Indexing Economies

[Doc]

I'm going to move this over from the post on LOD = USD. The more I think about it, the more it would appear that I jumped into a discussion. I'll then delete my posts on the other thread:

I want to pick up this project in Kalistan- I used to work on a realistic economic model in Mordusia, but lost interest in the project when it became clear that a number of my essential assumptions are flawed.

My goal for Kalistan is the same as my goal for Mordusia. I aim to find out whether the spending priorities for Kalistan are realistic. To accomplish this, I need to figure out a few things:

1) I need to learn how to compare the economy of Terra to the economy of the world. To do this, I need an arbitrary starting point. The one thing I will say, which occurred to me as I read THIS thread was that it is really kind of pointless to compare currency values. Currency is whatever a government says it is. A government like Argentina, for example, pegged their currency to the US for years. That doesn't mean that the Argentine economy was exactly the same size of the US economy- it certainly was not. It also doesn't mean that the value of each Argentine peso, as a representation of the total number of pesos/GDP(AR) was valued the same as the value of each USD, as a representation of USD(t)/GDP(US)- the number of pesos in the Argentine economy was almost certainly more compared to their GDP than the number of USDs compared to their GDP. By this calculation, if the Argentine Peso was pegged to the USD, they were actually WORTH, in terms of buying power a LOT more than the USD, which were fairly easy to come by. This misvaluation of the Argentine Peso was actually borne out in the ability of Argentines to actually purchase things in their economy. The Peso, because it was pegged at the USD rate, was very scarce in the Argentine economy. Consequently, prices were more or less too high for the average Argentine citizen to buy anything with their Pesos. It got so bad that when the Argentine Peso was unpegged, it almost immediately lost 2/3rds of its value in the economy, and people lost a fortune as it settled into a more equilibrium valuation of 3 Pesos to the USD, seemingly over night. The result was a financial crisis of 2002 and the default on the debt of Argentina. I think, therefore, that setting the LOD at even 4 USD seems incredibly arbitrary- that would make it incredibly difficult for anyone to actually buy anything in Lodamun. But at any rate, Lodamun could pass a bill to set the currency at whatever rate it wanted.

2) And yet, we would need to set an arbitrary point. What I propose is that we index the GDPs (not per capita, but just size of economy) of Terra. And then we compare it to some index of the world's GDPs. I would say we find the bottom of the top quintile, in both cases, whatever country that happens to be, and then set that are our 100. We would then say "Terran X is equal to Earth X." From there, each of us would know what our own country's index number is, and we could compare it to an index number in the world to get a good idea of how relatively well off our country is. If we have several choices, we could look at GDP per capita to get a finer tune. Each of us, for the purpose of comparison, pegs our currency to THAT real world country's currency, for the purposes of this experiment.

3) Then we look at how that country spends its money: We can see what it spends on similar spending programs that we spend our money on. If it is a social democracy, and we are a social democracy, we can look at how it spends its money on health, education, food etc. If it is a liberal country, obviously it will have different spending break downs. We would have to look at spending as a percentage of THEIR GDP and compare it to our spending AS A PERCENTAGE of our own GDP. This would help us get a better idea about a real economic valuation in our own country.

In short, comparing our currencies to the LOD will not give us any idea about the RL value of our currency or the size of our economy. We would have to find a less arbitrary figure, like an index of economies to compare to a similar index in the RL World.

[Doc]

Alright, here is the Spreadsheet I worked up.

First- Methodology.

I took Siggon Kristov's Exchange rate data and calculated everyone's GDP in Lodamun Dollars with the following Formula: GDPc*RATElod=GDPl

I then ordered the GDP's from Highest to Lowest, and divided them into 5 groups. The bottom three groups had 12 countries per category, while the top two had 11 countries per category.

I then created two indexes. One set at the GDPl for the lowest country in the top Quintile (which is Solentia, at roughly 296 billion) and the second was set at the mean GDPl, (which was Trigunia, at 252.6 Billion). For the first index, I divided each GDPl by Solentia's GDPl, and then multiplied by 100, to produce an index which ran from 166.71 to 0. 10 countries exactly are greater than 100 in this index, the remaining 48 countries are below 100, though except for the lowest 3 countries, the lowest index value is 30.51. This means that each country's GDPl is that much more or less, as a percentage. So, in this case, Republicca Istaliana (Quanzar, on the list, or Country 39) has the biggest economy, and is 166.7 percent of Solentia's. In this case, Solentia is just the country which sits at the lowest point in the top Quintile.

For the Second Index, I divided the (country's GDP in LODs by Trigunia's) times 100, which is the average economy over the entire world. In this case, there are 34 countries with bigger economies than Trigunia's and 23 with smaller economies. On the Indm, the index runs from 196 (or roughly twice as big) to 0, though above the bottom three countries, the lowest indexed score is 35.

The reason for these two different indexes is because then I used the World Bank's GDP data for September 2014 to create similar indexes. For the data listed by the world Bank, I created a Quintile Index and a Mean Index. Both of these should give us a means for comparison, assuming Terra as a whole is similar to Earth as a whole. Interestingly enough, the Quintile Index had Chile at the bottom of the Quintile Index and Thailand (a country with a bigger GDP than Chile) as the index point for the Mean Index. The answer to this curious situation is that the economies of the US, China, Germany and Japan are so incredibly huge that it pulls the mean WAY off the median income, where would have otherwise expected it to be found. The US is especially problematic in this activity, especially in terms of the Mean Index. Since the Quintile Index is merely a count measure, rather than any sort of mathematical measure, it is not problematic there.

Now- the point of this process is to see what country your country would look like if Terra were transplanted to Earth. Based on these indexes, most of our countries are what we would call "Developing" Countries. That is not a problem- Most of the countries of the world are not advanced economies by any stretch of the imagination. But if your country is in the top quintile of Terran nations, you could generally expect to act like those in the top quintile of Earth's nations as well, and so forth. I included the Mean index to give us some different ideas, and take into account a lot of the differences between earth and Terra.

In no situation will a country approach the GDP of the US comparatively. Or China, or Germany. But then again, you could aspire to Saudi Arabia Status, or Belgium status. And really, in terms of size of the economy, that really isn't so bad. In the Quintile analysis, there is a lot more room... The top of this index are sitting at around Venezuela, Denmark, Malaysia and Singapore levels.

Also, I should point out, that these are just guides for your country. You could go up or down a few degrees in either index.

The ultimate goal is that you should use these indexes to begin to research countries LIKE yours in the real world, in terms of GDP, to get an idea of how they do their spending respectively. It will help you RP your country more accurately, if you are so inclined. Or not. Check out the Spreadsheet, get some ideas, and hopefully it is helpful. Perhaps some of our friends in Moderation can publicize this work.

[Doc]

We have conducted an analysis of Kalistan's comparative economic index. In Kalistan, we selected Austria to compare ourselves to- A small, developed economy about 2/3 of the way down the index, which was not based almost exclusively on one single resource, which is primarily self-sufficient, and exports luxuries and some minerals, along with some petroleum.

On our National project Page, I wrote the following:

All told, after handcoding a little bit of data, the total time of the analysis took me about a half hour over all, including writing the analysis. Any person interesting in performing this analysis can easily find budget data on google, and then run your own nation's budget. Good Luck, and Peace.

Alright: here is the comparative analysis with Austria's Government Budget. Nominal amounts are not important. What is important is the percentage of the total budget each ministry takes up.

https://docs.google.com/spreadsheets/d/ ... sp=sharing

Austria's economic data is 2014 proposed budget, which should give us an idea of what they actually passed. Their data can be found here:

http://www.statistik.at/web_en/static/r ... 37422.xlsx

The only data that I finessed was the Austrian "Federal Ministry of Families and Youth" was combined with the "Fed. Min. of Health" to equal our "Ministry of Health and Social Services." Otherwise, the comparison was more or less one for one.

You will notice that compared to Austria:
1) We REALLY underfund Science and Tech. 75% of their budget goes to science and research in Austria while 11% goes to science and tech in ours.
2) Compared to Austria, we overfund our Health Ministry by 23%, and Food and Education by 15% each. We also overfund our Ministry of Justice by about 8%.
3) Everything else is similar to Austria's budget, +/- 2% or so.

This analysis should give us an idea of where to cut and where to increase funding to come more into line with spending in a similar country. I am not saying cut Health by a full 2300%. I am saying we can afford significant cuts in Health, Food, Education, and Justice, with a major increase in Science, and still be somewhat realistic in terms of spending priorities in a RL nation similar to ours.

[Doc]

A correction- When we broke the science budget into R&D, which I assume are rolled into each of the ministries' respective budgets, we get the following breakdown, which is a lot more realistic.

Alright- Divying up the research Budget according to http://www.statistik.at/web_en/statisti ... 71123.html I have fixed the analysis

Now, compared to Austria, we have the following situation

1) Overfund- Food and Ag, by 12.6%, Education and Culture by 12%, Justice by 7.6%
2) Underfund- Industry and Trade by 22%, Transport by 5.8%, Health by 2%
3) Everything else is comparable, +/- 1.5%

This means that we could, realistically, take some money from Food and Ag, Education and Justice, and put money into Industry, and we would be almost right on Austria.

[Amazeroth]

Without wanting to destroy any of your work - the data you used is not the Austrian budget. It's just saying where the money goes that Austria is spending on R&D. As far as I've seen, you won't find the Austrian budget on Statistik Austria, mostly because it's not a matter of statistics.

[Doc]

Interesting.

Looking back at the Austrian Data, you are correct. That chart is titled Research.

So Back to the drawing board on the comparison.

Somewhere, there has to be a list of ministry budgets. Austria isn't exactly Albania with regard to government Openness (and by Albania, I mean "Not open"). It shouldn't be too difficult to find this set of numbers, somewhere.

[Doc]

Here is my data:

This breaks down the federal budgetary expenditures by sector, which I'll take as a proxy for IG Ministry funding.

This sort of breakdown actually gets to what I wanted to get to: as a percentage of one's economy, what does a military weapons policy cost, and so forth...

I'll analyze this tonight

[Amazeroth]

From what I see it will be close to impossible to break these expenditures by sector, since they are very indescript to what means they are used.

There is, of course, open data on the Austrian budget, and its allocation in respect to the different ministries, but it's usually in German. And it's usually deceiving, since it only considers revenue from taxation, and not, for example, the social security system, since that's usually not funded by taxation per se (a great, great part of the taxes are going to helping the pension funds, though), but gets its money by having employees and employers both pay the social insurance agencies directly. Which, although all of them are completely owned by the government, isn't listed as taxation, and isn't included in the budget - for particracy, that would be part of the budget, though, since there's no way to allocate money to health systems other than that.

[Doc]

The old saying is: We go to war with the data we have. There's not many data points on the Dataset. While of course I will not be completely sure, I can make some educated decisions here.

The goal of course is not an exact comparison. I'm trying to get a general idea if our spending is similar to Austria. Since there is no IG mechanic which puts an actual price to the budget of various policies, currently, I have no idea about the connection to our country's laws and their cost. The numbers are completely arbitrary. I am merely trying to get an idea of whether our country, with its mixed economy and fairly generous social services package is anywhere close to realistic. I would therefore need something in the real world to compare it to. If we was spending wildly on one of our ministries compared to some country which is subjectively selected from a set of countries +/-10 indexed points from ours, it would show up in an analysis such as this.

The spending is unfortunately not broken down by ministry in the Austrian data, but I can still select where I would place those programs that are listed into the IG schema. This is a coding choice. I can be completely transparent in the process, and others can then check to see if they agree with my coding decisions, and if not, we can debate on a few points, and change stuff around. But the goal is to provide a general picture of the spending of a similar countries, not an exact 1:1 comparison. Besides- Austria was merely the choice of the players active in the discussion in Kalistan- I would have gone for something more like Iran. But if we set Austria, we look at their data. The goal is to get some RL basis for determining proper levels of our spending in a completely invented world which, unlike the real world, actually does operate according to algorithm.

[Amazeroth]

The old saying is: We go to war with the data we have. There's not many data points on the Dataset. While of course I will not be completely sure, I can make some educated decisions here.

The goal of course is not an exact comparison. I'm trying to get a general idea if our spending is similar to Austria. Since there is no IG mechanic which puts an actual price to the budget of various policies, currently, I have no idea about the connection to our country's laws and their cost. The numbers are completely arbitrary. I am merely trying to get an idea of whether our country, with its mixed economy and fairly generous social services package is anywhere close to realistic. I would therefore need something in the real world to compare it to. If we was spending wildly on one of our ministries compared to some country which is subjectively selected from a set of countries +/-10 indexed points from ours, it would show up in an analysis such as this.

The spending is unfortunately not broken down by ministry in the Austrian data, but I can still select where I would place those programs that are listed into the IG schema. This is a coding choice. I can be completely transparent in the process, and others can then check to see if they agree with my coding decisions, and if not, we can debate on a few points, and change stuff around. But the goal is to provide a general picture of the spending of a similar countries, not an exact 1:1 comparison. Besides- Austria was merely the choice of the players active in the discussion in Kalistan- I would have gone for something more like Iran. But if we set Austria, we look at their data. The goal is to get some RL basis for determining proper levels of our spending in a completely invented world which, unlike the real world, actually does operate according to algorithm.

If you want to, I can give you the budget broken down by ministry and translate it into English, it's freely available on the ministry of finance's page.