Economics Vs Alchemy

>Magical/Alchemic transmutation/polymorphing spells are common and available enough that any low to moderate level individual can scoop up some dirt and turn it into gold or a dollar bill so perfectly accurate that counterfeiting laws become impossible to maintain.
>Modern economic systems break down, and trade becomes completely different. Possibly based on direct trade of mana/life force/souls/deeds, etc. other regions may become meritocracies or social darwinist clusterfucks based on pure (magical) strength.

I know you can easily come up with a way of preventing this from happening in a setting with magic, but all that aside, does this cause and effect make sense for a premise?

In the Chinese novel settings I'm reading they basically made the currency directly become cultivation pills (basically rare candies of the martial arts world). Since they diminish thus never inflating, used by martial artist that just take power from themselves thus being a soft currency will never lose value, and require complex pill methods thus are hard to counterfeit.

Magic settings can have the same type of currency just have items that boost/restore magic capacity becomes the universal soft currency for the setting (though the economy will never grow).

Not as an equibrium condition. An economy can collapse if this knowledge appears and becomes widespread very quickly, just like any other hyperinflationary event, but if it takes too long then there will be a major price shakeup, the currency will change (or switch to barter) and then things will stabilize. If widely available transmutation has been around for any length of time, then the prices willbe weird but the economy will have long since stabilized.

People mistake the shape of coinage for the laws of economics. Microeconomics works just fine with no currency at all. All this is is a hyperinflationary event. This happens all the time in history.

When you're designing an economy, work out the coinage LAST. it's the least important part.

Transmutation doesn't break economics anymore than changing rulers "breaks" length. Currency measures value, it stands for value. It isnt value.

what's the first thing one should do when designing an economy?

If magic/alchemy is discovered in a modern day setting, an apocalyptic war triggered by the intense economic upheaval sounds like a good way to transitions us from a mundane setting to a more fantastical one.

It would have to hit very, very fast indeed. For two reasons. First, how easy is it to learn the recipe and buy the chemistry set to do it? That's your first big speed bump right there.

Second, and this feeds from the first, is speed of propagation of information. Markets are about information brokerage, and price is primarily about signalling and information transfer. They're incredibly efficient at this.

So as fast as knowledge of alchemy goes, the change in forward-looking expectation of what this will do to comparative value of goods will move even faster. Communication in the modern world is so damn good that resources will re-allocate very, very quickly to adapt to the new reality.

What might make your idea work is not money, but power. Political power (and the political power that derives from wealth) is about the "now", not the future. So if you had entrenched political and business elites look at the risk that their portfolios could fall apart, they might try to stem the tide by restricting or banning alchemy.

That won't change anything, but it will make the spread of the technology slower and less even. Meanwhile, an alchemical noveau riche emerges and acquires allies and power of their own.

Hence you still have a hyperinflationary crisis, but it takes years to play out rather than months and prices aren't allowed to reach equilibrium. THAT'S a formula for economic collapse throughout history (check out Thucydides in ancient greece, or Rome during the fall of the Republic).

So...capitalism works until the people at the top are afraid of losing their position?

I think you're overestimating the government's ability to adapt to new things, but okay.

Start with as short a list of setting-critical "truths" as you can. A price list for common goods might be a good start (D&D approach) or the standard of living and wealth distribution of the general public (GURPS approach).

Then start working your way outward, drawing logical inferences and implications. If you get some result that doesn't fit with your vision for the setting, you have to invent a reason why things work the way they do. Or modify your vision.

What you're doing is a give-and-take between your vision for the gameworld and what's possible according to the laws of economics. Just like any sci fi setting. (Of course, in fantasy you can break the laws of economics just as easily as the laws of physics. I'm just assuming you want something vaguely plausible.) Each have to give way a little bit. By doing this a little at a time, you're taking a very big problem and nibbling it away in small manageable bites.

So GURPS Magic does an example of this with the Powerstone cost. Based on the spell mechanics, they work out how long it takes to make one and what the material and magical energy costs are. You know how much an enchanter makes per year, so armed with this you can work out how much he has to be charging for his time in order to have that lifestyle.

The trick is to start SOMEWHERE.

A good introductory microeconomics text will help immensely. Don't worry about macro-- economists still can't even agree on its basic principles. Or talk to an economics professor, many of whom are gamers.

The economy wouldn't have developed in a way that magic could collapse it in a setting where such magic is commonplace. Magic would instead be integrated in to the mechanisms of economy from the ground up.

We're assuming that magic is discovered almost overnight, in a roughly modern, information age setting..

The setting I was thinking was that a magical star goes super nova in the night sky, and infuses the population with mana. Powers, manifestations, and the harnessing of these powers spring up and accelerate exponentially. It's very cheap and very efficient.

> So if you had entrenched political and business elites look at the risk that their portfolios could fall apart, they might try to stem the tide by restricting or banning alchemy.

So basically, depression resulting from political reasons, into war caused by political reasons? I'm thinking magi-tech world war 2, and that's actually pretty cool. Not the kind of immediate "panic and anarchy in the streets" I had in mind, but perhaps just as interesting.

Capitalism isn't an "ism". It's what happens naturally when there are voluntary exchanges of value between people. OTOH, the natural POLITICAL state of mankind is to use force to stop these transactions when they're perceived as a threat by the military/police/political leaders.

If this hits all at once, then it's almost better because there's no way to stop the upheaval in time. If it doesn't, then you'll have the chance for policy-makers to react to persuasion from today's winners to prevent the existence of tomorrow's winners. Not existing yet, tomorrow's winners can't out-lobby today's.

Remember, while we say "people at the top", we're really talking about at least three different groups. Status, wealth, and coercive power. Coercive power is a stop-gap, but status and wealth won't even serve to slow technological advance down (and alchemy in this setting is clearly a technology).

It's not a question of ability to adapt. It's a question of willingness to adapt. Organizations only change when they perceive a threat to their existence. In a free market, bankruptcy provides that threat. Institutions not subject to market discipline (political and religious institutions come immediately to mind) can hold themselves together by forces other than economics. So they will, and can't bring themselves to change until society is much, much, much farther down the road.

Also, pricing is like magic. It will rapidly communicate highly complex information to an entire economic ecology, unearthing opportunities and interdependencies that no single analyst or group of analysts could figure out on their own. Institutions that follow the logic of power (coercive) don't respond as much or at all to pricing. That causes them to start misallocating their resources.

Governments will try to react as fast as they can, but they can't keep up with the speed of price. Even corporate managers can't do that. The price just happens, an emergent property of markets. It's only when these changes are happening slowly and can be foreseen that there's time to push some reaction through the political process.

Ahhh...

Ok gimme overnight to think this through. If the thread's still up then I'll give you my thoughts. I'm assuming that the goal is to create a magi-pocalypse? It can be done, but I'll have to work it out.

I dunno, what kind of alchemy are we talking here? Precious metals in to other metals or thin air in to shotguns? If there exists important things that cannot be simply replicated then they will eventually come to form the basis of economy. Food is an obvious choice. In theory a system not unlike the gold standard could be adopted, but instead of a dollar being a receipt for a certain weight of gold held in reserve, it would instead be for a certain weight of rice or wheat. Of course, rare earth metals or really any useful substance that cannot simply be fabricated is a viable candidate. Not saying there wouldn't be collapse or instability or anything, but a financial system not unlike our own could still be implemented eventually. Business is based around doing whatever it takes to make money and control those processes, it doesn't matter what they are, business finds a way.

>I dunno, what kind of alchemy are we talking here? Precious metals in to other metals or thin air in to shotguns?

I'm still thinking about that, but I'm leaning more towards making it "overpowered", because part of the thematic idea for the setting was to explore just how radically various magical powers would affect society and the human condition.

I think it can be more interesting to make the magic itself seemingly innoculous but have BIG effects,

That works too. What if it were logical but obviously extremely efficient. Ie:

>All you need is equivalent mass and some sort of easily available magical catalyst to transmute one substance to another

You can't make complex objects (so maybe the counterfeiting of actual dollars is out the window, unless anyone can think of a way that that could be worked in without leading to shotgun out of thin air level level stuff) but you can conjure up gold, plutonium, steel, whatever you need fairly easily.

In addition, maybe some of the tension of the setting is that peoples understanding of magic is accelerating, starting out innocuous but with the threat of a "magical singularity" on the horizon as it slowly grows towards the really overpowered stuff?

As long as there is something that cannot be fabricated, the potential for a functioning economy and financial system based on its trade and production can exist. The more powerful the magic, the more unfamiliar I assume this system will become, it could be anything from some kind of agrarian food or manual labour based economy to an economy based on computer processing power. Economies are reactive, and without confirmation of the restrictions on them, we can only make wild guesses as to what they might look like.

I wonder, what if there is nothing that can't be fabricated. What happens then?

Of course, that might be going off the deep end since labor and such would be hard to fabricate. Unless you added homunculi to the mix.

Of course, if one can only make wild guesses, that might be the perfect opportunity to just pick something that sounds "fun" and interesting, and just go with it.

An idea based economy? of course, you could fabricate those too...

Fine art and entertainment based economy.

In the end this is pretty much the question/problem of the Post-Scarcity Economy, something sci-fi has been wrestling with for a long time.
Here is my take, going through each of the main ways of doing it, first:
>Cashless Fiat
Fiat money is likely the money you use in your country, one dollar/pound/euro/yen/etc. is not equivalent to anything real, it is not backed by anything, so if a country said "we will now abolish cash (physical money)" then the economy would still run (there would be some uncertainty and unpleasantness but it should sort itself out), after all how often did you NEED to use cash and you couldn't have paid by card?
This would also buy time for governments to find a solution such as:
>Gold Pressed Latinum
As seen in Star Trek, Latinum is a materiel that could not be made with a replicator, the gold was just so that it was easier to deal with.
If something can't be made from "thin air" then it is a valid choice for the currency, in the same way gold was in the day of yore, or just to make coins with.
If that isn't possible, or a government chooses against it there is another alternative:
>Power Credits
Whether it be magical power or electrical power, if there is a resource consumed in the production then that is probably where currency will be found, it doesn't even require governance, if you know that a billiard ball requires a third of a Thaum to create, you can expect to pay a little above (due to markup) that to buy one.

>make currency LAST
>start with a price list
;^)

>Everyone can make gold from everything
>Nobody ventures into dungeons anymore, because who needs gold anyway
>The dungeons rot away and are forgotten about, erased from all the maps and the world moves on
>fast forwards a thousand years
>someone sees the word dungeon in an ancient history book
>"This looks like a fun concept to build a game on"

Path of Exile logic. Every currency can be consumed and has practical value, thus it can never inflate. Lord knows where they originate from though

Have you seen "tass" in the White Wolf games? It's this sort of currency. Mages can pour magical energy into creating tass that sticks around as a sort of battery of crystallized mana, trade it around, then use the tass as fuel to cast more spells at a later time. Sounds like a decent premise.