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[daishi5]

A few reading suggestions in english:  "New ideas from dead economists: an introduction to modern economic thought" by Todd Buchholz, this is a nice light read that basically attempts to relate the development of economic theory to modern events.  Nothing very in depth, but if you don't know anything about the history of economics, this is good way to get a very light overview.

"The wealth of nations" Adam Smith,   This is considered the beginning of modern economic thought.  The book is actually not too hard to read, although it is rather large, and Adam Smith's insights even in 1776 are really quite amazing.  This is a really really good book to read to begin to understand economics.  He lays most of the groundwork that other economic thought is based on.

"Basic economics"  Thomas Sowell,  (Warning, thomas sowell is about as libertarian as they come, and you need to understand his bias when you read his book.)  Another basic overview, where "new ideas" covers the evolution of economic though through time, Basic Economics just covers the basics of how economies work.  The role of a market, how it functions and what it does, and many other things of that nature. 


Those are what I would consider good "intro" books, that I have personally read.  All of them are written for people who know very little about economics, Smith wrote his book before there was even a study of economics.  I would recommend that you go for deeper reading if you read sowell, he has a very obvious bias, but I still feel it should be recommended because he has done probably the best job of any book I have ever read of explaining how a market functions, and why it is so strong at allocating economic resources. 



Moving on to the original post, and the economic simulation.  I think your criticisms of the economic simulation may be based on an un-realistic expectations.  Economies always sprout from microeconomic transactions, because all decisions are made at the micro level.   So, when you see something like "Like over centralized or uneven economic balances"  that result may be unexpected, but that doesn't mean it is wrong.  Many industries are very centralized, such as steel production, and the world is full of uneven economic balances.

I have a few questions about the simulations, did you include anything that would simulate economies of scale, such as fixed vs variable costs?  Did you have anything that simulated dis-economies of scale, such as resource exhaustion or increasing costs of extraction?  These two in combination should produce varying levels of centralization.  Did you have substitution and compliment effects for factors of production? 

[counting]

And it brings us to a good question, what's the number like 2.99 EURO, or 3.99 USD when you think of a hamburger really means? Does God places a meter in our heads so we automatically pop-up some numbers when look at something, as a smart dwarf? what's 1 dwarfback means anyway? God decides how pricy the goods should be? Or is it the merchants who sell things? And these questions will bring us back to the true supply/demand problems that bother us so much. Is it the only way to set a number for every objects in economic simulations? Perhaps it would be more reasonable to set only a certain measurement as baseline using some necessity goods, or the unit of time as a measurement in order to calculate the relative values of every other thing. All these need to be determined before a truly functional currency system can be simulated properly and naturally.

Well, that's an interesting point.  The $4 hamburger means the value of that burger as determined by the merchant is equal to $4 worth of any other good as determined by the common currency unit, be it $4 worth of an airplane or crude oil or anything else for that matter; if people don't believe that that amount is justified on the basis of their utility, they won't buy it and the price will necessarily have to fall to stimulate demand.  Otherwise, it will never be sold or only very infrequently.

The challenge of this is as you identified a utility system; we'd need a way to determine utility for goods and services in order to determine prices and in turn trade networks and supply and demand.  The biggest question here is how to do so.  Do we assume civilizations have a certain utility for various classes of goods in the context of an overall hierarchy of needs, or do we simulate it on the individual level?  Do we calibrate this by a certain degree of variance, either random or fact-based, to produce more realism (e.g. one civilization values emeralds over diamonds because of religious symbolism or cultural aesthetics)?

Regardless, I do think DF needs more goods to create an economy; adding new animals is a good first step but more variety is needed to really establish plausible trade networks.

As I mentioned above, we use different elasticity of products to represent the demands. Using economic terms that we are using expected utilities to form a indifferent curves. So when the production kicks in they can be used to determine the number of consumptions (purchases).

But in practical term, you can't write a program like that, and expected it to run the simulations with only equations. You need to fill in some initial variables. And we used real life products as templates. But we tweaked them a lot and only selected very few of them so they all fall into certain reasonable parameters. And they are not static, it will change due to already purchases, the level of wages, and most importantly using the rational choice theory to help them choose. (As a whole). Lucky for DF, I guess the utility shouldn't be that hard, since they are not necessary to be real (and logical), and can be as wild as possible.

And the whole supply/demand theory in microeconomics are working, is due to an assumption that although every people can be affected by some many random different reaons leading to unexpected results. But statistically analysis shows their distribution is not random. And we can using regression analysis to extract parameters from those actions. much like you can draw a curve about the distributions of human heights, and they are centralized in the middle, regardless the giants and dwarfs. (I know it's not funny :X)

So strictly speaking we are simulated in a statistic level, rather than individually on the department of demands. (Oh the crowd is stupid! @@). And we are more focus on supply and productions chain, and monetary economics, trading effectiveness. And as far as I can tell by Toady's update, they are doing much like the same thing. Although we do not simulate the labor forces like DF, but rather also view them as sub group of population.(we simulate larger population as well) So there are not much room for randomization. (We want them to be as less as possible) However, that's why when the results become to sensitive to certain variables' changes. We will definitely know they are important. (And for the fun of DF, I guess more randomize is good though XD, As long as they are not causing entire economics failure)

And last, about currency, hmm. money, dwarfbucks? what ever you called it. I guess that's exactly what I said earlier. People need to forget about what they think of money before they can better understand the banking and money market. MY answers about $3.99 is that they are not only the pure measure and exchanging unit with absolute neutrality. But they are also commodity in their own right. The whole process of money creation, can be viewed as "money manufacturing". And you definitely know that money supply and demands are real concerns in every central banks through out the world, tightening with government bonds, international exchange rate, interest rates, and even GDP grows, In/Exports. How can it not be a commodity? And when $4 in your pocket as cash, deposit in the bank, in the form of debts, they will have different meaning, and almost certainly has different values. And the sum of many currency has different affect and even utility of it's own. (paper no worth much, but they still do)

So again, using DF terms, and temporary forget the "base value number" and every other multipliers. Let's just assume you do live in a DF world. You melted a silver bar, and get 500 round and shiny little coins. You take 4 of them, and going to a DF butcher shop. Do you think you can buy a raw cow meat? Do you want to spent them? Are they the same when you the fortress barely have any food supply or abandon with them? How about when you are starving or just finished eating? Does it feel the same when you think they are 4/500 of your possession now, and when you have just spent 496 of them and the 4 of them are all you have left now? What about they are gifts for free as mayor are so happy to give everyone a free bonus? There are chances and opportunities, so people tend not to think about them and just put out 4 of them laying on the table, and hopefully the owner will be happy to accept them, and he will not giving your a rotten meat. They are a form of contract in every buy and sell, and the process is a never ending negotiation of "price finding" like in an auction house.

I'll post a suggestions next, about market, and hopefully be lucid enough and come up with something concrete. (Where is my dwarven ale!) Than possibly a short story about how I view the world of economics in DF.

[harborpirate]

The challenge of this is as you identified a utility system; we'd need a way to determine utility for goods and services in order to determine prices and in turn trade networks and supply and demand.  The biggest question here is how to do so.  Do we assume civilizations have a certain utility for various classes of goods in the context of an overall hierarchy of needs, or do we simulate it on the individual level?  Do we calibrate this by a certain degree of variance, either random or fact-based, to produce more realism (e.g. one civilization values emeralds over diamonds because of religious symbolism or cultural aesthetics)?

Regardless, I do think DF needs more goods to create an economy; adding new animals is a good first step but more variety is needed to really establish plausible trade networks.

DF has lots of items with equivalent functions (tons of different kinds of melee weapons, for instance), and few-to-none of certain types of critical items (no plows).

Much of this is due to the fact that DF is a very detailed warfare simulator, but doesn't require the use of many other kinds of objects. Cups, for instance, have no use since dwarves drink directly from barrels. In fact, dwarves do not use any eating implements of any kind, and the game doesn't even require you to make them to even halfheartedly simulate the need for them.

The game requires no farming implements, and in fact I don't think you can even make any of them.

It requires no medical instruments, other than thread. Somehow dwarven surgeons sew injuries up (a bit anachronistic, IMO, but its Toadys game) despite no one ever having made a needle.

Anyway, no point in carrying on with that rant.

One can hardly blame Toady. I find the "medieval simulation" aspect of the game fascinating, but the majority of users are more interested in the warfare simulation.

As for contributing ideas, the first step would probably be to categorize objects with increasingly detail tags that could go into the raws.

For instance, a sword might have: sword, edged weapon, melee weapon.
A cup might have: container, liquid holder.

If these things were made of gold or crystal, they should get modifiers indicating that they're also luxury items. Presumably those would be in the materials raws or calculated by rarity.

[counting]

A few reading suggestions in english:  "New ideas from dead economists: an introduction to modern economic thought" by Todd Buchholz, this is a nice light read that basically attempts to relate the development of economic theory to modern events.  Nothing very in depth, but if you don't know anything about the history of economics, this is good way to get a very light overview.

"The wealth of nations" Adam Smith,   This is considered the beginning of modern economic thought.  The book is actually not too hard to read, although it is rather large, and Adam Smith's insights even in 1776 are really quite amazing.  This is a really really good book to read to begin to understand economics.  He lays most of the groundwork that other economic thought is based on.

"Basic economics"  Thomas Sowell,  (Warning, thomas sowell is about as libertarian as they come, and you need to understand his bias when you read his book.)  Another basic overview, where "new ideas" covers the evolution of economic though through time, Basic Economics just covers the basics of how economies work.  The role of a market, how it functions and what it does, and many other things of that nature. 


Those are what I would consider good "intro" books, that I have personally read.  All of them are written for people who know very little about economics, Smith wrote his book before there was even a study of economics.  I would recommend that you go for deeper reading if you read sowell, he has a very obvious bias, but I still feel it should be recommended because he has done probably the best job of any book I have ever read of explaining how a market functions, and why it is so strong at allocating economic resources. 



Moving on to the original post, and the economic simulation.  I think your criticisms of the economic simulation may be based on an un-realistic expectations.  Economies always sprout from microeconomic transactions, because all decisions are made at the micro level.   So, when you see something like "Like over centralized or uneven economic balances"  that result may be unexpected, but that doesn't mean it is wrong.  Many industries are very centralized, such as steel production, and the world is full of uneven economic balances.

I have a few questions about the simulations, did you include anything that would simulate economies of scale, such as fixed vs variable costs?  Did you have anything that simulated dis-economies of scale, such as resource exhaustion or increasing costs of extraction?  These two in combination should produce varying levels of centralization.  Did you have substitution and compliment effects for factors of production?

I do agree about centralization in some way, the reason we were shocked about the simulation result is due to the fact that it actually happening without our predetermination in any way. We might think that with international trading, there should be more specialized cities and even the mega-cities should be able to differentiate with each others, but rather they are more alike and the difference between poor and wealthy are so huge. It's like measuring the height of a group of people and finding only super giants, and a lot of dwarfs. But it may actually be valid result actually, and I do mentioned it in my essay.

For the questions, liquid asset (as wages) and long-term asset(machinery, factories construction and land value) are indeed implemented and calculate with marginal production function. And even there are MRTS rate, when the number of labor isn't enough (I've mentioned it somewhere). They may suffer from increasing, constant or decreasing return to scale. They are varied from industry to industry, even in different combination of labor and capitals in the same industry. They are observed effect due to the use of machinery, the decay of them, even the supply of workers. (And their skill level). And in deed that those capitalized central enterprises do become monopoly in small city as expected. But in mega-city there are many competitive with labors and capital, the results are more complicated.

And by means of additive products and half-products materials, Industries can create a rage of perfect to imperfect substitute goods. (I think I mention this somewhere also). And the complimentary good is most likely be the half-products or materials that often go together in the later production chains. (And we do have shoes, and they are selling as pair, not one by one), also the number of food/drink ratio per person per day are fixed. So they should be as well. Again they behave much like we expected, the price of substitute goods going up and down synchronized. vice versa.

Still we even implemented the price discrimination for shops. so it will be like there are wealthy customers and poor customers, and multiple brands for the same quality products. (But we first think of them, is due to the difficulty of tagging proper prices for products. Because the NPC sellers are not that smart to "smell" the changes in market. And we don't have to check(call) the decision making sub-routine so often.)

[daishi5]

I do agree about centralization in some way, the reason we were shocked about the simulation result is due to the fact that it actually happening without our predetermination in any way. We might think that with international trading, there should be more specialized cities and even the mega-cities should be able to differentiate with each others, but rather they are more alike and the difference between poor and wealthy are so huge. It's like measuring the height of a group of people and finding only super giants, and a lot of dwarfs. But it may actually be valid result actually, and I do mentioned it in my essay.

Interesting, I want to take a stab at what I think might have been one of the causes for this "giants and dwarfs" result.  I am going to guess that you may have not taken into account the limits of transportation for an area, which should greatly limit a cities ability to become wealthy, and thus produce a more smooth mix of economic success.   But, to be clear, transportation limits should cause river cities and harbors to be much wealthier than other cities, which is historically accurate, up until recent history.   I am going to return to my steel example, because we have a steel mill in the area, so it is easy for me to come up with examples.  Steel, as you might guess, is a very capital intensive industry, and tends to centralize due to returns to scale.  The steel mill in the area here spreads over several miles, and I am sure it could be much larger except for one thing, the size of the river.  The biggest limiter to the steel mill is not actually capital, materials, or demand, but the ability of the river to handle traffic over our lock and dam system.   Without that limit, there would be no reason for the steel company to have several other mills throughout the country. 

Did I get my guess right, I am sure there were other factors that led to the "giants and dwarfs" but I am wondering if you had a cost for moving goods in a city that increased as more goods were moved within the city?

And, I think this kind of supports your original point.  When dwarf fortress moves to having a more full economic simulation, small details about limits and efficiencies could lead to some very weird results. 

[counting]

The challenge of this is as you identified a utility system; we'd need a way to determine utility for goods and services in order to determine prices and in turn trade networks and supply and demand.  The biggest question here is how to do so.  Do we assume civilizations have a certain utility for various classes of goods in the context of an overall hierarchy of needs, or do we simulate it on the individual level?  Do we calibrate this by a certain degree of variance, either random or fact-based, to produce more realism (e.g. one civilization values emeralds over diamonds because of religious symbolism or cultural aesthetics)?

Regardless, I do think DF needs more goods to create an economy; adding new animals is a good first step but more variety is needed to really establish plausible trade networks.

DF has lots of items with equivalent functions (tons of different kinds of melee weapons, for instance), and few-to-none of certain types of critical items (no plows).

Much of this is due to the fact that DF is a very detailed warfare simulator, but doesn't require the use of many other kinds of objects. Cups, for instance, have no use since dwarves drink directly from barrels. In fact, dwarves do not use any eating implements of any kind, and the game doesn't even require you to make them to even halfheartedly simulate the need for them.

The game requires no farming implements, and in fact I don't think you can even make any of them.

It requires no medical instruments, other than thread. Somehow dwarven surgeons sew injuries up (a bit anachronistic, IMO, but its Toadys game) despite no one ever having made a needle.

Anyway, no point in carrying on with that rant.

One can hardly blame Toady. I find the "medieval simulation" aspect of the game fascinating, but the majority of users are more interested in the warfare simulation.

As for contributing ideas, the first step would probably be to categorize objects with increasingly detail tags that could go into the raws.

For instance, a sword might have: sword, edged weapon, melee weapon.
A cup might have: container, liquid holder.

If these things were made of gold or crystal, they should get modifiers indicating that they're also luxury items. Presumably those would be in the materials raws or calculated by rarity.

When I saw farming, and I remember when implementing the agriculture industries, and most important factors affect the unit production per land is calculated by the number of time it's watered, the use of fertilizer (they are modifier and industry product from chemistry industries). So they are naturally the easiest labor centralized industry. Since the machinery to transform it into capitalized centralized is very hard to produce (long chain of production, you need a car industry combine heavy machinery, both hard). So they never learned the beauty of mass production agriculture, and happily exploit low wage labors in poor cities in mass. I believe its one of a major failure due to some poor design or tweaking. (Never get the car right somehow, with no reason. but other transportation are fine.)

And sadly we are not able to simulate a medieval or even ancient, pre-classical economy. Since there are no data about what ancient people actual demands (their utility for glass windows? how can you tell, nobles are different with serfs how much) are without the invention of time machine. We can make up the value of those variables, but I doubt they are any accurate. And require way more tweaking I believed. But also you would think less products may be easier to simulate, but I think it's the depth of simulation are causing more trouble than the width of simulations. Setting up a bunch of similar and less perfect substituent goods are easy (just using more memory and columns). But a mechanism of detail weaving into interactive components is difficult.

And I suggested that why not embedded gems into weapons or armors to make them luxury. Or even cups. Although the fey mood legendary finest goods, seems a kind of them, but they are hard to mass produce. (Modern luxuries are also products of factories often than custom made)

[counting]

I do agree about centralization in some way, the reason we were shocked about the simulation result is due to the fact that it actually happening without our predetermination in any way. We might think that with international trading, there should be more specialized cities and even the mega-cities should be able to differentiate with each others, but rather they are more alike and the difference between poor and wealthy are so huge. It's like measuring the height of a group of people and finding only super giants, and a lot of dwarfs. But it may actually be valid result actually, and I do mentioned it in my essay.

Interesting, I want to take a stab at what I think might have been one of the causes for this "giants and dwarfs" result.  I am going to guess that you may have not taken into account the limits of transportation for an area, which should greatly limit a cities ability to become wealthy, and thus produce a more smooth mix of economic success.   But, to be clear, transportation limits should cause river cities and harbors to be much wealthier than other cities, which is historically accurate, up until recent history.   I am going to return to my steel example, because we have a steel mill in the area, so it is easy for me to come up with examples.  Steel, as you might guess, is a very capital intensive industry, and tends to centralize due to returns to scale.  The steel mill in the area here spreads over several miles, and I am sure it could be much larger except for one thing, the size of the river.  The biggest limiter to the steel mill is not actually capital, materials, or demand, but the ability of the river to handle traffic over our lock and dam system.   Without that limit, there would be no reason for the steel company to have several other mills throughout the country. 

Did I get my guess right, I am sure there were other factors that led to the "giants and dwarfs" but I am wondering if you had a cost for moving goods in a city that increased as more goods were moved within the city?

And, I think this kind of supports your original point.  When dwarf fortress moves to having a more full economic simulation, small details about limits and efficiencies could lead to some very weird results.

I have a question about your second part question, why should there be increased cost when a city is huge? Traffic? We do not simulate that it's way too detailed. Competitions? Yes they will compete over limited capitals and labors. But with skilled workers and a healthy money flow especially in mega-cities, they are not problems, and the factories is often locate in next tiles or in the cities tiles themselves. So very short term transportation are not major factors. Or is it the lands? The reason why industries are located not in the city itself but the neighboring tile (there are a lot of empty land between each cities, it's a big empty simulation world actually), mostly due to the rents, and also the crowd residential buildings in the cities themselves. (A lot of old initial industrial land in cities are transferring into residential over time, due to the relative proximity of shops and people are generally very wealthy, easy to get loans, hence afford the high prices in cities)

Also about the cost of transportation, are you referring the accessibility of cars and gasoline? (Yes, they need fuel, and surprisingly those export oils are not that wealthy at all, I guess foreign capital assistance or political decisions or the oil crises never happens to them, and we do NOT implement WAR at all.)

Still, I wonder why a limitation about transportation can force out the industry to other cities. It's more than likely a separate competitive enterprise will locate itself again near the mega-city (if demand are not met), but move to a different cities with longer transportation supply chain (costs), less access to capitals. Although not optimized with 2 capital centralized industries in a region, still more efficient than in completely separate regions. Or maybe there is something neglected in the banking system, or international exchange rate.

P.S The implementation of monetary market are not that fully or efficient as they should be, since they have indeed the rocket science in economics world, like derivatives for options and futures. The theory and model about them are not tested or fully developed and mostly failure to predict in any forms, but they drive a large portion of the money market, a lot of investment funds and others rely on those tools. And the fact that recent economic crises spread so quickly and globally has much to do with the success of global money market. They are not always a good factors.

[counting]

King's royal bank and royal market

NOTICE: This is only a early draft.

There is a somewhat easy way to deal with the complexity of money in a currency driven simulation. That is to setup an official bank, and official market in a group of economic entities first.

We started with the official market. In my previous post, I mentioned that it will be difficult to finding suitable goods for a city by means of only sending small bands of caravans several times a year. And we used inter-city enterprises to help finding them. Although they were excluded eventually, the idea of a regional, and international auction market was used to replace them.

They are none-profitable organizations (special zones), with buildings belong to the city government. And their functions is only for industries owner to bring their products in a central locations, so it's more likely to find the match with minimum traveling costs. It will consist of more than one trading post, shops, and possible residents(inn) for travelers.

Also we assigned the markets in top most wealthiest cities as 'regional market centers'. So the owners only have to travel to the city market first (buying and loading goods), then travel to each of the regional market after their surround neighbors' markets. Hence greatly reduce the time to search for suitable goods. Once they find the matching targets, then they will start direct trading with the matching city itself. (Instead of sending general purpose caravans, it will send specialized caravans to exchange those specific goods)

Side note: As a result the most productive and high level enterprises choose to setup nearby regional market to increase the chance of gathering materials more easily. Although the process seems convenient, but later may cause high differences in wealth between major cities and poor ones.

But provide enough difference between regions and higher chance that a region containing more than one cities. The cities in a region automatically become a self sustain economic unit, better than a city along. Although it still felt like planned economic system, but in history, there are many cases that these kind of regional trade fairs existed since the beginning and feels much like a market's market in a way. (We eventually add a world's level market, but it has little effect on increasing the chance of finding goods, And by forcing the owner travel to the central location of the world, it increases the traveling costs rather than decreases)

I imagined that the market can be a specialized zone, where many trading posts can be setup within. (Or we can have a comeback of the shops). And also the market is one of the limit areas where dwarfs can use currency or drop it. I'll explain the reason in 'king's royal bank'. But it should help the excessive coins problem a little bit as a side effect.

The other problem about these system is caravans will most likely not regularly visit to a certain fortress any more.It's very likely before you receive one, you need to sent out your own caravan first to the nearby major city's market in order to display your demands and supplies. Big problem in small remote starting fortress, but a solution may be the major cities' caravans should behave differently and send more of their caravans to all their regional markets before other long-distance regional ones. Hence the poor little frontier fortress will at least been taking cared by their regional rulers.

[sockless]

Any link to this cool sounding simulation you made?

[counting]

Any link to this cool sounding simulation you made?

First, The lab simulation project does not open for public, and it's not a game like DF, an I am still writing the thesis. However, if you are hard core old school players (who can read Chinese) and remember MUD, and interested in developing simulation, the predecessor of the simulation is in fact a game, and the open sourced codes and library, the one I used to adapt are based on MUDOS (no longer update anymore), modified first into this with it's own library, and a dedicated player/wizard who still operate (not much since players aren't that many anymore) the MUD game, and then I modified it into pure economic simulations for research purpose. The MUD engine serves mostly mere for the purpose of display and feedback interface, running on a separate server. And the roles of agents (owners, and the original roles for players) are modified into a cloud computing networks with slave client programs connected via LAN network.

Warning, the open sourced are not even alpha, and any bugs and damages it has, I can not help everyone who has questions about it (I can explain it). but if you are interested in playing the game, I do recommended you to try the MUD game (again provided you can read Chinese), but I am no longer a wizard there.

[counting]

I want to set a lighter tone for the "seriousness" of this thread, and DF is about fun, so I decide to take the view of imagining if you are a dwarf in the economic dwarf fortress world, what will be like? (Maybe later I'll move it to the story board)

NOTICE : still developing, and unfinished

In a village many many years ago, once lived dozens of hard working people dwarfs who settle in a hostile land, surrounded with unknown wild, that they know little about.

For years, the villagers struggled to survive. They have ales, and animals, and dirt under their feet. The mountains surrounds them with little trees, a river running through. They hardly own anything but their clothing, and simple tools on the hands. So they formed a society based on sharing resources with everyone like a community farm, so they can overcome the hardship, and survived.

They started charging the earth digging into the earth, chopping down tree, planning seeds on the surface, they don't have a roof on their head, and they slept on the ground, eating while idling standing and working. All and all life is FUN in the village.

The materials they dug up, the log they chopped down, and the plants they collected are scattered all over the land, and the journey for retrieving them become harder and harder, even for a hardy dwarf. And the village elders decided that they should setup a rule and place, so everyone can gather the materials they collected to the common place they assigned. Many lazy hard working dwarfs started picking up anything they can get, following the rule and hauling it.

While digging down the earth, they found that there are new materials - rocks, stones, beneath the dirt, harder than wood, and they found all kinds of them, some of them are even shinny under the sun unlike the others, they don't know what they are, but they are all excited about the shinny things.

The villagers dug out more and more space, underground, so they decided to move into the caves and longer need to eat an sleep under the sun. And they moved their stockpiles inside too. Although they share everything with each other, so there is no theft among them. However they consider the act for everyone other than themselves taking their precious community possession a act of evil. So when the stockpiles are moved inside, they all felt a relief and much safer. They changing their gather ground to near the entrance of the caves, so their pet animals (dogs, cats) can guard there. 

After they moved into the cave, one day an elder who was exhausted and unhappy, complaining he always has to sleep on the ground, so he decided that there must be a better way. He pulled out the wisdom deities gifted him, and told everyone that they should have a new industry - using a building called workshop. And it should make something called bed, constructed using the logs they chopped down from the trees, so he everyone no longer need to sleep on the floor.

They opened more workshops, they carved stones into tables and chairs, so they can sit down to eat, and relax. They made doors, so they can put them on the entrance and the bedrooms where they put bed in them. Although they do not value the concept of privacy, and sharing bed were common, they still build the doors with build-in locks, so the hostile eyes lurking in the dark, which they have not yet known what they are and belonged to, can be kept out the caves when necessary.

But the evil lurking in the dark didn't come as expected, but friendly came. A small bands of caravan arrive outside the village. Although they desperately needed more resources, and suffered from food and wood shortages, there was no place for the caravan to stay. So the caravan came and gone. The elders gathered together to discuss the gravity of the situation and pull out schematics, then decided that a trade depot would be constructed near the warehouse area they put the stockpiles. Next time, when the caravan came they would have a place to stay, and think of something for them to bargain with.

-- PLACEHOLDER --- The story of immigrants

-- PLACEHOLDER --- The story of making ales, and farmings, butchering, and mugs?

NOTES: I started to think that DF can add tool making industries as machinery tools in my simulation, and using as capital investments and accelerate or increase efficiency of a workshop (so we may have a sequence of workshops more like factory lines, or at least increase the efficiency of manpower dwarfpower, 1 dwarf can have 2 times productivity or more)

-- PLACEHOLDER --- The story of coal and metal working

Finally the caravan came back and this time, Urist the elder was appointed as the broker for the village. On his idling free time outside the hazardous working, like all the other dwarfs, he enjoy a mysterious form of ritual to honoring Deity-'T', which involves running around doing nonsense, jumping-up-and-down-back-and-forth dancing like a male deer in mating season. Urist called it Dwarf-Buck dancing. And he discovered that magically he needed exactly same amount of energy to do a dwarfbuck dance. More amazingly is that when he pick a field of prickle berry it costs exactly twice as much energy, and when he chopping down a tree it costs exactly 3 times.

So Urist started bargain with these tall but oddly looking stranger. Although he couldn't tell where that oddly feeling came from, or perhaps it's their little greedy eyes. Urist started by ordering all the mugs the villagers made to be brought in and all the fine meals they can spare for the guests.


-- PLACEHOLDER --- The story of barter trading

-- PLACEHOLDER --- The story of weapon making

-- PLACEHOLDER --- The story of luxury and gems

-- PLACEHOLDER --- The story of babies

... beginning of coins and currency started here ...

-- PLACEHOLDER ---

One day a village elder entered into fey moods, went into a workshop and start crafting some metal crafts with the images of himself on them. They seems worthless, and have no function at all, so the villagers hauled them somewhere in a cave, and forgot about them for a long time.

[counting]

Just want to note quickly about some basic concept that can be misleading when talking about money.

1. Money is a tool to measure wealth, BUT not the ONLY kind you can use. And if a tool is used to measure wealth, does NOT automatically make them money. So a dwarfbuck although used as a measuring tool, doesn't really qualified as currency, it's measuring tool at best.

2. The unit of money can be used as a measurement, BUT also not the ONLY way. You can measure your wealth however you want. And it's different from person to person of subjective views. You can think you are the wealthiest person in the world, but money is used as a fair measurement, so people can agree with each other. (the meaning of medium of exchange)

3. The use of paper money doesn't mean it's a fiat money. You can image a system where people put labels on everything. Going to the market and instead of bartering with real commodities, but using the labels which represented them only. After that people exchange the real things. Paper are easier to carry and you won't lose your merchandizes if you are robbed on the way to the market. But there is nothing in here that makes these paper labels fiat money. So if a dwarfbuck base vale number is attached on a coin, it doesn't makes they fiat money or even the coinage at all. But in fact still commodity money.

And although there are many definition about money, and their properties, but the real money through out history are all evolved over time, and doesn't satisfied all the definition and properties. They are more like observations than definitions. The "moneyness" in different form of money is varied.

Hopefully this can clear some more misconceptions about money being measuring tools and measurements.

[Maklak]

@counting:

Interesting thread, and good job on explaining how banks legally conuterfeit money. For anyone interested I recommend film "Money as Debt" http://www.youtube.com/watch?v=Dc3sKwwAaCU and this short story: http://www.relfe.com/plus_5_.html

Oh, and that economic simulation is a nice idea for a LARP, but what exactly are "hugs" and "kisses"? Are they pieces of chocolate? (That is, did the professor, or king or whatever bring a lot of bars of chocolate and partition them among the winners at the end?) How many turns does this last? (There need to be turns and not real time, as production functions are per unit of time)

[daishi5]

I do agree about centralization in some way, the reason we were shocked about the simulation result is due to the fact that it actually happening without our predetermination in any way. We might think that with international trading, there should be more specialized cities and even the mega-cities should be able to differentiate with each others, but rather they are more alike and the difference between poor and wealthy are so huge. It's like measuring the height of a group of people and finding only super giants, and a lot of dwarfs. But it may actually be valid result actually, and I do mentioned it in my essay.

Interesting, I want to take a stab at what I think might have been one of the causes for this "giants and dwarfs" result.  I am going to guess that you may have not taken into account the limits of transportation for an area, which should greatly limit a cities ability to become wealthy, and thus produce a more smooth mix of economic success.   But, to be clear, transportation limits should cause river cities and harbors to be much wealthier than other cities, which is historically accurate, up until recent history.   I am going to return to my steel example, because we have a steel mill in the area, so it is easy for me to come up with examples.  Steel, as you might guess, is a very capital intensive industry, and tends to centralize due to returns to scale.  The steel mill in the area here spreads over several miles, and I am sure it could be much larger except for one thing, the size of the river.  The biggest limiter to the steel mill is not actually capital, materials, or demand, but the ability of the river to handle traffic over our lock and dam system.   Without that limit, there would be no reason for the steel company to have several other mills throughout the country. 

Did I get my guess right, I am sure there were other factors that led to the "giants and dwarfs" but I am wondering if you had a cost for moving goods in a city that increased as more goods were moved within the city?

And, I think this kind of supports your original point.  When dwarf fortress moves to having a more full economic simulation, small details about limits and efficiencies could lead to some very weird results.

I have a question about your second part question, why should there be increased cost when a city is huge? Traffic? We do not simulate that it's way too detailed. Competitions? Yes they will compete over limited capitals and labors. But with skilled workers and a healthy money flow especially in mega-cities, they are not problems, and the factories is often locate in next tiles or in the cities tiles themselves. So very short term transportation are not major factors. Or is it the lands? The reason why industries are located not in the city itself but the neighboring tile (there are a lot of empty land between each cities, it's a big empty simulation world actually), mostly due to the rents, and also the crowd residential buildings in the cities themselves. (A lot of old initial industrial land in cities are transferring into residential over time, due to the relative proximity of shops and people are generally very wealthy, easy to get loans, hence afford the high prices in cities)

Also about the cost of transportation, are you referring the accessibility of cars and gasoline? (Yes, they need fuel, and surprisingly those export oils are not that wealthy at all, I guess foreign capital assistance or political decisions or the oil crises never happens to them, and we do NOT implement WAR at all.)

Still, I wonder why a limitation about transportation can force out the industry to other cities. It's more than likely a separate competitive enterprise will locate itself again near the mega-city (if demand are not met), but move to a different cities with longer transportation supply chain (costs), less access to capitals. Although not optimized with 2 capital centralized industries in a region, still more efficient than in completely separate regions. Or maybe there is something neglected in the banking system, or international exchange rate.

P.S The implementation of monetary market are not that fully or efficient as they should be, since they have indeed the rocket science in economics world, like derivatives for options and futures. The theory and model about them are not tested or fully developed and mostly failure to predict in any forms, but they drive a large portion of the money market, a lot of investment funds and others rely on those tools. And the fact that recent economic crises spread so quickly and globally has much to do with the success of global money market. They are not always a good factors.

Think about it in terms of a port, if there is only one ship sailing in a port, it only has to avoid fixed obstacles.  Each ship added to the harbor adds one more obstacle, and because each ship must avoid and be avoided by every other ship, every extra ship increases the difficulty of sailing in the harbor at an increasing rate. 

Also, in the time periods before the locamotive, boats were the only really efficient way to move goods, the next most efficient way was to dig a canal, which is just a really difficult way of gaining boat or barge access. 

[counting]

A few reading suggestions in english:  "New ideas from dead economists: an introduction to modern economic thought" by Todd Buchholz, this is a nice light read that basically attempts to relate the development of economic theory to modern events.  Nothing very in depth, but if you don't know anything about the history of economics, this is good way to get a very light overview.

"The wealth of nations" Adam Smith,   This is considered the beginning of modern economic thought.  The book is actually not too hard to read, although it is rather large, and Adam Smith's insights even in 1776 are really quite amazing.  This is a really really good book to read to begin to understand economics.  He lays most of the groundwork that other economic thought is based on.

"Basic economics"  Thomas Sowell,  (Warning, thomas sowell is about as libertarian as they come, and you need to understand his bias when you read his book.)  Another basic overview, where "new ideas" covers the evolution of economic though through time, Basic Economics just covers the basics of how economies work.  The role of a market, how it functions and what it does, and many other things of that nature. 


Those are what I would consider good "intro" books, that I have personally read.  All of them are written for people who know very little about economics, Smith wrote his book before there was even a study of economics.  I would recommend that you go for deeper reading if you read sowell, he has a very obvious bias, but I still feel it should be recommended because he has done probably the best job of any book I have ever read of explaining how a market functions, and why it is so strong at allocating economic resources. 



Moving on to the original post, and the economic simulation.  I think your criticisms of the economic simulation may be based on an un-realistic expectations.  Economies always sprout from microeconomic transactions, because all decisions are made at the micro level.   So, when you see something like "Like over centralized or uneven economic balances"  that result may be unexpected, but that doesn't mean it is wrong.  Many industries are very centralized, such as steel production, and the world is full of uneven economic balances.

I have a few questions about the simulations, did you include anything that would simulate economies of scale, such as fixed vs variable costs?  Did you have anything that simulated dis-economies of scale, such as resource exhaustion or increasing costs of extraction?  These two in combination should produce varying levels of centralization.  Did you have substitution and compliment effects for factors of production?

About the book list in English. I do however owned a book, not as an introduction but rather talked about the mighty "invisible hands". Not so tough to read (for my standard I think @@), but giving a lot of reviews of some classic phenomena in economics that we thought we understand, and their recent development. Especially about the origin of money and their roles on affecting human behaviors in economic activities through out history. 

The Invisible Hand in Economics: How Economists Explain Unintended Social Consequences
by N. Emrah Aydinona, 2008

And I just finished reading a recent paper, which experiment on how people react when they saw a money, or quasi-money being torn up or cut. And using MRI to actually measure the changes with varies test subjects from someone who has no concept of them to economic professors and students (The researchers are indeed very brave). And it tells a interesting aspect that people do consider and associate "the fiat money" with real emotions and will provoke real response. Hence when people grow up we are actually learning the concept of money and combine it with stimulation provide by the pleasure or pains it caused. So in a sense, modern people DO perceive the green dollars differently. I would like to say that the piece of paper that supposed means nothings are indeed valuable by itself. (The absolutely fun part is that when using fake dollars to test the subjects. Even when we know it's fake, we still associate it with money, and provoke reactions and feelings!)