Paul Krugman, an economist and writer for the New York Times, recently put out a fascinating (and funny) paper he wrote in the late seventies about interstellar finance and trading. I know the trade aspect of SoaSE is fairly simplified, but Krugman's paper proposed two fundamental theoroms of interstellar trade:

1) When trade takes place between two planets in a common inertial frame, the interest costs on goods in transit should be calculated using time measured by clocks in the common frame, and not by clocks in the frames of trading spacecraft.

2) If sentient beings may hold assets on two planets in the same inertial frame, competition will equalise the rates of interest on the two planets.

Basically, the first theorom means that interest will be added up by counting the amount of time that has elapsed on the planets using a shared clock, since, from the point of view of passengers or crew on an interstellar ship travelling near light speed, time will slow down. Leave for space as a young man, come back a young man and find everyone you knew 100 years old, for instance.

To explain the second, Krugman says shipping goods and buying bonds earn value at the same rate (if I'm understanding this all correctly - I majored in journalism, not economics). The interest rate of the two different planets will equal out because otherwise trade would only flow one way (the profitable direction).

Does SoaSE meet these two theoroms? I was surprised to find that, in the most basic views, yes, the game does.

The first theorom is the easiest to prove with SoaSE. The game clock is the only clock and measures all time and travel of ships, rotation of planets, etc. The amount of credits earned per second is inherently based off this shared clock (the common intertial frame of, in this case, not only two planets, but the universe). Credits are not calculated off the point of view of the captains of those trade frigates, but off the view of the people manning the trade ports and following interstellar time.

The second theorom is a bit more difficult to prove in SoaSE and some assumptions must be made. Credits do not accrue faster (more per second) when planets are farther away from each other. Two planets in-game could be very close or very far, so ships, whether trade frigates or not, could take a different amount of time to reach the other system. But the amount of credits accrued from a single trade port to another does not vary based on distance, only on the number of trade ports and links in the chain of ports.

Additionally, trade ships travel back and forth through the systems. Trade goes both ways and, as mentioned above, trade ports are equal to each other, so I would guess individual systems and ports have the same interest rates, despite distance. Unless, of course, interest between Port A and Port B, which are 20 light years apart, is different than the interest rate between Port A and Port C, which are 5 light years apart, in which case oh god my head hurts.

I'm probably wrong about some of this stuff, but like I said, I majored in journalism, not economics. If any economic people out there can correct me, please do!

Favorite parts of Krugman's paper:

"This proof has a special case; but the proposition is in fact relatively general. (The reader must, of course, be careful not to confuse relative generality with general relativity)."

"Arbitrage is possible internationally because an investor can choose between holding his wealth in different countries for the next, say, thirty days simply by callin gup his broker and instructing him. In interstellar trade things are not so simple. Even if we leave on one side the problem that nonhuman brokers may not have ears, let alone telephones, there is the problem that simultaneous arbitrage is not possible."

"Then it (the merchant) may have in its mind (or equivalent organ) a series of transactions of the following kind."

Fun stuff to think about. And holy crap, am I a geek.