This post aims to provide a basic understanding of production. The most established definition of economics is some variant of “the study of production, consumption, and distribution of goods and services”. This is the second post in a series exploring economics in board games, you can find the full series here.
Production is defined as a process which combines inputs in order to create some output for consumption. An output is a good or service (as covered in my last post) which provides utility (value/worth) for individuals. Consumption is defined as spending (most often income) in order to acquire utility, perhaps best understood in contrast to investment which is spending in order to acquire future income. We shall return to discussing consumption more closely as it is one of the central concepts of economics. For now, just remember this simple definition and let us instead focus on the last part of the definition of production: the inputs.
Inputs are anything that is used in the production and creation of goods and services. In order to make (produce) an omelette (output) you need eggs, a kitchen, a frying pan, a spatula, some butter and a cook (inputs). In economics all inputs are categorized in three very broad categories: land, labor, and capital. These three are more commonly referred to as the factors of production. I should perhaps mention that only having three very broad categories is a definition from classical economics. There have been discussions whether or not it would be relevant to add more factors of production. However, I will hold myself to the classic three for now and commit the rest of this post to only discussing land as a factor of production.
Land is most easily thought of as natural resources such as water, air, soil, minerals, flora, or fauna that are used in production. Land also includes geographic locations – which is highly relevant for most productions as nearly all require a factory or some other locale. The exception being plenty of services: for example a plumber, electrician, or traveling salesman will often (or exclusively) produce their services in a location they do not own themselves.
A common characteristic for all of these resources is that they are fixed in their supply. A fixed supply means that the short term availability cannot be influenced. You can’t really influence how much air there is in our atmosphere, or how much water there is in the oceans. The distinction between fixed supply in the short-run vs. the long-run is important here. Some natural resources, like fish or fauna in general, are not considered fixed in the long-run. You might for example be able to influence the supply of fish by facilitating their breeding habits. A consequence of having a resource with a fixed supply is that a change in demand should always lead to an equal change in the price of the resource – i.e. if demand goes up so will the price. This is because you cannot increase the supply of something with a fixed supply to satisfy the increase in demand.
An example of this might be land rights in big cities like London, New York or Paris. Cities where an seemingly ever increasing amount of people want to move (increase in demand over time) but there is only so much land (fixed supply) upon which you can build housing. Part of the explanation for why property prices are just frankly absurd in these cities. In economics this is called low price elasticity of supply, a topic I intend to return to once I’ve covered the intricacies of markets – I just wanted to give you a glimpse of things to come.
The availability of land is a common feature in board games, but players rarely claim ownership of the land through economic means. Games like Caverna, Small World, or Catan have a finite amount of land for which the players compete. Typically players face no price to acquire land in games – they are usually a given. For example, in Caverna players are given private boards with a finite amount of land spaces where they can place farms among other things. Players might however compete to implicitly claim land through other means, like building something and thereby preventing others from building in the same space. The prime example of this would be Catan where players build roads and settlements along the borders of hexes representing different types of land. There are also quite a few games where you claim ownership of land through military might. In Smallworld for example the whole game is centered around owning as many land spaces on the board as possible to gain victory points. Another example is the game Viticulture where players start with three spaces on a private board on which they may plant grapes. They may also sell these spaces to the game for money with the possibility of buying them back at a later date. An interesting way of assigning a price to land without introducing competition between players.
A more classical example where you actually buy land is Monopoly where the whole point of the game is to purchase land in order to construct properties upon them and extort your friends and family. The economist here would urge you to always distinguish between property rights and land rights. Just because you own the land it does mean that you also own all the buildings upon the land. Common sense perhaps, but this distinction is oftentimes missing – for example land and property are used interchangeably on the bgg page for Monopoly. Imagine instead if Monopoly had functioned as in the real world, where other players may construct buildings on your street for rent or a one time fee. Players would compete for the most attractive spots and perhaps you could win simply by owning streets and no buildings. Combined with a bidding mechanic this hypothetical game might become truly economically interesting since then the price would be determined by actual demand and not simply be a function of who happens to land on the space first. My challenge from me to you for this post is therefore something along the same line of thinking:
Challenge: take a game that features a land component and change it so that players face a price in order to acquire the land. How does this change the player experience? If it already has a price for acquiring land, what would happen if you could rent out your land to other players? Use my example with Monopoly as inspiration and feel free to leave a comment below with your thoughts.
Next up: Introduction part 3: labor as a factor of production