Economics for Dummies
•
by Dishmcds
Economics is not the "end all" of all knowledge here in Erepublik. You do not have to be an expert to run a business properly, manage your daily earnings, wellness, or otherwise. There are some fallacies and facts that people need to realize before they go into business which sometimes get overlooked by the masses.
First, just because someone is a poor manager doesnt mean they'll go out of business directly. It's easy enough to make enough money in the money market to run a low quality business. They'll continue to undercut the market, charging prices which make it impossible to make a profit in the normal fashion.
Second, not every business needs a million employees. It's nice to have lots of them producing goods at high rates, working daily, and so forth. It's a nice feeling when someone tells you that you're a good boss, and that you've treated them well, however, not every business in lower quality fields should have that many employees. Owning a company in lower qualities is not a way to make money overnight.[/b] In fast paced industries such as food or gifts, you'll simply overproduce, and in long term industries you'll under produce. This is why you won't see fourty different hospital companies within the eUK, there simply isnt enough labor or profit to support it. There's a reason it takes a "minimum" number of employees to upgrade quality. It's a tiered system that is designed to have a certain amount of employees.
And I am sure to that argument I am going to hear something about the production formula having "number of employees" built into it, but there's an obvious overproduction problem, has been since they released this Beta and I dont expect that to change much in V1. So there.
Now, on to what the article is truly about.
Those are fallacies, here's a simple truth: The basic economic structure of a country is based off of, but not regulated by the money market/money supply. Yes, controlling and/or releasing money into the economy will raise or lower the RER, but the economy is truly held regulated by the price of the cheapest item in it's stock: Q1 food. Let me explain.
First of all, the food market is based on it's lowest quality product. It's Q1 market will determine how much Q2 is sold (or bought, since the consumer is or should be smart enough to figure out that a Q2 food shouldnt be four times the price of Q1), which determines how much Q3 is sold, and so on. It's a chain reaction in the food market alone, which is the lone required product to survive in Erepublik. Now, you may ask how the price of Q1 food affects other markets. It's really quite simple:
Your wellness lost per day, depending on your industry and quality determines what quality of food you need to eat. If Q1 food drives the prices of the other food markets too cheaply, then there is hardly any need for gifts. If, for instance, I can purchase Q4 food for 1 GBP (which I can't, but it's an example) then I can work in any job Q3 or lower and not need gifting (once I've already attained my 100 wellness). I don't even need a house.
And from those basic industries, it trickles down through the others. During times of peace, weapons should be stockpiled, hospitals placed (which, by and large is a government program in almost every country so even though they are owned by private companies they still operate through the government) and the basic industries should be produced with higher rates. The GM of a Q1 food company can drive the market so low that they can crash an economy. It's that simple. That's why people think it's so important to have some business experience.
Now, I wont call for an ethics contract since I believe in the freedom to operate companies any way I choose, but I will say that in these times, where every country in Erepublik will overproduce goods due to the lack of war, there are two things that can save us:
1. Export surplus. If you have stock greater than the whole of the population of the UK, you should be exporting half of it. Even if you don't quite get "the return you're looking for", you'll be able to make decent sales and at least pour some money into your company.
2. Work with the other companies in your quality and industry to set a price you can all agree on. This way when products are released they are all the same price and you can all at least make a little.
Otherwise, in about two weeks half the companies in the UK will be looking for government funding because they can no longer afford to operate. We need to try and stay away from government dependence.
Thanks
Dishmcds
Minister of Trade
Facebook
Twitter
Discord
Comments
very good article on the problem of overproduction.
voted with no doubt.
Makes sense, a good article Dishmcds, I especially agree with your your two solutions to the current problem., even if we do disagree on the social responsbility contract.
Voted.
While I agree that we need to raise awareness of the problem and tell GM\'s how to solve it, I also think that as you said if this doesn\'t work half the companies in the eUK will come crawling along asking for government funding. We shouldn\'t give this funding to just anyone. We need to establish a way of seeing who we would give funding to based on how ethical they are.
\"Now, I wont call for an ethics contract since I believe in the freedom to operate companies any way I choose\"
I certainly agree, companies should have the freedom to operate any way they choose. At the same time, a responsible GM deserves the right to have government funding in times of crisis. But a company that\'s been responsible for the crisis in the first place, or a company which pays its workers peanuts, doesn\'t deserve this at all. Therefore, guidelines to help the government determine what the point is at which companies have a right to aid need to be set up.
The government picking and choosing companies to help out is the first step on the road to corruption.
@Deilos: I have a dream.
I have a dream that each and every company in the eUK is not judged by the color of their quality, but rather the content of their export licenses 🙂
I think each company should strive to split their stocks three ways. One, domestic. Two, export (smaller portion, just to offload stock), and Three, surplus, 10% of daily production for times of need. In my opinion splitting your stock those three ways is the most successful way to take advantage of market opportunities.
As far as fairness goes, I\'ve proven to be rather fair and unbaised in economic terms. I have my fair share of tiffs with people, but mostly over ideals. Rest assured that if I am given such a responsibility, it will be as fair as possible.
And see, I spelled your name right 😛
I agree with your ways of splitting stock, very good; but not everyone would do that, really. As good as that would be.
My problem is not with how fair the government official would be, I have no doubt that anybody I could think of as candidate to being in charge of such a job would be very fair. However, I think that giving a responsibility to anybody to decide what\'s fair or not without guidelines is only asking for trouble, because it sets a precedent.