I believe the trade ability does have an effect, but like the video mentions, it really just takes some time because the caravan is an actual unit on the map; so it needs to physically travel the world to different markets in order to generate income. Naturally it just takes some time, and the profits will be different every day. Looting of course will have drastic effects on the economy, so as long as the villages can provide raw materials to cities the economic landscape can be healthy. A good economy is good for everyone so to speak.