Economic (Stock and RHS) Theory

[el cid again]

AE (Stock and RHS) Economic Theory

1. General: I find few players, even those with economics degrees, actually manage the economy when playing AE. Instead of managing the economy, they tend to ignore it until some crisis shuts down something critical, at which point they try to address that. This article is an attempt to provide a theoretical framework to use to proactively manage the economy with a minimum of effort. Since most mods use the stock system, and since RHS and mods based on it use a significantly modified system, I will try to explain where and how and why these differ? Since they are broadly similar, the basic ideas are the same. Essentially, both the stock system and the RHS system attempt to simplify the amount of player management required using very different approaches to the problem.

The manual section 13.0 (The Production System, page 225) says "The economic system in war in the Pacific Admiral's Edition is similar to, but modified from, the original War in the Pacific game. There are several new types of industries, and the inputs and outputs of the industry centers have been changed. These changes have been made to allow a more detailed and accurate simulation of the wartime economies of the combatants in the war."

I am glad to see the use of the term "accurate simulation" in this description. Sometimes forum commentaries say "AE is a game, not a simulation." Yet it only works when a reasonable effort is made to simulate the fundamental economic situation that serves as context, as well as means for prosecuting the war. Japan is unusually dependent on imports for its industry: domestic resources are more limited than for any other significant nation. The Allied attempt to force Japan to submit to its will by threatening to cut off imports of oil, iron ore and rubber backfired: Japan was unwilling to be dictated to, not merely over China, but over any issue that might arise from then on. So instead, it attempted to create an autarky - a self sufficient local economy - at the expense of resources and oil from Allied colonial areas. The game war is ultimately about whether Japan can establish, and then defend, such an autarky? For this reason, the Japanese need a clear sense of what is needed, and how to manage it. Similarly, the Allies need a clear sense of what Japan needs to do, to interfere with it, in addition to being able to optimize on map production so they have more to fight with sooner.

The manual goes on to explain the Production System is not identical for both sides. "When the Production System is on, Japan can control all elements of their industry...The Japanese can expand and convert their factories whereas the Allies cannot." It goes on to explain that most Allied production is off map, and also that most Allied production is allocated for other theaters of war - so a total Allied management of their economy exceeds the scope of the Pacific War. Japan and the places it may control are entirely on the map, and all their production is used in the game. Andrew Brown also writes that the Allied theater commanders are not in charge of what gets built: that is decided by others and not under their control. Japan was actually controlled by its military services, and they substantially do get to decide what to build? As well, the Allies eventually have a vast number of units to manage, and a simplified economic system helps avoid bogging the player down with too much detail.
 
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Some aspects of the economy are automated. Certain locations can generate "free supplies" - that is, supplies, fuel, oil and/or resources can automatically appear at the location every turn. As well, land lines of communcation, and adjacent ports when level 3 or above, will automatically "ship" supplies, fuel, oil and/or resources as required, within code defined limits of the capacity of the particular connection. When resource centers or oil wells are connected by road or rail or adjacent major ports, SOME of the management of shipping between various points is removed from the player. Unfortunately, this often is not completely the case, or players may wish to modify what is sent where in some operational situations. It is possible to influence what a given location tries to import by using the location display to say "yes" or "no" to stockpiling supplies, fuel, oil or resources. As well, the amount of supplies requested can be modified on the same display. When locations are connected by lines of communication, turning on stockpiling at one and off for the other will tend to maximize the movement of what is wanted in the specified direction.

As always, the devil is in the details. And there are real differences between the way stock AE and RHS work with respect to the production system. Because stock had to have a playable game in order to issue the program, it developed relatively few locations economically: many locations have no local industry at all and many problems exist trying to feed major industrial centers from the few places that generate what they need. As an expedient mechanism, many places were given "free supplies" (which might be resources, fuel or oil) to facilitate production. Thus, resource poor Japan has several gigantic resource producing locations, simply because neither AI nor human players would import enough resources for the huge industrial centers in Japan. With years more time available for research, RHS adopted a more detailed approach, doing a microeconomic analysis of every location, on about twice as many locations. This process included discovering things like oil fields or certain kinds of industries which are not modeled at all in stock. Precisely what is needed, and where, and in what quantity, is significantly different depending if the mod uses the stock or RHS production system. In general, "free supplies" in RHS are at map edge entry points, or are very limited modeling something very specific about a location. As well, HI in RHS is much more demanding of resources, as a deliberate attempt to require the use of shipping to support the economy. While the same principles apply regardless, they apply more in RHS than in the stock system. In RHS, you MUST import the resources used by Tokyo industry, or shut down production, or it will automatically shut down when they are consumed. The amount needed EXCEEDS what can be imported by railroad or road, so much MUST come by ship. RHS generally provides players with more ships, but requires most of the shipping be used to support the economy - or production will be dramatically lower than it could in theory be.

Finally, note that much industry in RHS starts the game "damaged" - particularly for the Allies. This permits a measure of player control over "growth" of the economy - at the price of supply points used to "repair" the industry. It is not intended that everything be repaired at once, in most cases. In particular, aircraft factories for types not yet in production should NOT be repaired - so production will "ramp up" and also so that excessive drain on available supplies will not occur at game start. This mechanism, using "damaged" industry, means that Allied production grows significantly over time.
 
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2. Primary Industry: In the most basic sense, there are three kinds of economic inputs in the game: resources, oil and manpower. These are used by secondary industries to produce fuel, supplies and HI (Heavy Industry) points. These in turn are used by tirtiary industries to produce various weapons systems as well as being consumed by ships and land units and construction activities to facilitate operations. However, in the case of the Allies, much (probably most) production of supplies, fuel, and weapons is done automatically and off map or at the map edge in the form of "free supplies" rather than industry generated - so the Allied player(s) responsibility is restricted to the fraction which is on map. However, the Allies have several medium sized and many small economic zones, and these will better support operations if actively managed than if ignored. In RHS a fraction of off map production is industry generated - in part so production can grow during the war rather than force a constant rate for the entire period.

The ratios of production inputs and outputs may differ between the stock system and the RHS system, although only in degree, not in kind:

1) A Resource Center in stock produces 20 (tons) or resources per day. In RHS it produces 24 (tons). As an input to Heavy Industry, Recourses are (by weight) mostly coal. The largest single non-coal component by weight is iron ore. After that, in order, is copper, aluminum, tin and trace materials/ As an input to Light Industry, Resources are (by weight) mostly timber (logs), gravel, and agricultural crops (both to make food and fabric, and to make gun-cotton). After that, they include various chemical minerals, such as sulphur, used to make things not made by Heavy Industry.

2) An Oil Center in stock is identical in output to an Oilwell/Rubber Plantation in RHS: each produces 10 (tons) of oil (or rubber) per day. When a location has less than 10 "oilwells" RHS considers them to be "rubber plantations" instead. When a location has ZERO "oilwells" it is considered to be a known oilfield that is not developed which players are permitted to develop with the technology of the time (see Kenai, Alaska for example). One case is exceptional: "oilwells" at Whitehorse, Yukon Territory represent the end of a pipeline from Norman Wells, Northwest Territories - and they cannot be "repaired" until the pipeline is completed (in Spring 1945). A similar case is the wholly undeveloped Ramree Island, which has no port or airfield, but which can have both infrastructure built and "oilwells repaired" if a player wishes to invest in them.

3) A Manpower Center in stock produces 5 manpower per day. In RHS it is only one. Manpower is not generally a limitation in game terms. For this reason, RHS has reduced production to the minimum level, in the hope that sometimes it will be a limitation. RHS also has many more Manpower Centers because it has added so many locations, so the attempt to limit manpower production requires very little manpower per center. RHS defines Manpower Centers as 100,000 population in an urban area. In RHS, a city with 4 to 9 Manpower Centers is defined as Urban Light, while a city with 10 plus Manpower Centers is defined as Urban Heavy.
 
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3. Secondary Industry: The ratios of production inputs and outputs may differ between the stock system and the RHS system, although only in degree, not in kind:

1) A Light Industry Center in Stock requires 15 (tons of) resources in and generates one (ton of) supply out. In RHS, each LI Center requires 12 (tons of resources) in and generates two (tons of) supply out. Thus there is a fundamental difference in the ratio of resources to supplies: when LI is used to make them, the ratio is 15:1 in stock but only 6:1 in RHS. This is because there are few industries which are so horribly inefficient as to require 15 tons of input for every ton produced. A typical Light Industry might be a sawmill or a cannery or a cotton mill or a sulpheric acid plant: RHS assumes that Light Industry is 250% more efficient in terms of weight of output compared to weight of input than stock does. Light industry is "powered" by the resources it consumes: if an energy source is required, it is assumed that coal, or even wood, is burned to get it, and both are part of the "resources" consumed.

2) A Heavy Industry Center in stock requires 20 (tons of) resources in. As well, it requires 2 (tons of) fuel as input. It makes 2 supply points and 2 HI points for a ratio of 5 resource points and half a fuel point per ton of output. In RHS, HI Centers are more demanding: they need 48 (tons of) resources plus 4 (tons of) fuel in, and produce 4 supply points and 4 HI points out. The RHS radio is 6 resource points and half a fuel point per ton of output. RHS assumes that HI is slightly less efficient in terms of needing resources as well just as efficient in terms of needing fuel per ton of output. But the important difference isn't in the ratio change, which is similar: each HI center demands 240 % more resources and 200% more fuel. For this reason, locations with many HI centers often require vastly more shipping to get what they need to stay productive all the time. For players who make that happen, these centers also are able to generate a 200% more supplies and 200% more HI points. This makes HI Centers even more important than in stock. As well, it permits Japan to produce somewhere near its historical quantity of ships, aircraft and armaments, and occasionally to consider expanding industry - none of which is seems practical in stock. Nominally, the Allies don't use HI points. But it appears that Allied aircraft production either does use them, or it has been coded so that some day it can use them: the HI required field is active on the Allied economic display. One reason to think this is the case is that if HI shuts down at an Allied location, all aircraft production turns OFF at the same location. Heavy industry is substantially coal powered, and about 2/3 of the resources consumed are coal for power or for coking in steelmaking. However, since fuel is consumed, one point should be considered to be lubricants and the rest as petroleum fuels required to power certain processes. The typical HI Center is a Steelmill combined with an Iron Smelter. Steel is the second most important strategic material, after oil, used by a WWII era industrial economy. HI Points and supply points made by HI Centers substantially represent steel production.
 

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3) An Oil Refinery in stock requires 10 (tons of) oil in and produces 9 (tons of) fuel plus one (ton of) supply out. In RHS, it requires 15 (tons of) oil in and produces 12 (tons of) fuel plus two (tons of) supply out. This means that RHS refineries are not perfectly efficient: 1/15th of the oil is "consumed" to power the refinery itself. Also, each refinery demands 50% more oil, and produces 33% more fuel and 100% more supplies than in stock. This is the biggest difference between RHS and stock industries (where as Oil Centers are the only case the two systems are identical). This was done for a variety of reasons, mainly to make it easier to model historical production rates and somewhat more realistic industry modeling. The effect is to increase the demand for tankers to ship oil to Refineries as well as to move fuel from them.

Note there are three different ways to make supply points, each with a different primary "cost" to make them. LI Centers, HI Centers and Refineries ALL make supply points - but each demands a different input to do so. Thus it is not possible to say what a supply point costs in terms of resource points? It is either 15 (for LI), 5 (for HI), or 0 (for Refineries) in stock OR it is 6 (for LI), 6 (for HI), or 0 (for Refineries) in RHS. These ratios are further complicated by the requirement for oil or fuel: LI Centers demand none of either, HI Centers demand fuel and Refineries demand oil in order to make supply points. [Here HI centers measure resources required per ton of output by dividing the total of supply points out PLUS HI points out into the resources or fuel in.] This is not very different from real life and is good modeling: the cost to produce the things we consume is not identical - it varies from one case to the next.

4. Tertiary Industry: Tirtiary industry produces aircraft engines (Japanese only), aircraft, ships, armaments and motor vehicles. All of these are featured in the player displays and in most cases have control switches permitting production to be turned on and off. In addition, there are a few special cases where devices are produced by name. For example, at Batavia the KNIL Heavy Improvised AFV and the KNIL Obervalwagan are produced. These industries can have repair turned on or off, but lack production buttons. This system was introduced by stock for production of certain Japanese weapons, like missiles, and has been considerably expanded by RHS. Sydney, Melbourne, Brisbane and several cities in India produce various kinds of vehicles - and these usually upgrade to better vehicles over time. If they are captured by the enemy, they can be repaired and will produce - but dump their products into the pools of the "wrong side" - so generally a player who captures a location with such an industry should not repair it!
 
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Tirtiary industry management can be very complicated, particularly for Japan with respect to aircraft and the different engine types needed to produce them. In RHS, some effort has been made to simplify this. Simplified RHS Scenarios all have even numbers (92, 102, 104 and 106). For both sides, in Simplified RHS, aircraft production "ramp up" is crudely simulated, so there is less need to "repair factories" - simply turn on production when the date arrives a type enters production. Except in cases of very low production, the starting date will be a month later in time, and production will start at the full rate for the factory. Stock does not use training aircraft as trainers: such trainers as exist either are used for recon, or in Downfall Scenarios, as suicide attack aircraft by Japan. RHS does use trainers as such (Japan only), implementing code permitting training air units - which works fine. However, while a player MAY produce trainers, much trainer production is wholly automated and does not require player management (and also cannot be diverted from trainer production to warplane production). The Japanese may produce EXTRA trainers if for some reason they wish to, but they cannot prevent the basic trainer production of history and divert that to producing something like Zero fighters. Similarly, and on both sides, RHS has automated some air transport production, particularly for types which players would not elect to make but which are available for operations. Note that Japanese training air units are NOT able to perform normal missions - only training missions. The rare Allied training air units (see Liuchow China for example) are cases where an air academy fielded squadrons of trainers for OPERATIONAL use, generally for recon or bomber missions. Other Allied units using trainers - common in IAF and USMC for example - also permit operational missions - and the units eventually upgrade to combat types. In addition to aircraft management, ship conversion is under player control. Japan also may suspend, stop, or accelerate ship production. Leaving production set to on for everything, or accelerating all production, will mean that too many HI points are required, eventually limiting production of aircraft, ships, vehicles and armaments (when the pools run out, production does not happen). Trying to understand what one can produce and if acceleration or halting is a good idea can be very complicated indeed. Some attempt to help with this is made below under management tips.

Theoretically, Tirtiary Industry (as well as construction and production of units) requires HI Points for Japan. [They also appear to be used by aircraft factories for the Allies.] While HI Points are dumped into a global pool for each side, and can be used by industry anywhere, it appears the chances of production by a given industry are better if the HI Points required are produced in the same hex. When HI Centers are turned off in a hex, often tirtiary industry in that hex is turned off automatically, or remains on but does not happen. Try to keep HI Centers working in tirtiary industry locations you want to produce.

5. Economic Management Tips: The fundamental principle of player management in the AE game economy is to decide what is needed by a major industrial location and where it should come from? If you are lucky, what is needed may be nearby, and may be able to move by road or rail line. More often, some, much or all of what is needed must be moved by ship. The amount of what is required for production may vary over time (for example, industry can be built, damaged or repaired). Also, players may decide to reduce demand for something by curtailment of production of the industry which demands it. The economic mini game is a constantly changing re-evaluation of these matters, location by location, on a regular basis (ideally daily for every location).

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Each time a player examines a location, it is a good idea to review the production data for that location? First, click on the left side of the industry row, and get a list of the kinds of industries at that location.

1. LI Case: Most locations have Resource Centers and Light Industry Centers. In the standard case, decide if the number of Resource Centers is greater than required to "feed" the Light Industry Centers? This is easy in RHS: a single Resource Center can supply the needs of TWO LI Centers. If the number of Resource Centers is half (or more) of the number of LI Centers, turn Stockpiling Resources to OFF and export the surplus, to the degree possible. For stock, every three Resource Centers can feed FOUR LI Centers.

2. Special Cases: if there is no LI or HI in the hex, turn the Stockpiling of Resources to NO and the location will then export to the maximum degree possible. The same for Oilwells: if there is no refinery in the hex, say NO to Stockpiling Oil and it will export, is possible.

3. HI Case: if there are HI Centers in the hex, generally there are also LI Centers as well. In this case, usually Stockpiling Resources should be turned ON, so the hex will try to import them to feed the industry. However, you can take the time to decide if that is the case if there are many Resource Centers in the hex. In RHS, it takes two Resource Centers to feed an HI Center: if the number of Resource centers is not more than twice the HI, set the Stockpile switch to ON. If the number is bigger, subtract twice the number of HI from Resource Centers: what is left can feed the LI Centers. If the number of LI is less than twice as large, the hex supplies ALL the resources it needs, and Stockpiling can be turned OFF, so it will export the surplus. If you turn Stockpiling Resources to ON, look at the current amount of resources in the hex: if it is less than needed by both HI and LI, turn HI off in RHS, or turn LI off in stock due to the relative efficiency of production when you cannot afford both.

4. HI Complication: HI Centers ALSO demand fuel to produce. Look at the fuel stockpile in a hex with HI centers: if it is not FOUR times the number of HI Centers (in RHS, TWO times in Stock), the HI will not produce. If the location is also a port hex, consider if the location needs to fuel ships, or worse, to load tankers with fuel? If it does, and if that has priority over HI production, turn the HI off - so the HI will not consume the fuel. In RHS this is a particular problem at Capetown: many ships go there and need fuel. Local fuel production is not much larger than needed by local HI. If you have not imported enough fuel, turn HI off to be able to fuel more ships. When you import enough, turn HI back on and get more supply points as your reward.
5. Oil Refinery Case: If a location has an Oil Refinery, see if there is a local oil supply in the form of Oilwells or free oil? If there is, and if it is greater than needed by the refinery, turn Stockpile Oil to OFF. Otherwise, turn Stockpile Oil to ON and try to import it automatically. Stockpile Fuel may be set to either off or on depending on if the location needs to build large fuel stocks or if it can export the fuel it produces to other locations over roads and/or railroads. It takes one oilwell to feed one refinery in stock, and 3 oilwells to feed 2 refineries in RHS. 

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6. Shipping Management Tips: One fundamental truism is that there is never enough shipping. Aside from getting what is needed from where it is to where it is needed, doing so in a more efficient way will pay dividends for the player operationally. If ships take one thing one direction, and return with nothing, it is not as an efficient use of shipping as taking things in both directions, or in setting up a triangle route with something carried on two legs of the triangle. Since the total shipping available does not usually permit full production, using it more efficiently means more can be shipped, resulting in more production at more locations.

A general principle is that ships should not be kept idle except when part of a reserve to commit in an emergency contingency. In general, AKs and tankers should be moving, carrying cargo to support the economy or directly assigned to military operations. Even APs can be used to haul supplies or, less efficiently, fuel.
Another general principle is that long range ships belong on long range sea lines of communications, as far as possible from enemy units, and not used for short range sealift nor, even worse, in places where the danger of sinking by enemy forces is high. A good rule of thumb is that ships with five digit ranges, in excess of 10,000 nautical miles, should be limited to use on long range SLOC.

Some locations have sufficient local sources for only part of their industry: player who ignore this will find industry periodically shuts down until enough is present to permit production again. The more industry you keep working, the more that industry will produce. In most cases, it is ships that permit moving more than otherwise moves automatically under AI control down rail lines and roads, or between adjacent ports (Level 3 and above). The game has a system for automated convoys which does work. Generally, however, optimum efficiency requires constant player evaluation of what to ship on what ship, to what destination, on a case by case basis, every time.