly with the magic item creation mechanic. I would therefore suggest that a more likely response to a large wealth surplus in a village is for prices to remain the same but for artisans to slow down production and stop accepting commissions for cash. Artisans might sell a lot of products in a few weeks and then, wealthy beyond their wildest dreams, bury their money in the back yard and take some time off or go to a city or simply continue accepting cash commissions but only in trade goods.

 

[fusangite]

Good point. Enter the marauding dragon that lives nearby. It raids the countryside and takes what it wants back to the "cave". The villagers aren't tough enough to do anything about it, so they just have to sit there and like it. Maybe the dragon has swallowed up the other little monsters in the region. Why wouldn't it. Plus you have the left over wealth of those who have already tried to take out the dragon. Plus that of those who tried to take out the smaller monsters and got killed doing (i've had players get killed or run off by creatures they were darned well supposed to wipe out leaving treasure/equipment behind), which the big dragon then takes back to the cave as well.

Stories of dragons with hoards come from an era when people had been burying money and valuables for centuries due to lack of faith in a cash economy. From this, I think we can determine that because there are so many hoarding monsters in D&D, that most D&D societies are the distant heirs to some kind of long-past economic golden age. This can help to explain some of the money stored in the ground; another explanation, also from the Beowulf era is that there were a lot of raiding societies that stole money from distant lands and then buried it. But you're generally right: it is very hard to sustain a model of the D&D economy in which treasure hoards are endogenous.

 

[fusangite]

An acre is roughly (originally defined as) the amount of land a man can plow in one day. Given a one month planting season the max amount one man can plant would be about 30 acres, but we'll assume an average of 20 acrres per peasant family (four people).

As long as you understand that the draft animals and equipment that comprised a heavy plough were almost never held/owned by a single individual. Operation of a heavy plough was a shared collective enterprise. As long as we understand the single peasant worker as a mathematical abstraction, you production figures don't seem off to me.

However, a few caveats:
(a) there are wide variations, of course, based on the weather/ecology of regions and soil quality
(b) only wheat had consistent cash value historically; as long as wheat was available, those paying cash for grains would almost always purchase it over barley, rye or lower-status crops. So, even though reduced yields associated with switching from rye or barley to wheat might not make any sense, even if one factored-in wheat's considerably higher cash price, people would often switch to wheat production because barley, regardless of the volume might produce 0 cash. While I think part of the fun of D&D is changing what foods are popular and which are not, the historian in me wants to suggest that whatever grains this applies to, the problem should remain.
(c) one must consider the productivity of forests; pigs and even cattle sometimes were often expected to life off forest rather than cleared land. Indeed, the Carolingian polyptics described forests based on how many pigs they could support. I think the cereal focus of your model presents some problems.
(d) In 9th century France, 60% of the grains harvested were used for seeding. By the 12th, this had dropped to less than half this figure -- therefore, the portion of cereal production costs that is reinvested varies considerably. Perceiving agriculture in terms of labour rather than material costs may be problematic.
(e) There is considerable variation amongst feudal models in the degree to which capital assets are owned by tenants -- sometimes things like ploughs are village/commune property, sometimes they are the property of the lord; sometiems they are individual property.

Anyway, that's all my responses to this thread. I think you've raised some important issues and sparked some excellent discussion. Carry on.

 

[drnuncheon]

I posted this to another thread that alsih2o put up a while ago but I think it bears repeating here: D&D does not make sense if you use economics. Indeed, the rules are pretty clear that value, in D&D, is largely impervious to supply and demand.

I offer the following evidence in support of this:

Don't forget spells with material components like "500gp worth of diamond dust".

J

 

[fusangite]

Don't forget spells with material components like "500gp worth of diamond dust".J

Added .

 

[painandgreed]

Some answers to the above.

Although the idea of a medieval economic theory with absolute value is interesting, I don’t think I could do it. Even if I did, I don’t think that the players would and they’d probably find a way to break the system. Instead, I just assume that such absolute values are included in the game system for playability since this isn’t a merchant game. Even games where PCs are merchants such as Traveller, the rules are grossly oversimplified. Rather than assume such a system, the point of this thread is to eventually work out a supply and demand system that is not too complicated and will work with D&D. That’s where we’re going eventually with the transportation costs, on to different markets and trade routes.

Most things IMC (which all of this can be considered), are similar to RL unless acted upon by magic or otherwise changed to fit in with the fantasy world setting. With super high Intelligence and Wisdom scores as well as knowledge given via Gods, some things are known that were not known in RL. Basic germ theory is understood by those with healing skill for example, although nobody has actually built a microscope to see them yet. Some wizards have some basic idea about physics. Similarly, modern supply and demand economics will be understood by some merchants, nobles, and clerics of the god of wealth, or in other words, to those to whom they apply. Even so, many things are fixed socially by an authortarian governmental systems that are in place. The relation of gold to silver to copper for example is not because they are present in that relation to each other and constantly are valued like that in the open market but because it is the ratio set by the major economic country IMC.

The rules present a base point, but any actually deviation would depend too much on the individual campaign world. First off, many D&D players and DMs simply aren’t going to want to bother with it. To work out proper supply and demand, it’s going to require knowing where the areas of manufacture are as well as markets and trade routes, etc. Add in changes for various customs and laws and it gets much more complicated. All of this is going to be highly dependant on the individual campaign setting, so there’s no real reason bothering with such in the main rule set.

The cereal focus of the main example is a problem, but it works for what it is and can be used as a baseline. Someplace, I’ve got some estimates on how much land it takes for various livestock animals. Herding is definitly a large part of many societies including the standard D&D setting. There are also gross differences in the amount that can be grown due to weather/ecology and soil quality. Still, as I’ve said before, we’re not trying to make an medieval agricultural simulation here. We’re just trying to add a little bit of realism to our fantasy world setting so we’re convinced that it is at least internally consistent enough to satisfy the DM.

As for the Appraise skill, my personal take is to give local (pr personal) knowledge of the value of an object, and if the check was good enough, inform them of any other markets or conditions that might modify this. However, without a good idea of the markets, it pertty much becomes just a plot hook.

 

[fusangite]

Although the idea of a medieval economic theory with absolute value is interesting, I don’t think I could do it. Even if I did, I don’t think that the players would and they’d probably find a way to break the system.

I'm not sure there is any "doing it" entailed in the absolute value system. My point was simply that if you play based on the rules in the book where prices never vary, it is easier than creating an economic simulation model. Aren't you in greater danger of exploitation/breakage with your proposed system by pegging item creation XP and spell costs to fluctuating prices? It seems problematic to me that the XP costs of a magic item could be reduced by glutting/flooding the market with certain materials.

Most things IMC (which all of this can be considered), are similar to RL unless acted upon by magic or otherwise changed to fit in with the fantasy world setting.

How does your physics hang together? How is magic explained/understood?

The rules present a base point, but any actually deviation would depend too much on the individual campaign world. First off, many D&D players and DMs simply aren’t going to want to bother with it. To work out proper supply and demand, it’s going to require knowing where the areas of manufacture are as well as markets and trade routes, etc. Add in changes for various customs and laws and it gets much more complicated. All of this is going to be highly dependant on the individual campaign setting, so there’s no real reason bothering with such in the main rule set.

I'm not making a statement about the conscious intent of the writers of D&D; I think certain things were not really thought-through when it comes to economics and the like. I just tend to build worlds/rules where the physics/social science are not on a collision course with the rules. I run games with absolute value to simplify things -- while your supply and demand model, as you point out above, presents horrendous complexity factoring in political, cultural and material concerns, my "play by the book" rule doesn't have to worry about any of those things. Things are worth what WOTC says they are worth all the time and it's backed up by a single coherent system of both hard and social sciences.

We’re just trying to add a little bit of realism to our fantasy world setting so we’re convinced that it is at least internally consistent enough to satisfy the DM.

I think this is where we see things differently. For me, realism comes from internal consistency not from similarity to real life. Your system, interesting as it is, is actually less internally consistent than a strict Aristotelian reading of the rules. The way that your economics provide realism is by making things more similar to the real world at the expense of internal consistency. This kind of realism is very popular so I think some people will find your ideas useful but I think you should really re-examine whether your addition to the rules produces a more internally consistent economics for the game.