True value of early trade: a case study

[East Street Trader]

Agree that much remains to be researched.

But from my visits here to date I would say you are very far from being alone in feeling the desire to subject different aspects of the game to rigorous analysis.

William Keenan's Barbarian Paper is a particularly striking example.

And try searching the threads for some of the analysis on combat outcomes.

The fortnightly OCC comparison games have led to a good deal of well backed up work, by Tonic and others.

But you are right that many of us, myself included, rarely if ever turn to the cheat menu and embark upon a systematic examination. Nevertheless the sheer volume of Apolytoners' experience built up during play regularly generates an insight or a useful/interesting quirk.

I value contributions whether based on science or intuition. Speaking for the intuitive tho', I am very glad that the scientists such as yourself are generous enough to share with us all the fruits of your labours.

So let the walls of Carthage tumble yet a few more times and if you refine your marginal rate of return notion I will gladly hear your further exposition of it.

[Hawkman]

I’ve been following this thread for a few days and find it very interesting, being an accountant in real life and an avid Civilization player in cyberspace. But perhaps you could address the following questions:

Money in Civilization doesn’t seem to have a measurable discount rate. In real life, it can be invested (various stocks, bonds, etc) but that function is not available in Civilization. Nor is the game designed as a money making game, so money goals are not built into the process, as they are to varying degrees in a corporation that manufactures a product or provides a service for the public. In Civilization, one can calculate the cash flow in a given project (a Caravan, for instance), but discounting future revenues is not appropriate. Therefore, if net present value is just an arbitrary number with no meaning, what is the point of trying to calculate it?

On the other hand, the concept of “opportunity cost” is very valid in Civilization. Building a Caravan, for example, means one has forsaken the opportunity to build something else. Thus, different builds should be evaluated against one another. I’m not sure, however, that $ (or francs) is the proper measure. The most critical element in Civilization is time. How do you meet all your goals, or objectives, in the amount of time you have? Critical path analysis helps out in this case.

One final thing. In my opinion, rush building a Caravan should only be done in an emergency, such as when you need to use it to help build a wonder. One will rarely recoup the money used in the rush build. For example, if it takes 10 turns for a city to build a Caravan and you pay X amount of gold to get it done in 2 turns, then you have saved 8 turns with X amount of gold. If you want to calculate how much gold you gain by rush-building, you have to do it over just 8 turns (after the Caravan connects with its objective city). Everything after that, you would have gotten without rush building. Of course, you should also consider that the city might build something else in those 8 turns – this is “opportunity.” Despite my profession, I usually follow my gut feeling on this. Don’t most of you use this criteria, the gut feeling?

[poppawoppa]

How do you handle the situation where you build a caravan, look at the trade demand screen to decide whether to assign it your hides, or coal or gold, then send it off to the foreign city which is 25 squares away overland with no roads...then as you get to London or Delhi, you check their trade demands to find that when you assigned your caravan to carry coal to London 25 turns ago, now London only wants Spice, Gems and Silver? It seems this happens to me a lot in my games both OCC and otherwise.

Knowing that the coal going into London will only yield 28 gold and 28 science beakers, I have at times turned the caravan around and headed it back to Rome or Veii to put it to work in a Wonder building project. That may be too shortsighted to me, but in my mind, if I can't get at least 50 gold/beakers upon delivery of a commodity, it is more valuable to use in building a Wonder.

Your comments?

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The man who dies with the most toys...is DEAD.

[Hawkman]

Poppawoppa, I've turned a few back, too, but usually I look for another city that's within a reasonable distance. Also have to consider if the caravan might be destroyed before it reaches another objective. In most cases, the bonus is lost and I might as well just get what I can and build another caravan.

[Carolus Rex]

Monsieur La Fayette!

It was not my intention to disregard your effort. On the contrary, I found it very interesting and impressive! Let me quote someone on these forums you know much better than I do.

quote: Originally posted by La Fayette on 01-12-2001 10:36 AM I'm pretty sure that you have noticed what I have noticed when reading the archive to this forum: many many posts stressing the importance of this and that, and long term effects and the like.

Yes, I have!

quote: I feel somewhat on the same line as (I suppose) Scouse Gits (with GL and starting techs), oedo (with statue and unfinished) or Slowthinker (with dips and spies): much has been said and achieved by the 'masters' (I won't name any, since you know them better than I do), but much remains to be tested and researched by those interested. That is one of the numerous reasons why this game is GREAT.

I couldn't agree more!

quote: That is also why I published this case study: trying to make some people react otherwise than saying "I use home trade and I'm glad with it" or "a settler is better than a caravan".

I agree with you on this too, especially since I am one of those people who post stuff without running experiments first and man do I wish I had in some cases! .

Looking forward to read about your continued tests and the results!

Carolus

[Carolus Rex]

quote: Originally posted by Hawkman on 01-12-2001 01:46 PM On the other hand, the concept of “opportunity cost” is very valid in Civilization. Building a Caravan, for example, means one has forsaken the opportunity to build something else. Thus, different builds should be evaluated against one another. I’m not sure, however, that $ (or francs) is the proper measure. The most critical element in Civilization is time. How do you meet all your goals, or objectives, in the amount of time you have?

Definitely agree! The constant trade-offs you face in this game is what makes it fun and difficult. Unfortunatly, that is also why it's so hard to evaluate different (long run) strategies and even (short run) actions and compare them against each other. This is IMHO not an excuse to not even try to, though, as Monsieur La Fayette heroically demonstrates.

quote: Despite my profession, I usually follow my gut feeling on this. Don’t most of you use this criteria, the gut feeling?

Yes, and with inconclusive results!

Carolus

[La Fayette]

Carolus
I never never thought you disregarded my efforts. Your post about NPV is thoughtful and deserves a more specific answer than the one I gave at first. I'll try.

EST
Shall we say that all the authors mentioned in SG's Great Library are great thinkers and great players?
I shouldn't have named anyone, since naming a few means forgetting many (I'm a humble man studying on a cobble-stone street and would be very glad if something I wrote came to be considered valuable enough to be mentioned up there some day).

Poppawoppa
I agree: risks (of wrong or delayed or no delivery) must not be forgotten. Please, let me answer Hawkman first.


Hawkman
Perhaps Carolus explained NPV better than I did.
The basic idea is precisely to introduce time (and side effects and long term effects and opportunity costs) into the picture, using a "rate of discount", which you might consider arbitrary, but which in fact reflects your will (shall I be long sighted or short-sighted?).
In civ2 the unit of time is the turn. Anyone knows that any gold obtained next turn is better than the same amount of gold obtained 20 turns later. Then, if you choose to be short-sighted, you consider that 20 turns later is very far and you give it a low value by choosing a high "rate of discount" (and the reverse).
This leaves us with the main problem: how to deal with opportunity costs, side effects, and so on?
To make it short, I would answer that, in most cases, no one can do it properly but it's worth having a try.
Our problem is decision making. Then, when a decision is to be taken playing civ2, I suppose we all use our intuition (our guts, our rules of thumb,...) but that always implies some kind of wisdom behind it (in fact almost no wisdom at all if I am a newbie playing chieftain for the first time in my life )...
Sorry, time to go, I post again to-morrow.

[La Fayette]

Hawkman
Sorry I had to stop in the middle yesterday.
1) No need to have any Market Place or Bank or interest rate in your civ for using the discounted cash-flow. Perhaps it's even better just forgetting them and imagining that the "rate of discount" is a trick that we economists use to show that time indeed has a value (actually, I don't know whether "rate of discount" is the right technical name in english; in french we name it "taux d'actualisation").
Let me take an example:
I build 2 settlers; #1 is finished next turn, #2 is finished 10 turns later. If I'm short-sighted, I give a small value to settler #2 (for example V2= V1/(1+r)power 10, where V1 is the value of settler #1 and r is the "rate of discount"). If r=8%, then V2=0,43V1 .
If I'm long sighted, I choose a lower rate, giving V2 a higher value; if r=2%, then V2=0,82V1.
Those values can be measured in shields if I will. No need for gold or $, or anything like that.
I agree with you: it is arbitrary, but it is far from useless (since it helps greatly giving a value to the time that passes, and that is precious in decision making).
2) Net Present Value (NPV)
(Carolus, tusen takk for navnet paa engelsk; min förste kone var norsk, derfor er jeg saa glad aa kunne bruke et skandinavisk spraak for aa takke deg - og jeg er ikke helt sikker paa den svenske rettskrivningen)
NPV=Discounted Revenue - Discounted cost
The calculation should be quite simple, but defining Revenue and Cost is not so easy, because you always find someone who points out that you have forgotten some side effects, or long term effects or opportunity costs.
3) Opportunity costs
They are so numerous and tricky in civ2 that one would need huge simulation models to handle them all. Then, don't bother: if someone tells you you might have chosen to build a settler or a knight when you start building a caravan, just say "OK, you are right, I build one next turn in another city".
It is generally advisable to handle opportunity costs by defining 2 solutions (I do this , and I do that), then giving them a NPV each, then comparing NPVs.
For example, if I am building a WoW (let us say HG=200 shields) and hesitate between rushbuilding it and rushbuilding caravans then bringing those caravans to my capital, I can forget settlers and knights for a while, as soon as I have decided that I want HG.
I know that rushbuilding the Wow is going to cost me about 800 gold (with 1 shield in the box to start with), and building a caravan stepwise costs 125 gold, then 125(1+r)power n (n being the number of turns travelling between the city and the capital or waiting somewhere if I built it too soon) is the discounted cost.
And I conclude: unless r or n is very very high, it is generally advisable to build a wonder with caravans rather than buying it (except of course when I start thinking about that wonder when reading the well-known message about "the Romans...", and also except when I notice that I can get so rich when sending those caravans to a fat foreign city ... but that brings us back to the start).

3) Side effects and long term effects
I wished to write a quite short and simple post when I started this thread. That's why I didn't mention them. I thank you all for posting about them (risks, building ships for foreign trade, citizenry, and so on) and I stick to one short answer "the true value is never true, but, in many cases, it may help taking right decisions without daylong calculations".


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aux bords mystérieux du monde occidental

[Hawkman]

La Fayette, I still don't see that NPV has a place in Civ II in the traditional way that we use it, because the game does not have the investment alternative built into it, nor is inflation very obvious. However, I think I am closer to using an accountant's view while you are closer to using an economist's view towards this. In other words, your view is broader and therefore it could be fitted to the game in some manner. But (there is always a "but"), to play the game and track the various values of caravans would require a second computer, something I've often thought about and seldom tried to implement. I prefer to follow my instincts and if I'm not exactly right then I just build more caravans.

My instinct tells me the short-term value of a trade route early in the game is relatively small, so I don't try to establish lots of them. Each city I view as a manufacturing unit, producing goods and also having a need to build up its productive capacity. Production therefore has to be balanced between these two conflicting priorities (for each city). One thing I do fairly early in the game is start City A to building the Colossus, while other cities produce three caravans which are sent to City A where ownership is transferred (to City A) and the caravans are then sent overseas to establish trade routes for City A. With the Colossus and three trade routes, this city is on its way to becoming an economic powerhouse. Add two more wonders (Cop's Observatory and that College that comes later) and the city is a powerful research center. Meanwhile the other cities may not have many trade routes until about the time that factories become available.

You can say that I would have more cash if more trade routes were established early, and that is true. But I need relatively little cash until I have to build factories, while my need for military units and city improvements is much higher. Would more cash help me to build more of these things? In the short run, yes, but in the long run I would never have enough cash if I pursued that strategy.

Wouldn't it be nice if we could capture caravans? That would be the ultimate solution.

[East Street Trader]

Sir

Your English is awesomely good. And now you casually start using Swedish?

Is it a gift which you have or do the teachers of Albi specialise in foreign languages?

By the by, "rate of discount" seems fine to me but I am doubtful about "power n". "Power 2" in this sort of context usually means "multiplied by itself, "power 3" multiplied by itself twice etc. That doesn't seem right in the context of your posts. Do you mean something like "discounted to allow for". If so I expect there is another symbol for that. Unless I am dmonstrating exactly how shallow my grip on maths/economics is, of course.

[La Fayette]

EST
It wasn't swedish. It was norwegian (I fell madly in love with a norwegian girl many many years ago, that's why). But I know Carolus is going to understand me (and danish readers too, if there are any on this forum nowadays) since norwegian is somewhere between danish and swedish (as a language, not on the map).
Power 3 means exactly what you wrote.
Then 1/(1+0,1)power 1=0,91
1/(1+0,1)power 2=0,83 (and so on)
These are to day's values of 1$ you receive next year or 2 years ahead, if you choose a "rate of discount" of 10% (which is rather short-sighted, but, as I tried to explain, you are perfectly free to choose it, if you think it helps you taking wise decisions).

Hawkman
Rehoming caravans in a capital with Colossus, then sending them faraway is something I would consider quite profitable (it happens to me to do exactly that now and then). Go on playing the way you like. This is a game and I wouldn't like people to be playing it with computer #2 behind their back (though I heard it said that some people do exactly that, when playing MP; but I haven't bought MGE yet, so I don't care).
...


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aux bords mystérieux du monde occidental

[Carolus Rex]

You speak norwegian?! Now, that was a surprise!

Moi, je suis né à Grenoble. Mon père est francais et ma mère était suédoise. Ils se sont divorcés quand j'avais deux ans et nous (maman et moi) sommes retournés en Suéde. Chaque été je suis allé voir papa, mais il y a long temps maintenant que je ne l'ai pas vu, donc ca fait au moins six ou sept ans que je n'ai pas parlé ou écrit francais. Alors, ne vous vous mocquez (?) pas trop de moi et ces petites lignes.

BTW, where on the keyboard do you find the little line that should be attached to the "c" in "francais" and "ca" to make it sound like an "s" instead of a "k? Also, I always confuse "ou" and "où". Which of them means "where" and which means "or"?

Carolus

[Carolus Rex]

And yes, I did understand the norwegian!

Carolus

[Hawkman]

And I understand your French, Carolus Rex, surprising to me since it's been over 25 years since I spoke that language (I could read and write it better than speak it). My languages are English, German, and French but it's been too long since I've used any German, too. Also know a little Thai and Japanese. One problem I have is mixing the languages, so I sometimes throw in a word from the wrong language and my family is quick to correct me.

La Fayette, I agree with the reasoning that early trade routes can be very profitable. My reluctance to build many caravans for trade is simply the high cost (50 shields) for a small city. The game was well designed in this respect, to force the player to think about the hard decisions and realize there is a cost for each one.

[La Fayette]

Carolus
ççççç...this is named "c cédille" in french . On my french keyboard it is situated under 9.
ou=or
où=where (ù is under %, right to m, on my french keyboard).
Hils din far fra meg, hvis du faar anledning (og din mamma med det samme).

(Ming
Please, excuse me for those few lines off topic. I forgot that we have a possibility of private messages).