The economics of SR Options

[hobgoblin]

Sitting here watching some video:
http://www.debtdeflation.com/blogs/2012/01...res-interviews/

And while watching the second one, i find myself thinking about just how nasty the SR economy really is.

With the corporations being nations in their own right, each time a nation (or citizens of a nation) buy products or services from one of them some of the spending power of the nations gets locked away in the corporate vaults. This because the workers of the corporation are corporate citizens, not national citizens. And so the wages do not get spent inside the nation, at least as long as those workers are payed in corp scrip.

[Cheops]

Why do you think that so much of early shadowrun was focused on the Neo-Anarchist movement? Oligopolies suck and corporate feudalism sucks harder.

[CanRay]

Why do you think it needs to come back?

[nightslasthero]

The Shadowrun economy is best described as unrealistic.

The wages from corporate script do get spent within the nation (within the corporate building) and contributes to the economy (in as far as produciton and hiring of goods go). The corporate script is (Probably) untaxable (given the nature of the megacorporations). However, maybe corporate script counts as income and is taxable? Either way, it does add to what the corporation needs to produce and needs workers to produce those goods. Not all employees get paid in corporate script and so the corporation still contributes to the economy in that sense. (Basically the drone cleaning unit you bought with corporate script may have been made by someone who got paid in nuyen.

However, a real corporation would likely not use corporate script. (It either wouldn't count as income so would hurt the bottom line, or woudl count as income and be taxed to a point to encourage the corp to no longer use corporate script.) There is also a problem with the corporation not producing everything. (and a corporation producing everything simply isn't viable economically in my opion)

It should also be noted that these problems occured during the Articles of Confederation where each state had their own money. This basically killed interstate trade. I think a similiar thing would occur within the Shadowrun universe where it would most likely head to phasing corporate script out completely. (Though not doing so could definetely be why the Shadowrun economy is so bad).

A similiar idea is why Europe is heading to the Euro rather than individual currencies.

Also I think the conectedness of the corporations to the local economy would likely make nuyen almost equal to corporate script anyways. While the corporation is saving nuyen by paying employees in corporate script, it is not gaining anything to its bottom line when they purchase the goods with the corporate script. (Give them too much corporate script and they will buy more products from you costing you income you could have had on those products. At some point the cost of making the goods they buy will be greater then the nuyen you save for not paying them. Pay them too less corporate script and you will find employees defecting to corporations that pay in nuyen (or higher corporate script).

The corporation can only buy one good with corporate script (Labor) and still must provide goods at market equilibrium.

So to end my rant, I think a real corporation would have tossed corporate script away a long time ago, however, this could be a good reason the Shadowrun economy sucks.

[thorya]

Corporate Script would be the same as old company stores, in company towns. They don't have to produce everything they sell. Instead of having a monopoly on location and being the only place to buy things, they have a monopoly on being the only place to spend a certain kind of money. The corporation buys low quality things in bulk and then marks them way up when they sell them for corporate script to their employees. The employees don't have a choice, because they can't spend the corporate script somewhere else. They tell their employees that corporate script is the same as nuyen, but it probably has about 50% of the real buying power.

Edit: Of course, it's entirely possible that a blackmarket might develop or other places might start recognizing corporate script and this presents a problem for the corporations control.

[Warlordtheft]

Corp scrip is only good in the corp store. Most employees want to be good employees and only buy at the corp store. The corp buys those items at wholsale or makes them, then sells to employees at slightly less than MSRP. Corp makes mone on the difference, denies customers with other corps (a minor issue), and keeps the wageslave on nice secure corp territory where he can be watched all day. "Have you seen the crime stats in downtown seattle?" Ergo, labor is less expensive than if paid in Nuyen. Also the wageslave could get a split of nuyen and corp scrip.

Potential Scenario:

Salary for a mid level manager the offer might be assuming 1 nuyen ~ $1 in Ares Script:
Nuyen: 5,000 a month
or
Ares Corp scrip: 7500 a month
or
Split: 1,000 nuyen and 4000 in Ares corp scrip.

For this extra 2500 if just corporate scrip, the company makes profit as the persons value to the company is 5000 nuyen. Now they offer goods at the company store for at 20% of MSRP. THe wholsale cost/production cost is 25% of MSRP (basically a 100 nuyen item is sold for 80 nuyen and cost the company 25 nuyen), meaning that 7500 in corp scrip costs the corp 2,343.75 nuyen, while the middle manager is able to afford the lifestyle of someone earning 9,000 nuyen. In the split scenario, the 4,000 nuyen is effectively 4800 nuyen for the employee, and costs the corp 1,250 nuyen.

Of course this means the employee is at the mercy of corp for everything, but hey he has a secure place to live, 3 squares, is clothed, has medical and gets his vacation once a year to a corp resort. Grand bargain--right? (IMG:style_emoticons/default/cyber.gif)

[Wakshaani]

Yeah, CorpScript is, in an ideal world, akin to the old Company Town format. You get your Ares check, pay your Ares rent, buy Ares groceries, Ares clothes, watch Ares Trideo... you're essentially working for the corporation for free. They make their profit by selling stuff to the *other* people. You, they just keep placated and fearful of the outside world.

Imagine being a worker at a Super Wal-Mart, for instance, which sells clothes, groceries, and Stuff. Stuff that isn't in the store can be ordered via the Internet... literally, everything you want can be got through the company. You're then given a choice... due to the bad economy, you can take a 10% pay cut, or get a 25% raise, but be paid via gift cards .... you can only use them in the store, but everything you want is available. Do you want $360 in cash, or $500 in Gift Cards?

For those times when a corporate worker goes on vacation, they convert their corp script to Nuyen and head out into the scary world ... kinda like people switch over to traveller's checks. You never want to get robbed when out on vacation, so Corp-sponsored Nuyen is tracable digital currency, to make sure that even if you get mugged, you don't lose a dime.

[CanRay]

If you're getting mugged on vacation, they're taking everything... Including you.

Hey, Corp-Bodies are full of good condition organs!

[nightslasthero]

The problem with buying the items at wholesale is buying the items. Say a box of goods costs 500 nuyen. Sure you can sell it for 200,000 corpate script but that nets you Zero Nuyen, so you have no nuyen to rebuy the 500 nuyen box. You have to get money (actual nuyen) elsewhere. Not a good business proposition. The only vaiable alternative is to make the items yourself. This is likely still not a valid solution since nuyen would be required to buy at least part of the goods, and you are simply exchanging goods for labor, but not really making a profit on them.

Also I think suply and demand would still hold true and prices would go in that direction. The corp could not arbitrarly charge a large amount. While you can't spend corp script anywhere else, you can move or become a less productive worker. I would say the corp wouldn't follow normal monopoly rules since the corp by using corporate script is effectively exchanging goods for labor. True monopolies don't have to worry about labor issues, since it can pay you a good amount and still make money. But a corp getting corporate script isn't helping its bottom line.

I still think economic concepts would dictate a smart corp would never have corporate script.

Underground economies would definetely play a role.

[nightslasthero]

Imagine being a worker at a Super Wal-Mart, for instance, which sells clothes, groceries, and Stuff. Stuff that isn't in the store can be ordered via the Internet... literally, everything you want can be got through the company. You're then given a choice... due to the bad economy, you can take a 10% pay cut, or get a 25% raise, but be paid via gift cards .... you can only use them in the store, but everything you want is available. Do you want $360 in cash, or $500 in Gift Cards?

The problem economically with this scenerio is that wlmart would still have to give me an additional $140 in goods. As price goes down demand goes up, which should arrive at equilibrium and dictate the price of the good. If you sell below that price you won't be able to keep enough items in stock, sell above that price and you won't be able to sell all the itmes you have in stock. Sure it works good as long as walmart can buy the goods and sell them for a profit still, but the new demand for the goods will raise their actual price more. At some point the demand for goods will be greater than what is supplied by the outside economy and the price to purchase the goods will increase.

Sellling below equilibrium or above it is bad for a company whose purpose is to make money.

In the end I don't see this model as sustainable, even if you save on paying employees. Part of the issue is that all the megacorporations are doing it, making your potential customer base really small. Also hyper inflation would likely be an issue that would have to be addressed, since you couldn't make an arbritary amount of corporate cred avaliable. (same reason real countries can't just print as much money as they like)

There are alternatives of course such as going a more socialist route rather than a capitalist route, but that lowers prodcutivity and never works for any country.

[3278]

With the corporations being nations in their own right, each time a nation (or citizens of a nation) buy products or services from one of them some of the spending power of the nations gets locked away in the corporate vaults.

It's funny, but I was just reading about this last night in Shadowplay, which I vaguely recommend. You should check out Corporate Shadowfiles and Neo-Anarchist's Guide to Real Life, if you haven't already: they discuss the doors off these issues.

This because the workers of the corporation are corporate citizens, not national citizens. And so the wages do not get spent inside the nation, at least as long as those workers are payed in corp scrip.

Most corporate citizens are, by my understanding, effectively dual citizens. [We just talked about this somewhere around here, but hell if I can remember where.] That - and the fact that I'm not sure all corporate employees are paid in scrip - dilutes the impact somewhat, but you're definitely right that the megacorps have a pretty good system of churn going on, an introspective economy.

Why do you think that so much of early shadowrun was focused on the Neo-Anarchist movement?

Because Nigel Findley was a big fat dork, what also happened to be smarter than us? (IMG:style_emoticons/default/biggrin.gif)

Why do you think it needs to come back?

It does add, I feel, depth to the setting to discuss the complexities therein. It makes Shadowrun more "realistic" if it has a complex economy with consequences. The reason shadowrunners exist, actually, is because of some of the economic minutia of SR, having to do with extraterritoriality, the Corporate Court, and bigger pieces of smaller pies and no for once I'm not kidding on the last bit. The cool thing about that, when done well, is that if it doesn't matter to you, you can ignore it and we're both satisfied, whereas if that material isn't in the game, only one of us is camping happy.

The Shadowrun economy is best described as unrealistic.

There's no doubt of that. These guys weren't economists, they were game designers, but for game designers, they were pretty reasonable economists. If you make the base presumptions that Shadowrun does about the economics of megacorporations, the existence of scrip needn't be unrealistic. Scrip is nothing more than the legal tender of the corporation, and the corporation has - by definition [Corporate Shadowfiles, p16] - the economic power of "a late 20th century nation-state," and I hear some of them work okay for a while with their own legal tender. (IMG:style_emoticons/default/wink.gif)

Now, it might be a bigger challenge if, a) free exchange of currencies weren't possible, or, b) employee-citizens could only ever spend within the corporation. To my knowledge, neither of these are the case, meaning that corporations - like nation-states - move money between themselves, not exclusively within themselves.

[thorya]

Corporate Scrip and equivalent has been done. It worked well enough that everyone was doing it for a while. It really depends upon how free you think people are to go find other work. I imagine that going from corp to corp is probably like emigrating today. So not an easy process, but doable.

http://en.wikipedia.org/wiki/Truck_system

[Daylen]

Corporate Scrip and equivalent has been done. It worked well enough that everyone was doing it for a while. It really depends upon how free you think people are to go find other work. I imagine that going from corp to corp is probably like emigrating today. So not an easy process, but doable.

http://en.wikipedia.org/wiki/Truck_system

It worked when there was hard currency. Its basically pointless with national currency being fiat. There is not much point in hording fiat currency, one only needs enough around to be able to make near term purchases. Other than that it is a burden as inflation eats away at value. The only real use of corporate scrip is to make sure your company gets the business, not to horde national currency.

[thorya]

It worked when there was hard currency. Its basically pointless with national currency being fiat. There is not much point in hording fiat currency, one only needs enough around to be able to make near term purchases. Other than that it is a burden as inflation eats away at value. The only real use of corporate scrip is to make sure your company gets the business, not to horde national currency.

I don't know what you mean? What does it mean for currency to be fiat?

[bibliophile20]

http://en.wikipedia.org/wiki/Fiat_currency

Basically, "It's money because we say it's money" rather than being backed by precious metals or other valuables.

[thorya]

Thanks, I had my rpg hat on and was trying to figure out how national currency only existed by GM fiat. It was not going well.

[bibliophile20]

*facepalm* LOL Wow, and I thought I was nerdy... (IMG:style_emoticons/default/silly.gif)

No worries, carry on. (IMG:style_emoticons/default/rotate.gif)

But to translate Daylen's comment, basically, in an economy where the money exists because we say it exists, instead of in an economy based around a limited supply of precious metals, because "hoarding" fiat currency doesn't do anything for your company (a fact that I wish RL Wall Streeters would realize, but I digress), aside from being able to make short term purchases reliably, and actually taking fiat currency out of circulation damages the economy that depends on it, due to a resulting inflation.

(does that sound more or accurate, Daylen? it's almost 1 in the morning here...)

[CanRay]

Are we still on a currency system based on precious metals? I thought it was far more complex now.

I've also described the Nuyen to my group as an "Artificial currency created to ensure economic stability, backed by the production and economic powers of the AAA-Level Megacorporations." They had no issues with that, and said it made sense in a world where Governments are Second-World nations at best.

[hobgoblin]

It worked when there was hard currency. Its basically pointless with national currency being fiat. There is not much point in hording fiat currency, one only needs enough around to be able to make near term purchases. Other than that it is a burden as inflation eats away at value. The only real use of corporate scrip is to make sure your company gets the business, not to horde national currency.

All currencies are fiat. Them being made of metal makes them no less so.

And while inflation erodes the value of savings, it also reduces the burden of any debt by the same mechanism.

And this also makes deflation incredibly nasty because it increases the burden of debt, something only creditors would want to see (at least in the short term, in the long term there will be waves of defaults with no way to liquidate whatever was put up for collateral).

[hobgoblin]

However, a real corporation would likely not use corporate script. (It either wouldn't count as income so would hurt the bottom line, or woudl count as income and be taxed to a point to encourage the corp to no longer use corporate script.) There is also a problem with the corporation not producing everything. (and a corporation producing everything simply isn't viable economically in my opion)

This overlooks the issue of extra-territoriality. Any AA or AAA corp would not pay taxes in the normal sense.

There may be some import/export tax, and likely a land lease of some kind, but beyond that everything is internal to the corporate territory and so outside the reach of national law.

And any trade between nations and corps, or between the corps, likely happens in nuyen, with each corporation maintaining more export than import. The orbital bank acts as the ledger for all this, moving the digital numbers around as time unfolds.

[Stahlseele]

Economics can never be understood. The book Economicon makes it so.
A Book so vile even users of the Necronomicon look at it and it's users with distaste.

[Blade]

It's scrip, not script.

When working on Style Over Substance, I faced the same problem of "how can a corp get money if they exchange their worker's labor for the product their workers build?". And I've got two answers for this:

1. The worker builds more product than he buys. His work is worth more than he's payed for. Since some of these products will be sold to the outside world, because there are some people (or businesses) that don't produce them and need them but also because Buzz cola is just better than Aztecola and you can't prevent people from getting the latest fashionable Fairlight commlink.

2. And I think this is the most important part: in 2070 like today, money isn't created by production but by debt. The worker don't buy the corp's products with the money they made building them, but with the money they'll make building them for the next few years.

[Irion]

The Megacorps have more in common with empires than with today cooperations.
In a World, where your competitor might just get rid of you by shooting your executive staff in the head demands for other forms of management.


@Blade

1. The worker builds more product than he buys. His work is worth more than he's payed for. Since some of these products will be sold to the outside world, because there are some people (or businesses) that don't produce them and need them but also because Buzz cola is just better than Aztecola and you can't prevent people from getting the latest fashionable Fairlight commlink.

2. And I think this is the most important part: in 2070 like today, money isn't created by production but by debt. The worker don't buy the corp's products with the money they made building them, but with the money they'll make building them for the next few years.

Lets start with a little village on a different planet. There are just 500 people and nobody to trade with.
To make things easyier they have the technologie of the medieval ages but they use paper money.

So you have 300 "Farmers", 10 "Aristocrats", 160 "Workers" (baker, miller, smith, hunter), 20 "Guards (Police, Firefighter etc.)"
The farmers produce the basic lifestock and the Rest produces higher quality goods or is responsible for the administration.
Lets say in this village their exsists 1.000.000 "money". So 2000 mony per villager.

No there are goods produced in this village. "Food, cloth, furniture etc"...
This means for example, one "bread" would cost 4 money. (The cost are determined by amount of bread/amount of money roughly)

So now aliens visit the village and help them build a watermill, teach them three-field (crop) rotation, how to use animals for field work and help them build a water supply system.
What has know happend? The amount of money stayed the same, but there is more "bread". Since bread is needed by everybody, it factures in the cost of every product.
(If I am able to half my price of living and the price of living of my employees I can produce ceaper)
So a bread does now cost only 3 money. This means the value of the money increased by around 33%. This means I could "create" 33% percent more money and everything would still cost the same. )

The dept thing does work quite the opposite. It means you create "money" up front without having any value. (Thats why the word "bubble" is used in this context)

[Blade]

@Irion: Creating money from debt isn't exactly creating money out of nowhere, with nothing to back it up. It's creating money backed by things that don't exist yet. It (sort of) works because the bank assures you that it'll have the money by then and that it can give it to you right now if you need it.

Sure it can lead to terrible crashes and bubbles, but that's the way the economy has been working for quite some time now.

[Daddy's Litt...]

Corp script also prevents defections. You have your last 12 years of savings in Renraku script that you cannot spend anywhere elese you are less likely to defect.