Undeveloped Goods Prices (trade)

Goods in the trade system are divided into two categories: those resources that possess a natural value at the moment they are found or uncovered and those resources that have value only after processing. This page will concern itself with pricing natural and undeveloped goods.

Undeveloped goods include materials that are dug up, caught, harvested from fields, chopped down or picked from trees. In our tutorial, we are counting 'bricks' as a raw material because our use of the term is meant to include stone; however, a more proper and detailed system would have separate references for stone and count bricks as manufactured products made from clay and other materials.

Similarly, while it would seem that animals are 'naturally' born and therefore collected as undeveloped goods, the fact is that before an animal can become valuable it must be fed for periods up to several years - the cost of this feed represents a form of 'processing' that we are not taking account for in this system at this time. Later, I will be describing how to make these sorts of distinctions - but for now, our primary goal is to create a simple system that accounts for most things the players will want to buy. We can add nuance later.

Some readers will be familiar with the post on my blog describing my trade system in 2010. It should be clear that I have made adjustments to the details described on that post in the last year - changing the overall behaviour of my trade prices. While much of what I described 6 years ago still reflects things I do today, my old method should not be confused with the method described here.

Also, the details below will be presented as calculations done in Microsoft Excel. While calculations for the system can be done with pencil and paper, the reader will discover that once ten or more markets have been added to the system that working without a computer calculating tool will quickly make the system impractical. My use of excel will be simple and I shall try to make it as easy to understand as possible for those who have never taken the plunge and used the system.

Gold Standard

Before beginning this section, the reader should be sure to be familiar with details about determining quantity of goods, locating references and transport.

We can begin to build prices for any other unprocessed good by first addressing gold. Gold is a convenient standard because, most importantly, it occurs naturally as nuggets or flakes (placer deposits) and as such can be easily hammered into shapes. The first tokens representing currency were made of gold; it is rare, measurable, consistent (unlike a system based upon, say, labour or grain production) and is therefore practical for our purposes.

Because gold is the standard measure, we must ensure that the value of gold from place to place differs only slightly - otherwise, the effect on the price of gold will cause all other prices in the system to fluctuate wildly (and make the availability of gold the only meaningful factor in determining those prices). My most recent method for doing this has been to make the price of gold 100 times less flexible than other prices in the system, as shall be seen.

Let's begin with the value of gold in one of our three markets: Marzarbol. The reader will remember that there are 1.2 references for gold in Marzarbol after transport adjustments. The total references in our entire system equals 2 and the total production of gold (using my number of 1320 oz. per reference) equals 2,640 ounces. I suggest creating an excel page that looks like this:

Each box shown below contains exactly what is shown except for the one that is highlighted, D4. By typing in "=1320*C4" (as shown on the function line, above), it calculates the value in C4 x 1320.

Next, we will want to determine how much physical gold is flowing around Marzarbol. To do this, we divide the production by the total number of references and multiply that by the local references. In excel, that looks like this:

Here I will skip two columns that will become important with other goods: the world value of that product in gold and the local value of that product. Where gold is concerned, the world value is equal to the total production, while local value is equal to the physical gold in the area. It won't be relevant at this stage, but keep in mind that one reference is always worth that reference as it applies to gold, so that a reference of sheep, timber or fish equals in value a reference to gold.

As well, the value in gold ounces per local availability always equals 1 where it comes to gold: that is, gold = gold. To show these aspects (and I understand they are difficult to grasp at this time - it will become more clear as we move to other goods), I will include this table update:

Now, before we can calculate how much an ounce of gold is in coins, we will need an adjustment for the relative rarity of gold in the market as compared to other markets. This is the adjustment for rarity: the total number of references divided by local references, multiplied by 0.02, plus 1, as shown:

Note that the calculation must be made inside brackets before the 1 is added. This formula creates a multiplier that is always above the original price for gold. Why 0.02 as a controlled variable in the equation? I tried several alternatives and settled on it as a reasonable control adjustment; 0.01 offered too little variance and 0.03 too much. Call it an approximation based on experience. If it seems that a rarity adjustment of 1.03 is too little, remember that Marzarbol has more than half the 'world's gold' at this point in the system. It is where the gold comes from, so we want to represent that by making as small an adjustment to the price as possible. Compare this with the Heap in the Hills, which has only 0.3 references:

Good, let's go back to Marzarbol and continue. My personal preference for pricing things is to convert everything into copper pieces. When I create a price table for the players, I convert copper into more convenient gold and silver (and we will eventually get to this process), but for base calculations, using the smallest coin is easiest. It is universal to every product and covers the lowest price as well as the highest, with a minimum of fractions. It does not actually matter what the silver or copper coin is made from: we can always assume that the proportion of metals in each coin, along with the exact weight of metal, matches up to the value of the coin in the system.

The number of copper coins per ounce of gold equals the amount of gold found in a given gold coin (as I said, one ounce of gold in my world is enough to create 8.715 gold coins), times the number of copper pieces per gold coin (in my world, 192), times the adjustment for rarity. For Marzarbol, this is 1 x 8.715 x 192 x 1.03, or expressed in excel:

Congratulations. We now have a total number of copper coins that is needed to buy 1 ounce of gold in our system in Marzarbol. While this seems like a very long process, in fact once the numbers are put together in excel, calculating them for a different market is near-instantaneous. Let's move on to other products.

Footnote: in a small system, like this one, where every market is relatively close to the source for gold, it is probable that the value of gold will shift only slightly from place to place, as shown above. However, as the system grows larger (and distances between markets and gold production increases), the potential for gold to fluctuate a great deal can threaten the system. What happens is that gold becomes the only meaningful factor in determining prices from market to market. My answer to this has been to stabilize the price of gold by reducing the modifier for rarity by 100 times, from 0.02 to .0002. As I say, in a very large system, adjustments this tiny can still massively affect the amount of gold available in a given market. I suggest that users pay attention to the numbers and - after becoming familiar with the system - consider making very slight adjustments to the value of gold.

Contrariwise, I strongly urge the reader not to make similar adjustments to other products; these products do not affect the value of every other thing in the system and therefore can exist in isolation to those other things.  As well, strong fluctuations in the presence of these things will create scarcity and game drama. These aspects should not be smoothed out in the way that the price of gold should be.

Other Undeveloped Goods

The process for calculating the price of undeveloped goods other than gold is nearly the same, except that now the value of these products is measured against the gold standard. Like before, I will go through the process of creating prices for these products as patiently as I have for gold.

For a first undeveloped good, let's start with ore. From the quantity of goods page, we can use 2000 tons of ore per reference. Assume that most of this ore is iron, since that is the most useful ore and by far the least valuable. Other ores, like copper or tin, will be much more valuable - but these can be added to the system later as we wish. For now we will just think of them as "ore." Marzarbol has 1.2 references in ore.

I would recommend setting up your excel page like the above. Note that I have multiplied the number of tons of ore per reference by 2000, in order to produce a number of pounds. Like using copper pieces over gold pieces, it is easier to use smaller units instead of larger ones. Of course, if the reader prefers metric, that's always a choice - but personally I can't reconcile metric with a fantasy campaign. It sounds too modern. Oh, and do forgive me; I am so used to describing references to four significant digits that I've done so here without thinking about it.

So far, so good. This looks just like the gold calculation. We can move forward to local availability:

Marzarbol market shifts 60% of the closed system's ore (1.2 out of 2.0). I want to be sure that those who don't understand excel all that well can follow along. Let's move on.

The value of ore in terms of gold ounces is a little tricky. Whereas 2 references of ore ARE the same value as 2 references of gold, remember that local gold has been adjusted for rarity. That means we want to multiply the total references of ore in the world against the value of gold (in c.p.) in Marzarbol ~ since this is the point of view we have right now. "Value" is mutable, depending on one's location ~ and we want our trade system to reflect this. The calculation is very simple:

** Sorry, there is an error in the above table. The cell H7 should read "world value (c.p./oz. gold). I am sorry about any confusion this has caused and will correct the images as soon as I have the opportunity.

For those unfamiliar with this aspect of excel, the dollar signs in $K$4 are there so that if the cell is copied, the cell referenced is not. This will be important later; when we fill out our table with other goods, we will want that calculation not to change.

Note how much more valuable 2 adjusted references of ore are compared with gold above. This is what I mean by a very small adjustment in the rarity of gold having large effects upon the rest of the system. We want to always keep an eye on this, as it can threaten to compromise the whole system.

This brings us to the local value of those 4.8 million lbs. of ore noted in cell G8. While local value of gold was equal to the local availability of same, the same is not true of ore. To get our value, we want to divide the local references by total references for the product and multiply that number against the world value (in Marzarbol):

This is simple algebra. The local value is 60% of the world's value because Marzarbol has control over 60% of the world's iron (in our closed system). Now we want a value for exactly how much a physical pound of ore is in ounces of gold. Since there are so many more pounds of ore than ounces of gold in the system, we can assume this will be a very small number. We get it by dividing the number of local ounces (I8) by the total availability of ore (G8):

There, we see that 1 lb. of ore = 0.0004 oz. of gold (to emphasize, in Marzarbol). From here we simply repeat the steps we've already used for gold: adjusting first for rarity and then multiplying 0.0004 by the number of gold coins in an ounce, the number of copper coins in a gold coin and that rarity adjustment:

Now we have built a template for all the undeveloped goods on our list. All we have to do is repeat the line containing ore and adjust the numbers for how many local references there are, how many total references (we made everything equal to 2 but the user can play with that and see how the other numbers change) and how much production we assign per reference. Everything else is an exact repeat of the calculations we've already created (being sure that H8's $-sign attribution to K4 is repeated on every line).

Here is the list that fits with numbers I've already given in the tutorial:

On the whole, apart from seeing for the first time the comparison between the amount of goods and the actual cost of things, there are no surprises here. Where the total number of references is so small, there isn't much room for the sort of rarity we will eventually want in place. We will address this later, when we are ready to expand the system in various ways. For the present, the important thing is to build the tools that we will need - this table and the next one, which we will use to determine the price of manufactured goods.

See this link for a break down of the work we've done so far.

See Trade System