Economy Suggestions

Economics: Economics in Spaaaace

By MJ12
Note: these do not represent end-user rules-this is just the logic and math behind them. They may come in a simplified fashion or be done entirely behind the scenes.

Growth and Savings

Or: You mean you need money to make money? Amazing!

The economy is constantly growing at a slow pace, and as such infrastructure improvements are made quarterly and "immediately" finish. Therefore, growth is done quarterly (whenever new builds must be submitted?) and said infrastructural growth immediately finishes.

Besides for the standard growth categories, there are two others that can be increased by spending-domestic support and population. The latter represents immigration-friendly policies, tax breaks for incoming businesses and their employees, improved government programs to integrate immigrants into society at large, and other similar policies for the most part, although nations with the inclination and will to use bioroid labor can simply start the factories up for another batch.

Domestic support can be increased by government spending as well, although the effects are generally temporary and short-term, used to compensate for crisis situations or simply to stave off impending disaster for just a little longer. This represents propaganda, beating people into a nationalistic fervor, spending a giant pile of money on pork, and other ways to keep the voting bloc happy lest they decide to vote you out of office-or worse yet, vote with Kalashnikovs instead of the ballot box.

Growth and Morale

Or: Bread and Circuses in the 22nd century

Many countries have found that keeping their population well fed and wealthy allows them to act more freely without the risk of significant dissent or revolt. This has not changed at all-poor growth in infrastructure and GDP can and will cause civil unrest, while high growth and the promise of economic prosperity can silence an angry population.

If economic growth does not hit a critical threshold, popular support can and will wane, although subsidies and government action (i.e. bribing the people) can stave off the worst effects, for a period of time. But once bread and circuses are promised, it is not difficult to cause the population to start demanding more, and with an essentially static infrastructure base, this is the way collapsed nations are built.

For developed nations, the quarterly growth needed to sustain popular support is approximately 0.5%, but for somewhat less developed polities (i.e. the player characters) owing to the easy access to resources and living room, desirable growth is approximately 1% in all areas (CIP, PIP, and wealth). Growth below this will penalize morale, causing it to decrease slowly. If total growth is below the threshold, a nation loses 1% domestic support per quarter. A nation suffering negative growth can lose a significant percentage of its domestic support as its population is wracked by poverty and unemployment-if a nation suffers negative growth, round the percentage of negative growth down to the nearest whole number and then subtract that from domestic support as well.

Example: The Nation of Explodia has had a terrible quarter with -2.1% infrastructure growth total. Its domestic support is already low, at 33%. Explodia loses 1% domestic support from having growth lower than 1% quarterly, and an additional 3% from its negative growth, reducing its domestic support to 29%. Its government may want to start thinking of ways to encourage economic improvement.

On the flipside, sustained growth can increase population support, as the promise of prosperity in the near future allows them to forgive the goverment for a lot more than people who aren't seeing their nest eggs and future brighten before their eyes. A nation which has the wealth, research and development infrastructure, and savings rate to sustain high economic growth can ignore its internal turmoil and societal problems for the most part-until it can no longer sustain said growth rates. If a nation's growth is above 2% quarterly, it gains 1% domestic support per quarter.

Deficit Spending

Or: How to get reelected and tick off your successor.

It is sometimes necessary or even desirable for a nation to spend more than it takes in via taxes and other means. A long time ago, some genius figured out that borrowing money was an excellent tool to do exactly that, whether on a personal or a national scale. National debt is commonly used to finance wars, prestige projects, or other significant expenses. Most notably, most ZOCU powers have been saddled with a moderate degree of debt due to their crash industrialization programs and proportionally smaller economies compared to the Core powers.

A nation can do deficit spending, which up to doubles their quarterly wealth income, but gives them national debt, at any moment. National debt, however, reduces future income, and at high levels can decrease public support of the current administration and its path. For every 5 WU of debt (round debt up to the nearest 5 WU), 1 WU of income must be reserved per quarter to pay interest on the loans quarterly. If the nation refuses to pay, massive domestic upheaval can result. Most critically, if a nation refuses to pay it is immediately disallowed from deficit spending until its deficit is eliminated, which may take a significant period of time. Payment of the deficit can be done with any budget surplus a nation may have.

Furthermore, the current deficit is transformed into a domestic support hit, and your economic system can easily suffer permanent damage-multiply your current Wealth production by (1 - Debt/Wealth), suffering a maximum of a 50% reduction in economic capacity. The permanent damage to the economy due to various factors can cause a nation to enter a depression which it may take decades to crawl out of, and the domestic support hit makes it worse. Therefore, most nations seek to ensure that interest payments on their debt are always paid, no matter what.

Similarly, high levels of government debt can also cause significant domestic support hits as people worry if the government can keep fulfilling its debts. One-quarter (rounded up to the nearest percentage point) of the percentage of total national debt (both foreign and domestic) over GDP is subtracted from the domestic support rating. (this assumes domestic support is still a 1-100 percentage).

On the other hand, a nation can borrow money from other nations, which may reduce the interest costs but gives them influence over one's economy. The results of defaulting on debt in either case are identical, as the main problem is the nation showing that it cannot be trusted to repay its debts on time. All repayment plans must be arranged ahead of time owing to the ability to use debts as leverage.

Nations start with 20% of their total GDP (Wealth infrastructure) in domestic national debt for every "-Debt" they have.

Reducing the Deficit

In many cases a nation with a deficit will seek to reduce it during times of plenty, by paying it down. This is done by spending wealth on it (obviously). However, as most debt is found in bonds and securities, with fixed repayment schedules, paying off debt is a slow and potentially painful process.

Debt can be "immediately" repaid, but such a process is inefficient. Owing to the mature value of most investments, this requires 10 WU to every 1 WU of debt. Therefore, most nations repay their debt in the "normal" fashion-by slowly paying it down and not borrowing further. A nation can pay off 2.5% of their debt, rounded up to the nearest WU, every quarter at a normal ratio (i.e. 1 WU spent to remove 1 WU of debt). Any debt a nation seeks to reduce past that is paid off at the higher 10:1 ratio.

Trade

Or: You scratch my back, I'll scratch yours.

Trade is common for one reason-in general, it makes everyone better off when it happens. Trade based economies are prosperous but generally also vulnerable to disruption, making it a tradeoff between security and prosperity.

To Be Finished

Economic Warfare

It is possible to cripple someone's economic system by selling goods massively under-cost, causing the economy to self-correct, men and women moving out of fields where there is a glut of production and into other fields. This can easily be done, sometimes inadvertently but most of the time intentionally, by trade, especially with a much larger power.

When using trade, it is possible to apply all gains from trade to economic warfare, losing any profit from trading as the government subisidizes factories to dump their goods in a market one wishes to disrupt or break a significant foothold into. The factories build items significantly undercost, causing the opposition's economy to rearrange itself.

Trade supplied undercost in this fashion gives double the returns in both morale (the public likes cheap goods) and wealth to the recipient, but also costs them infrastructure over the long term as unprofitable industries close down. In effect, the gains the sending party would be making are applied to buy negative economic growth, which, without intervention, can cause economic stagnation or recession in the long term. Spending wealth on positive economic growth cancels this issue out as normal.

Technology and the Economy

Or: How exactly did we get "A" from Technology?

Technological improvement also spurs economic growth as well as investment. As technology improves, productivity improves, even if the net effects are fairly minor. Therefore, Research Points can be used to improve the economy in place of wealth, representing focusing government research efforts on economic, rather than military, applications and improving prosperity in that fashion.

Galaxy-Wide Economic Events

Or: Help help I'm in a recession and I'm out of money!

However, most countries seek to keep a reserve of currency for a significant reason-economic fluctuations and other contingencies can only be predicted on a fairly rough scale, and must be corrected for. Lacking enough money in case of a galaxy-wide recession (not uncommon in a fairly interconnected economic system) can cause significant popular support hits.

Overcapacity

Or: The care and feeding of your very own Solow model

There are nations which generally have far more infrastructure than their savings rate and population can support. This is rare, because fundamentally this is unstable. A nation with overcapacity loses said infrastructure over time, as money and workforce are stretched too thin to accommodate it and businesses close down due to having to produce goods below their marginal cost to participate in the market. Therefore, a nation with overcapacity must invest a significant amount of wealth into maintaining growth or at least stagnation until the population and GDP grow sufficiently to support its infrastructure, as the market is already saturated and the government is essentially the sole party standing between it and collapse.

A nation with infrastructure greater than what its population can support abandons said infrastructure at a rate of (total infrastructure - maximum supportable infrastructure/50 * maximum supportable infrastructure) per quarter. So for example, Davistan has 1250 industry but can only support 250 from population and other factors. Davistan, therefore, loses 8% of its infrastructure per quarter (a -8% growth rate) unless it pays through the nose to maintain its productivity levels.

Furthermore, a nation's cost to subsidize infrastructure it cannot support is increased by a factor of (1 + total infrastructure/maximum supportable infrastructure), rounded down. So Davistan is also paying 5 times as much per unit to keep its infrastructure from decaying. Given that it's losing domestic support as its infrastructure decays, chances are it will be an ex-nation within a few years.