And this is their downfall. I mentioned this in another thread were I was talking about how initially none of the towns sell anything remotely decent early game. I mean you can't even window shop that 100k high end piece of armor because it just doesn't exist in the game. What I was told was that the economy starts from zero day one and the shops have have "learn" how to make the better armors and such so that is why they don't show up to late in the game. This is horrible since the economy should start out mature in the first place since the world supposedly existed before your character sets foot in it.
Same thing with how the lords use the same recruiting methods as the player and how after a bit of time, they tend to only field armies of recruits or captured prisoners rather than have many, or sometimes any, high tier faction specific units other than those that came to them as captured prisoners. This is also an issue.
The problem is both systems are too complex and rely on dozens of factors, many of which can't be controlled for it all to work. From what I am reading in this thread, it seems like the issue with Caravans stem from this as well because if you change the way caravans work, it changes the way a city earns income and prosperity, which will have an effect on production in the city, which itself will have an effect on a cities prosperity and so on. There are just too many systems, interacting and relying on other systems, might way too many variables, many of them uncontrollable and/or are based on how the individual plays the game. The result is a broken system.
They would be just better off to auto-populate shops with a random wide range of gear, have the prices go up or down based on prosperity of the city, which is based on just a few, controllable factors. Lord would do better just spawning in with some decent troops after a delay with can be controlled not by available recruits, that might have been depleted by a player, but by what is needed to make the game fun and exciting. Carvans would be better if it was just another cool passive income source for players with small chance that they might be destroyed.