Wealth in EMC

Discussion in 'Marketplace Discussion' started by 72Volt, Apr 27, 2013.

  1. Greetings, everyone! I'm 72Volt, the friendly neighbourhood economist.
    A lot of the time on the forums, it is asserted that the amount of rupees one has is a definite measure as to how rich one is. To everyone's likely surprise, this is in fact incorrect. Wealthiness can be determined by a number of factors.

    If we apply money supply theory to EMC, there are 5 factors of wealth; the amount of rupees one owns, financially mechanical assets (FMAs), physical assets, labour and bank accounts. These factors are ordered in the order of liquidity; that is, whether it can be turned into rupees with certainty and without delay or cost.

    The main factor you all know of are rupees. Similar to how real life currency is designated M0, let us designate rupees as R0. Since rupees are already rupees, they are the most liquid of the factors of wealth. They are the safest way of investing your money, much akin to storing your money in a jar hidden in your home, however because of this, they yield the least interest. The interest they yield is usually negative; if you keep your rupees as rupees, they are subject to inflation. If you leave EMC and come back in 5 years, your rupees could be almost worthless. However, they are the only way to exchange with a chest shop, and therefore the most versatile for spending in the short-term.

    The second factor is FMAs. An FMA is a concept I have created, to describe physical assets which have been constructed in a certain manner which is greater than the sum of its parts. For example, a slot machine, or a collection of signs educating a player about your lottery. All these have the potential to generate more wealth than they are actually worth. 'The potential' is in italics, because you could have a slot machine made up of a dispenser housed in diamond blocks, and that isn't guaranteed to create the actual value of selling the construction as physical assets would. You could sell the construction for 1,000r, or wait until the slot machine makes that money itself. It's all about potential.
    FMAs are designated R1, within Empire Minecraft they are the second-most liquid asset; not only do they function as a physical asset or assets, but also as something which can provide a product to someone in exchange for R0.

    The third factor is R2, physical assets. Physical assets include inventory items, objects on your res, and space on your res. These aren't as liquid as R1, because they are merely raw unconstructed items which cannot engage in production as with the slot machine example, but they are often easier to liquidate, as they can be stored in a chest and sold using the chest shop system. Physical assets are a protection against inflation, you could buy 1,000r worth of emeralds or a good with a relatively constant supply, and if the rupee became inflated, the price of the good would rise with inflation. Better yet, if a good is set with a high chance of increasing in demand or dropping in supply with the future (for example, the Empire Firework), you could very well make quite the profit by storing your wealth in physical assets. So, if you've got a sum of rupees out of your total amount which you are likely not to spend, put it into a Beacon! If you do desperately need monies in an emergency and the Beacon has not yet matured, liquidate it, you'll still make a reasonable sum of money :)

    The fourth factor is R3, labour. Labour exists in two forms; the potential labour you are able to carry out yourself based on how much time you have to allocate to Minecraft and how motivated and efficient you are, or less commonly an executable contract with someone, where they are thereby obliged to do some work for you. Labour is less liquid than the other factors because there's no guarantee that you will be motivated or efficient enough to carry out work, or that the person you have contracted for the work will actually do the work well, or at all. The only preservable component of labour is the executable contract, and that is subject to many risks making it worthless most of the time.

    The fifth factor is R4, bank accounts. In real life, bank accounts are the most liquid factor in the money supply below actual currency, bank accounts are among the most trusted ways of storing income and they are the cornerstone of distributing capital to those who need it, moving the economy forward.
    However, in EMC, the majority of people who attempt to create banks are either scammers, inexperienced, inept in the field of finance and lack the know-how to pull it off. As a result, banks are not allowed, and they are the riskiest and least liquid form of wealth, both because 90% of the banks are by inexperienced people/scammers and because any bank will likely be shut down by staff, without any refund for you. Theoretically, the very few banks which slip through the fingers of the staff and are also run by experienced, non-scammers could output some sort of yield, and if it is done well the yield could be very high, but it's not worth the risk.

    Now, one more thing; how to calculate your wealth.
    There is a difference, as I've highlighted, between the number of rupees you have, and your actual wealth, so if you ever tell people your wealth, highlight that!

    There are two types of wealth; current and potential.
    Current wealth is how many rupees you would get if you liquidated everything you owned right now.
    Potential wealth is the highest potential value of everything you own.
    So, if you owned 1 diamond, your current wealth could be 50r, but if you could show the price of diamonds would rise in the future, your potential wealth could be 80r.

    Your current wealth can be easily calculated as follows:


    where r is the number of rupees you have, t is the amount of time as a decimal fraction of a day you can spend running an FMA in total, d is the amount of money you make per day of running an FMA, p is the value of the physical assets which make up an FMA, o is the value of the objects on your res, s is the value of the space on your res, i is the value of your inventory items, w is the amount of time you can spend working as a decimal fraction of days, z is the amount of rupees per day of working, c is the total amount of labour time, a is the average probability that the contracts will be followed through by whoever you have the contracts with, b is the average amount of rupees earned through day of working by the workers, e is financial liability, either through interest on a savings account you owe to someone or a loan you owe to someone, f is the probability they will ask for the money, g is a financial asset, either someone owing you money from a savings account interest or a loan, h is the probability they will pay it, and j is your current wealth.

    I might add in potential wealth later, that's enough economics and econometrics for today :cool:
  2. um.. anyone got a new pair of pants i can borrow? i dont understand a thing..
  3. Interesting read. I always thought it was rupees, and nothing else.
  4. ditto
    PenguinDJ likes this.
  5. Very well explained. I particularly enjoyed your explanation of R1 or the FMA as it is often forgotten when calculating wealth as it is often difficult to explain/ calculate
    Well Done
  6. I do admit it is quite complex, but I think you may be able to understand better if you read a book on economics or econometrics. :)

    Why thank you ^_^
    PenguinDJ likes this.
  7. TL;DR
    I bet it's good, but I'll read it once I retire.
  8. i'm pretty sure i got to "we all know rupees are..." and then i just like, skimmed... and then i was like... yeah, not reading all that. lmfao. but i bet its glorious. :p

    easy? ..... i see no EASY in that in the least bit!
    Spenser6 and 607 like this.
  9. I actually read the whole thing and it makes perfect sense... but I am too lazy to take an inventory of everything on my res.
  10. At least that's one person who read it :)
    PenguinDJ and battmeghs like this.
  11. Er good job on this....
    ...... read 5 words and stopped.....
  12. I read it, 72Volt. One thing I think you didn't take into account is that everyone's definition is subjective and we often define ourselves and our possessions relative to others.

    One person might have the blocks they need to build and some nice tools and armor and feel quite wealthy because they have everything they need. Another person might have a million Rupees and feel they need to reach two million to be welathy. Another might have that two million and still not feel wealthy because they have a neighbor who they know has three million.
  13. Well, the formula provided is largely based on subjective forecasts of the value of things like physical assets and FMAs, but the feeling of wealth is indeed purely subjective :)
    PenguinDJ likes this.
  14. Help! I'm being crushed by a wall of text!
    battmeghs and AlexHallon like this.
  15. Welp... *sigh* Time to count up all of the dirt...
    PenguinDJ likes this.
  16. I read it. I think it's fantastic.
    PenguinDJ likes this.
  17. TL;DR

    But I'm impressed you made a formula.
  18. This is very interesting, and I guess that having the data provided by the Supply and Demand thread we could calculate our wealths, then start investing in goods. But no one should fret about the valueof their rupees, tho. For we are not taking into account some important concept: the Aikar factor.

    It's an unstable factor, I know, but it has a plan, and if it succeeds, it could be that your rupees increase their value as long as you don't fall for the Af's traps.

    Still, I like the fact that someone points out at last that it's not all about rupees :p
  19. Legit. Never thought about it that way... or my project for the matter...
  20. Eh, that thread doesn't really have the right approach to pinpointing equilibrium. The upcoming shop system and the likes of the Bitcoin exchange called Bitbargain is; producers in an economy post their offers, the consumers are matched to the best deal, as opposed to a mish-mash of people advertising their goods and estimating equilibrium or whatever goes on there.
    PenguinDJ likes this.