This is part 1 of a series where I explore how games illustrate economic concepts. I’ve got at least one more planned. After that, who knows?
Sometimes a return to the fundamentals refreshes curiosity and realigns the mind. This series on the way games illustrate basic economic principles will not be anything new to people who remember Econ 101, but I hope you’ll find it interesting regardless.
It’s possible to play through Sidereal Confluence and never trade. You’d lose, but nothing in the rules forces you to trade. You do trade, of course, because you’ve got some useless cubes but the person across the table has the cubes you need for your machines. Trading is the mechanism by which you get what you want. In the real world we mostly trade with money as a medium of exchange, but Sidereal Confluence has a small enough economy to function on a barter system.
For those who haven’t played, the core mechanisms of Sidereal Confluence are simple. Everyone has engines that turn cubes into other cubes. There’s a free-for-all trading phase. Each alien species in the game is very different with diverse engine specialties. There are more nuances but that’s all you need to know right now.
The beautiful thing is that in a competitive game, where everyone is trying to score the most points, something as cooperative as trading happens all the time. Each individual trade is, at the very least, perceived by each party as beneficial to themselves, which means that in any given trading round, with no additional cubes being made, people are better off at the end of the end of the trading than they were at the start. Without any creation of new materials wealth increases through trading alone, because the materials that were there are better distributed. The power of trade is what makes markets so incredible.
But I suspect most people will see this from a game of Sidereal Confluence. Let’s dig in a bit deeper.
The player screens that come with the game set up prices for each of the types of goods. However, if someone rigidly sticks to that pricing system they will quickly engage in suboptimal trades. Sidereal Confluence illustrates how simple market activity (negotiation and trading) can result in dynamic, emergent price fluctuations without anyone ever “establishing” a price for the rest.
You see the same sort of thing in Catan when players realize, through some combination of player strategy (adjusting demand) and where cities and settlements are built (affecting supply), that one or more resources are going to be hard to get and therefore demand a higher price in trade. Sidereal Confluence has the same dynamics, but there’s a whole lot more information on the table obscuring precise calculation. Experienced players are going to be able to see how prices might change ahead of time (acting as entrepreneurs in the process!), but they’re not necessary for price changes to happen. If someone really wants blue cubes but last round they were hard to come by, they’re going to be willing to exchange a lot more for those cubes.
It’s something of a cliche by now, but this is precisely what Adam Smith’s “invisible hand” is about. As people decide what they want and make trades to pursue those goals, emergent patterns form, adjusting based on the supply and demand of each good, even if every individual person involved has at most a vague understanding of what the overall supply and demand actually are.
Comparative advantage, David Ricardo’s great breakthrough of the early 19th century, is also seen in Sidereal Confluence. It’s a concept that’s easier to explain by example than by description, so consider this scenario. You’re piloting an alien species that’s super good at making blue cubes. You’re just the best at it, and no one can make engines that rival your blue cube production. You’re also one of three who can make those octagons (fun fact, no one actually knows what the resource bits in Sidereal Confluence actually represent. If anyone tells you otherwise they’re lying and perhaps an actual alien themselves.) Last round blue cubes were everywhere. Multiple people had extra blue cubes they couldn’t feed into an engine because no one would accept trades for them. Octagons were highly prized and fetched a high price.
With the resources you have you can either make blue cubes or an octagon. Clearly you want to make the octagon, despite you being the most efficient at making blue cubes. Someone else at the table might be in a similar situation but their best bet is to keep churning out the blue cubes.
In the history of economics Adam Smith titled his opus “The Wealth of Nations” because he was actually trying to answer the question of what made nations wealthy. The prevailing idea at the time, mercantilism, focused on large-scale domestic production and trying to export more than you import. Seizing land to increase that production was also a priority. Smith demonstrated that trade itself was beneficial to both sides and that specialization and trade generated wealth.
Ricardo, with the idea of comparative advantage, was able to answer the question, “what if a country kind of sucks at producing anything?” The answer is that people are incentivized to produce the things that incur the lowest opportunity cost. Back to our game example, if you choose to produce blue cubes that comes at the opportunity cost of not producing a super valuable octagon. But for another player the calculation could be different. Maybe they’ve got a spare blue cube production and the opportunity cost is doing nothing at all. Maybe they predict that people will shy away from blue cubes next round and they can sneak in some good value from making more (because the alternative is another highly-produced cube).
The final economic principle I’d like to highlight is the importance of trust and transparency in market activity. A lot of the challenging policy questions in economic matters revolve around this issue. In Sidereal Confluence it’s simply baked into the rules: you’ve got to honor the trades (even future promises) you make. In real life, places that have legal and/or community structures that facilitate trust in market activity work best.
This is where I find a lot of the discussion around NFTs the past few months baffling. I understand that the blockchain can facilitate “trustless” digital transactions without any middleman. That’s a fascinating innovation. But I’ve seen people talk about that like it’s all that’s required for the tech to work well in the market. With this hyper-focus other aspects of trust seem to have been completely forgotten. How can I trust that an NFT purchase was actually owned legally by the seller? How can I trust that the entire system I’m using to make and maintain the legitimacy of the transaction isn’t vulnerable to hacking?
In other person to person transactions we make, we take measures to create trust. If we’re buying something over craigslist we arrange to meet in a public space and inspect the item before handing over our money. If we’re arranging a board game sale at a local con we can suspect that the seller probably knows other people in that community, so if they try something scammy you can use those community channels to attempt to rectify the situation, or tarnish their reputation if they don’t make things right. This is basic stuff and I’m not seeing how the blockchain by itself solves for it.
NFT tangent over. I adore Sidereal Confluence as a game and as an illustration of the beauty of markets. It’s perhaps the most cooperative-feeling competitive board game I’ve ever played. That’s not a coincidence.