# Economy of advanced interstellar society

I am trying to create a game, where you take role of CEO of huge company in future interstellar society. All basic needs of humans like food, accomodation, trasport, healthcare, education are satisfied by default. But there are various luxury goods that not every human can afford for example some gastronomic specialities, private cars, mansions etc. You as a CEO can produce this kind of goods and try to sell them to citizens of the planet. This spending of money will happen on 'ingame monthly' intervals as well as payments and is calculated for whole planet entirely. For example this month all companies will pay their employees 1 billion dollars combined, so next month there will be 1 billion dollar to be spent on luxury goods. For better clarity every kind of luxury goods is evaluated as 'how much luxury' they present. For example a superburger would be worth 1 point of luxury because it is just food and car would be worth 1000 points. There would of course be many other kinds of luxury goods but to make the question simple, lets just have cars and burgers for now.

SETUP

Now let's imagine planet A with company A-burger-1 that produces 10 million superburgers per month and sells them for 9\$each. Then company A-burger-2 which produces 10 million of them and sells them for 11\$ each. There is also a factory company that produces 50 000 cars per month, A-car-1 and sells them for 10 000\$each and company A-car-2 that produces another 50 000 cars per month for 15 000\$ each. Lets put this into table and count the luxury points in:

A-burger-1: offering goods for total 90 000 000\$. asking for 0.9\$ per luxury point.

A-burger-2: 110 000 000\$. asking for 1.1\$ per luxury point.

A-car-1: 500 000 000\$. asking for 1\$ per luxury point.

A-car-1: 750 000 000\$. asking for 1.5\$ per luxury point.

Now lets say that citizens of planet A have 1 billion dollars to spend this month on luxury goods and of course they want to use them as efficiently as possible. This would mean, that they firstly buy out all the superburgers of company A-burger-1, then buy out all cars of A-car-1, then all burgers of A-burger-2, but company A-car-2 will sell less than a half of their goods. If next month people had 2 billion to spent, A-car2 would be able to sell all of their goods, but if people had just 500 000 000 to spend next month, not even A-burger-2 would be able to sell anything at all.

PROBLEM

Different planets have different condition and on most, certain kinds of businesses are doing better than others. For example planet A would be have good conditions of growing food and therefore A-burger-n companies would be able to sell their burgers for just 5\\$ making it for all car companies impossible to compete. Similarly planet B can be rich for metals so all B-car-n companies would prevail. Now this obviously makes no sense, since as a human you would get tired of buying superburgers all the time and never a car. On the planet A where burgers are super cheap, people would be willing to pay much more for a car than people of planet B.

SOLUTION I AM LOOKING FOR

I could imagine some kind of general algorithm, that would adjust luxury point of different goods on different planets. That it would not be strictly given that car is worth 1000 luxury point in the entire galaxy, but instead differs across each planet. But how would algorithm like this work? Should it take all recently spent money vs types of goods and calculate some ratio. It is also possible to take actual number of citizens into calculations. Like everyone wants a car, but dont need other car in next few years. But some people have more cars. At this point I really dont know.

Of course it is possible for any company from planet B to sell their goods on planet A, but interstellar travel is very expensive, so they would have to think about it twice. On the other hand, travel within a planet is free.

Thanks a lot!

• Comparative advantage, David Ricardo, On the Principles of Political Economy and Taxation (1817). Veblen goods. The economics of luxury goods is quite different than the economics of general goods. Commented Apr 22, 2020 at 11:19
• This will need some additional detail to flesh out, I think (it doesn't account for how people choose between luxury goods, what limitations on production exists, costs and duration of travel for interplanetary trade, and some other important areas). Also, you might get better answers on Economics.SE, as this is seems like a pretty mircoeconomics-focused question-- the worldbuilding elements are just assumptions for an otherwise very typical type of economic question. Commented Apr 22, 2020 at 14:39
• Why are luxury points required to be spent immediately? Does no one save? And why is "efficiency" in spending for luxury items required? Commented Apr 10, 2023 at 19:58

You could see the different takes in the space sims.
Do recommend watching the video from Sseth for Starsector. A humoristic view that shows what lawless places can create.Sset review for Starsector

Now on something far older and richly decorated with heaps of lore: Mechwarrior franchise, or Battletech world, its the same.
There, politics create scarcity where, by all rights, there should be abundance.

So you will continue eating burgers because its the only NOn sactioned foodstuff available. If you dare to think to eat an apple, your cargo will be taken for illegal goods (starsector).

Or everyone forgot how to grow up apples (Battletch).

Or the owners of the Apple market want to maintain the hold on it and if you meddle with them, they will liberate your entire way of life (Tachyon the Fringe).

So first try to list all the possible factors:

• politics (Mount and Blade got a system of Truce/amnesty/Non aggression/ for x days as spontaneous events)
• military power
• space pirates
• Travel Hazards (cant make the trip from A to B, there is a black hole, remnant of alien technology, base of undesirables, gotta go to C first and they ask for Taxes)
• Add that some goods are perishable.

With all of them, you can then make an excel sheet and create 2 worlds. Assign different multipliers to each resource, see how the impact of Piracy can affect both.

When Planet A (Pa) got cheap food and piracy makes it reasonably priced, its ok. Now Planet B (Pb) got reasonably priced food that with Piracy got Expensive. That means less growth as few people can afford it.

As you can see, Piracy can have a different impact beyond the obvious.

List all the factors you want the game to have. Diagram possible interactions and make a few examples. That would help you to see if it is too complex to be enjoyable and you want to hit the sweet spot of Realistic vs Enjoyable.

Don't make me purchase an Ingame Tax Consultant. I beg of you.

### Planetary vs Interstellar

What you described were planetary economics. If interstellar travel is too expensive, there will be no interstellar economics, except for some very rare goods (animals of a certain planet? Plants you can't raise elsewhere?) So the first problem are the goods to be sold on interstellar routes.

### Taxes

Second is taxes. You have 1 Billion salaries, with pension insurance, health insurance and taxes in the end you will have 500 Million free for luxury goods. This is a huge brake for everything. It encourages criminality, too. Who wants to pay taxes?

### Saturation

Third is saturation. You could possibly buy 1000 luxury burgers for 1 car, but after you ate one of them you don't want anymore until next day. So you will buy a maximum of 365 luxury burgers, if you really are a fan. Normal people with a functioning brain will rather buy between 10 and 20 per year, except if they don't mind becoming obese very quick. Assuming that normal people mind, there is a natural maximum. Same for the luxury cars. There might be people who buy one per week, normal people rather buy one in ten or 20 years. You could implement that as hard maximum, having just a tenth of a car per year. Or you can make a declining return function, giving you 1 luxury for the first ten burgers per year, 0.9 luxury for the next ten burgers per year, 0.85 luxury for the next ten burges per year... and so on. Go for a natural decline e function if you must. The advantage of a natural decline function over a hard maximum is that your players can sell more if they become cheaper in production, the disadvantage is a lot more calculation time needed on your server. A median way may be to have some ten or twenty steps, saving calculation time.

### Smugglers

Fourth is smuggling. Why is interstellar travel expensive? Is it taxes? Higher taxes can mean more criminality and cheaper prices on some goods, when they are smuggled instead imported. The key is low volume, high price. It will not be easy to find a smuggled car, a smuggled animal or plant is more realistic.

### Travel time

Risky routes can yield short travel times, safe routes can yield long travel times. What if the luxury car from B is worth a fortune on A in the billionaire class, but only if it arrives before it is out of fashion? A Billionaire might think a car is out of fashion as soon as normal people can afford it? So the Billionaire might pay for someone to take the risky route, while normal people have to wait half a year longer while the normal dealers take the long way around the black hole. You could implement it by having 2 or 3 years travel time, via the risky racing route only 1 year or instant sale but ten times the price? The first car sold on a planet may yield 10 000 000 luxury, the 10th car may yield the normal luxury, the 10 000 000 car sold may yield only half the luxury. It may force your players to develop new models.

The planet should have four prices at which it will buy items.

1. The bare limits. This will be a much higher price- maybe ten times the base- at which people will buy the item. The super elite and mega rich will always want a certain amount of luxury food, and even at a much higher price, they will buy this much. Say, 100 luxury cars per month at 10,000 luxury points.
2. Status symbol. The rich and middle classes aspiring for luxury will pay for a number at this price. Say, 10,000 at 3000 luxury points.
3. The base price. This is the price that people will pay if it's reasonably available for all middle class people. 50000 at 1000 luxury points.
4. The surplus price. This is the price people will buy if it's really cheap and they're working class. 200,000 at 500 luxury points. Below this point, the luxury points are better spent on raw materials.

This lets you say what people will buy at what price. If the cars are really expensive (3000 luxury points) people will buy 10k max. If they're dirt cheap, at 900, and 60k are available, people will buy 50k at 1000, and 10k at 900, because competition for the cars will drive up the price of 50k to 1000.

You can have a fixed ratio of luxury good demands for each population group (mega rich, elite, middle class, and working class) which can be increased or decreased by various factors, like happiness, war weariness. Exactly where the negotiated price ends up for any surplus produced could be tweaked by welfare and social policies.

## Some Basic Microeconomics

You are asking for nothing more than a marketplace simulation - and a simple one at that. There are lots of way to do this, but let me give you one of the more straightforward examples.

For each product, you create a Demand formula which expresses the Quantity Demanded as a function of the Price. The formula must have at least two parameters which we shall call Base Demand and Elasticity. Obviously, the higher the price the lower the quantity desired, so your formula should always have a negative slope. (You can use a linear formula, such as Quantity = 1000 - 5 * Price, but this can lead to results with negative quantities. More sophisticated equations will lead to better results, but there is no "right" formula. If there was, economic models would actually be useful in the real world.)

Next, for each producer you make a similar formula, the Supply curve, this time with a positive slope. This formula must also have at least two parameters, which correspond (inexactly) to Fixed Costs and Marginal Costs. Note that you have one Demand curve for every product, but multiple Supply curves since you have multiple producers. With the Supply curve you can use a linear formula, this time without worrying about getting negative numbers.

The next step is simple: try different prices until the sum of the Supply functions equals the Demand function for each particular product - burgers, cars, etc... You will then know the price and total output of every product (and the output of each producer, as well).

But there's one problem. Your model is static and will sometimes lead to outrageous results. In real life, we call outrageous results "opportunities"! That is, if it's really expensive to build cars on this planet, inventors and entrepreneurs will find better ways to make cars. The next generation of cars will be cheaper.

To reflect this, every time-unit you will want to adjust the parameters in the Supply curves by a small amount in proportion to the slope (Elasticity) of the Demand curve at the current price, with a random factor thrown in as well. This represents the investment made to improve production. You then run the price-finding routine again to determine the results.

This much should be enough to power a simple game. As the game gets more complex you can tinker with other economic concepts such as goods substitutions (e.g. when burgers are expensive, people buy more hot dogs), interplanetary currency exchange rates, and such. Much will depend on the specific formulas you use for demand and for the "investments", and you will certainly have to experiment to get the feel that you want.