TL;DR
I have apples. I hate apples. I like oranges.
You have oranges. You hate oranges. You like apples.
real world: we trade apples and orange.
Elemental: My apples are worth 0 to me, and your oranges are worth 50,000, so we can't make a trade.
The diplomacy ai seems to have trouble attaching the correct values to trade/treaty items. Possibly because there are only two values in play: both are ambiguously titled "perceived value".
In reality, for things I have to trade, there is a perceived value TO ME, and a perceived value TO YOU.
Likewise, for your goods, There is a perceived value TO ME, and a perceived value TO YOU.
then human irrationality steps in, we assign a final value, and make a deal (or not). But in elemental, there are no "black box" factors (laudable). So it's just a matter of matching up numbers. But it doesn't make any sense. Consider the following game situations i've encountered:
[Peace Treaty]
I'm kind of tired of kicking umbar's ass around. I'm feeling generous, having just killed three sons, two daughters, and 5 settlements without losing a single unit, and decide to offer peace.
Umbar says, well peace treaty is worth ~50 to you, but 5288 to us. Your offer displeases us.
Wut? Ok, maybe you have a Really Big Hidden Army Back Home (tm), but the situation kinda suggests that peace would be in your interest. But ok.
Next turn - Message from umbar: You've earned our respect. time to take the armies home. (aside: first time I saw this, i didn't realize it was a peace offer).
Wait, i thought you just said you didn't want peace? And what the hell, when i want peace, i have to offer something, but when you want peace, it's just yes or no - no offer of horses, or anything.
[Declaration of war]
Altar thinks I should declare war of yithril. I'm not inclined. And that's that. But If i want altar to declare war on resoln, well that's worth ~3000... and my declaration of war on yithril in exchange would only be worth 800. What?? If it's that disparate, stop asking me to declare war every other turn!!
[Trade Treaty] (starkest example).
Altar thinks we should make a treaty. Ok, i'm all for that.
uh, every treaty on my side is worth less than a hundred, and every treaty on altar's side is over 3000. Let's see, trade treaty... 70 for me, 3276 for altar. Proposal grants me 8.26 gildar per turn, and altar 13.78 gildar per turn.
Altar: You'll have to do better.
...how? by giving you 15 gildar per turn? I'm offering a treaty (a long term trade) that benefits YOU more than it benefits ME. And you expect ME to pay YOU to accept that arrangement? There is no subjective quality involved - there's no black box, it's straight math and number matching. What the hell?
[Dynasty] (machine ai has no gender)
Capitar: so hey, I hear you have a daughter to pim... er, available for marriage. Let's talk."
Ok... you only have daughters too... stop asking to set up a dynasty every other turn when we CAN'T.
While you're overhauling thing ai diplomacy system, it might be nice to insert a semi random variable to each diplomatic encounter... so it becomes less of a straight number matching scenario. I'd imagine people who are more friendly with one another would be more than willing to overlook a few points here and there... and people who hate each other's guts would want strict accounting. Other factors might include Gifts (time since last gift, magnitude of last gift), frequency of diplomatic requests (to discourage people from spamming diplomacy to find a favorable hidden variable round), and so forth.