A little gameconomics

Telecanter wants a simple system for abstracting sea trade.* Alas, I can’t do simple today. Much as I would love to answer this with a trading mishaps table, I think the way to get to a workable system is to start with the desired outcome and work back from there. I also can’t provide a system accurate to the silver piece straight off because I don’t know the particular rules of his game world. But if I were to build one, I would base it on these principles:

For trade to be worthwhile, you have to be able to hit a sweet spot where profit outweighs risk. High risk requires high profit. As risk goes down, so can profit, making more trades and types of goods feasible (and forecasting becomes more reliable, too, so you can choose to take smarter risks).

So your rate of risk pretty much tells you what the rate of profit should be – and it’s all expressed purely in terms of money potentially gained and lost. Why can we say that, and discount risks to persons, morals, societies and immortal souls? Because we assume going in that there is a class of traders willing to put those things on the line, and if we try to add those non-economic considerations to the economic model, we run the risk of someone (the PCs, obviously), privately discounting them and taking over the world (cf. the history of capitalist colonialism).

The really dangerous end of trade for your gameworld is the simplest one: intra-town or village-to-village peddling with no significant risks. You don’t want to put a crock in your game, where players can generate infinite money through grinding out some simple, low-risk trick. Here rate of profit must be fixed and low, and it’s all about scale: the amount one man can carry of basic goods (clothing, prepared foods, simple tools) should be enough to support him as a vagrant peddler/unskilled laborer, but not much more. A shopowner works at a bigger scale but the same rate of investment return, say 2-5% profit over total costs (goods + labor + building rent or whatever) per year.

Adding risk of any kind increases the allowable return proportionally. If there’s a 20% chance of being robbed by bandits then the profit rate has to jump up by 20% too – but it needn’t increase by more than that, because in general people are bad at calculating and respecting repetitive risk: they’ll be super happy about all the money they made by avoiding bandits twice (25% over base each trade!) and won’t think about the chances of avoiding them a third time.**

Sea trade has a massive extra risk safety valve built in: the capital cost of a ship. This adds a risk to every voyage that (historically) is often many times the cost of the goods carried. Just like that, allowable return jumps up (which is useful, because so does the scale of operation: a man might carry 100 lbs of goods on a handcart. A camel could carry half a ton. A big merchant ship might carry a thousand tons). If there’s a 10% chance of losing your ship and we maintain 5% overall “guaranteed” profit (ie if you kept playing this game with infinite ships over infinite time you’d make 5% a year) then that 10% of capital can be added to the profit potential of a single one-year voyage without breaking the economy. So if a new ship costs 10,000gp and the total cost of doing business (ie goods + crew wages + port fees + bribes) is 1000gp then the sale price of the goods should be 2100gp – over 100% “apparent” profit! That makes Sinbad type adventures highly attractive for individual, risk-seeking entrepreneurs while explaining why farmers don’t collectively abandon their crops for the high seas: if you bet the farm, you have to be ready for the possibility that you’ll lose it.

Also, the cost of ships adds a handy bar to participation in the profitable trades; what lords and kings can get away with matters less to your gameworld than what everyone could get away with: return from a warfleet can be basically uncontrolled, because the only people it really affects is a small class that’s eager to spend the profits on war.

The trick, then, is not to exempt the PCs from facing this bar: they have to be responsible for the economic risks they take and they have to inhabit the social rank their risk level demands (are your murderhobos sailing around in a king’s ransom? Then they can expect to face princely threats). There’s a hundred ways to do this, as long as you don’t forget them, from Jabba’s loan-sharking to law enforcement (in the case of those who steal their ships), to corrupt port officials to wars and unpredictably-changing trade agreements, before you even get to the more familiar fantasy seafaring threats of storms, gyres and krakens. Even if you’ve given your PCs a ship free and clear at the outset (because you weren’t thinking about the implications), if those PCs want to make more out of it than they would by just selling it, they’ll have to figure on replacing it one day. And they should consider the potentially devastating consequences of surviving the ship’s loss: was it rented/on loan? Then debt-slavery beckons. Did it have NPC crewmen? Those guys had families. What kind of reputation does a captain-for-hire get, from having his last gig literally sink? Don’t neglect non-capitalist arrangements – they almost always cost more overall, socially and communicably, than a simple cash-on-delivery deal. How do you face the chief who gifted you your knarr? Especially when you agreed to take his son on as water-carrier? Where were you when it all went wrong? The Cannibal Islands? The Cursed Latitudes? How will people react to you if you somehow make it back, in plump good health?

There are also possible outcomes other than success or catastrophe. Goods can spoil en route, be stolen or confiscated or jettisoned in a storm, eliminating profit but maintaining viability (or incurring debts). Historically, warehousing has been one of the decisive factors in the success of large-scale enterprises – if you can wait for the right market rate before you release your silks, nutmeg or wheat, you can dramatically change your profitability. The speed of trade is also critical – time is money: if you can make 5% a week, that’s wildly different from 5% a year. Sea trade adds unpredictability here too: Arab traders out of Cairo might see a roundtrip to Naples take 6 weeks or, rarely, up to a year, depending on weather and other conditions.

So what’s a good rate of risk for your game? Fundamentally that depends on how many trades you want the PCs to think about doing: are you playing Traveller, where it’s a way of life for millions of characters, or Jason and the Argonauts, where the potential profits are political or even metaphysical?***

The 50% or 66% or 84% chances of not coming back that Telecanter mentions are pretty rare historically – it’s the stuff of legendary quests like Magellan’s or Da Gama’s voyages, where a whole society makes a huge bet, hoping to make so much profit they can take over next door’s kingdom – or of massive desperation, like Somali piracy. Starting at that end of the curve sounds like complicated fun: there’s a good chance the PCs will retire after one job, so the job should be epic. And profits like that bring multiple risks, even after the voyage is over; everyone from cutpurses to bandits to state police want a slice: it takes strength to hang onto treasure (and might make for an interesting inverse campaign; you start with the goods and have to act smart to keep them).

On the other hand, if your PCs are tramp-trading around, waiting for a better job, a la Traveller, then something like a 10-20% chance of an adventure hook per voyage (you’re not going to sink them off-screen, right? When they could be forced into an unknown port or driven onto a mysterious island or made to make hard moral choices by pirates?) might make sense – then the trading is continuity, the returns are a sub-game, and you can keep ’em hungry by making ’em replace their ship bit by bit (broken masts or star-drives, drunk or fanatical mates), so they stay dreaming of retirement and that island in the sun, rather than playing Deckchairs & Cocktails.

I don’t have the time right now, alas, to write a nicely-balanced table that marries profit rates to all the hazards listed above, but I’d use that 5%-after-all-costs baseline to set market rates and assume that if a given commodity is available locally it will generally be cheaper to get it locally (with the proviso that 1 mile on roads might be equivalent to 100 miles by sea for some goods). Exceptions to the 5% rule apply where monopolies, rarity and other exotica come into play: i.e. when the PCs get involved. 😉 But then, trading in exotica should be a risky, tense, thoughtful, strategic enough game that the PCs won’t miss the dungeon. And if they can see past the economics of capital costs and risk analysis and refuse to stick their necks out for a piffling 5%, why there are plenty of ways they can voluntarily increase their risks in order to jack up their potential reward…

*I have to offer my profound apologies to the ACKS guys: I’ve just been too busy to keep up with their discussion, in order to make a meaningful contribution to what seems to me an extremely worthy product. Right now I can invest a couple of hours a week in this blog; anything more threatens my job hunting, work, sanity and marriage.
**Gold rushes and piracy invert the normal rationality of trade: there people bet on a eucatastrophe. The rate of profit is generally horribly negative (the average career of a “golden age” pirate captain was less than 4 years, from first running up the black flag to swinging at Tyburn), but there’s that tiny individual chance of never having to work again.
*** Historically accurate overall trade risks for, say, the medieval Mediterranean, are hard to calculate (and always were, even for merchants at the time) and of questionable value for your campaign, whatever it is. One day, I promise, I’ll crunch those numbers, and when I do it will be by looking at the rates of profit folks hoped to make from single voyages. Because they operated in competitive environments and we know that, with only a very few exceptions, any merchant family could be ruined by the loss of its ships and agents two years running.