Foreign relations of states are sensitive to power calculations. There is a vast literature surrounding the measurement of power, with much debate among analysts around the components that should enter into calculations of power capabilities and how those components can best be aggregated into a single measure of power. Ray (1990) did a good job of reviewing that literature and has, himself, contributed to power calculation. Working with the Correlates of War project at the University of Michigan, he and others have frequently emphasized three primary components of power capabilities: economic, demographic, and military strength.
The early representation of power in IFs used a formulation that aggregated these three components and that further differentiated between conventional and nuclear military strength. It allowed the user to provide weightings for the three. For instance, many analysts are loath to weight demographic size heavily for less economically developed countries like India.
Over time, users of the model suggested that other components of power should also be considered. For instance, Evan Hillebrand suggested that economic-technological capability, as indicated by the product of GDP and GDP per capita, should be a core component of capabilities. There has also been a long tradition, dating at least to Ray Cline, suggesting that government capabilities (as perhaps indicated by government spending levels) should be an element. And there is uncertainty as to whether GDP is best measured for power purposes at purchasing power parity (PPP) or exchange rates. In response to these suggestions, it was decided to create a more general function for POWER in IFs that allows the user to create a flexibly weighted sum of 9 different components: population (POP), GDP at purchasing power (GDPP), GDP at market prices (GDP), economic-technological capability using GDP per capita at either purchasing power or exchange rates (GDPPCP, GDPPC), government size (GOVCON), military spending (GDS), conventional military power (CPOW) and nuclear power (NPOW). For each component, a global sum is created and country capabilities are computed as portions of the global total. Setting a weight to zero removes the component from the power calculation. In the base or default case, most or all weights (wpwghtpow) other than the ones on economic, demographic, technological, and military strength are set to zero.
Conventional power (CPOW) for each entity decreases with depreciation (drcpow) and increases with the non-nuclear portion (1-nmilf) of annual military spending. A conventional power factor variable (CPowF) converts new military spending into conventional capability. That factor is computed so that the spending by countries with GDP per capita below $10,000, because such countries can hire personnel at lower cost, has additional leverage in creating conventional power, as determined by a developing country conventional power factor (cpowldcf). The additional leverage is phased out as GDP per capita increases. The calculation of nuclear power (for those states that spend some portion of their military on nuclear capabilities) is analogous, but conversion of spending to power depends on a factor (npowf) that is invariant across countries.
As indicators, it is also useful to calculate the world total of conventional (WCPOW) and nuclear power (WNPOW).