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I like historical settings for role playing games. I enjoy Cthulhu games, the campaign games I have played have been set in the 1920s and 1930s; I really enjoyed running a Mage Sorcerers Crusade game, set in Francis Drake's round the world voyage. I have an idea for a War of the Roses setting game. One of the reasons I like Ars Magica is the historical setting. There are, however, things that need to be thought about with using historical settings.
History breaks if player's characters can have an impact
In different games characters will have different levels of impact on the game world. In Cthulhu games characters begin as fairly ordinary people. In games like Call of Cthulhu and Trail of Cthulhu if the indescribable horrors fulfill their plan then the world will be destroyed, or all humans will become slaves. The players try to prevent this disaster, and their characters may become quite powerful during the campaign, but there focus is on stopping the horror. In the current Cthulu game my character is an advocate for civil rights, and has become a staunch opponent of colonial powers, but his focus is on stopping the monster induced apocolypse(s) not changing the human world.
In games where the characters have more power they can have more impact on the world, and while they will have other concerns, and most of the games include some mechanism for shielding every day folk from the power that they have, they should have the potential to change history. For me this is a feature not a bug.
Some players find history a barrier
I did not do 'O' level history at my comprehensive school because I did not like my history teacher. I did pick it up at sixth form college, and still remember details about Russia before world war one that I have yet to have a use for (although it might come in useful in a game at some point). Because of my interest in table top war gaming, and board gaming, I developed an interest in military history. Of course later in my academic career I co-wrote books on history of psychology. I like history. Some of the people I have played with do not, knowing little about recent history in modern setting games, and feeling uneasy about playing in an historical setting. There is an easy fix for this in Ars Magica, the person can play characters who before the campaign starts have had little to do with the world outside of the Mage's covenant. It might be worth making more of a fuss about this, in a AM game the players do not need to know history, they can play characters for whom the world of mortal society is a unknown.
Some players really get into the history
One possible source of tension around the table is when players know more than their characters. With fictional settings I find it relatively easy to distinguish between what I know and what the character should know. Until fairly recedntly I never owned any Cthulhu game books, and I have read one H.P Lovecraft short story. So most of the time my knowledge of the evil monsters characters were facing was the same as the character.
When I design a character for an historically set game I will do some reading up on the period, and the type of person the character is based on. One possible difficulty is managing the knowledge a player has; this can be modeled by making a player buy particular knowledge abilities, although the other side of that coin is trying to establish what any member of a particular communnity might know.
In general I prefer not being told what my character would think, so I try to ignore any anachronisms in how other's characters act and what they believe.
Real world attrocities
One of the Trail of Cthulhu games I ran (a series of scenarios rather than a campaign) had an adventure with a setting of 1937 China, with the characters USA citizens based in Shanghai for the adventure. The story had nothing to do with that, but the approaching Japanese army created an end point, by which time the player's characters needed to have left Shanghai. I am very uneasy with explicit links between real world attrocities and the fictional aspects of role playing games. Nazis should be horrific human beings, not the puppets of none human monsters. Provided it is done with care I am more laid back about the sweep of history affecting the characters.
Nonsense on stilts
Most of the games I have played that use real world or historical settings use one of the histories of the world up until the point the game starts. This can be easily handwaved for Cthulhu games, there can be ineffective cultists keeping traditions alive, but it is only when the stars align that the great evil begins to affect the world. It makes less sense in other games, the games have mechanisms whereby the player characters (and others) should try not to have too much of an effect on mortal society. However they very often do have an impact. If mages existed the world would not be like the historical world. This is something that as long as I do not dwell on it does not break my suspension of disbelief,
Language use
One of the things that interested me when writing about the history of psychology is the way that words have been invented, or their meanings changed by psychologists. There are a bunch of Freudian terms, some terms and concepts from Humanistic psychology, as well as neologisms like motivation, that now appear to be just a natural part of our human world. We are current humans pretending to be characters in a different time. As long as no one's sense of their character is not being spoiled by our less than perfect knowledge of history that probably the best we can hope to achieve.