New Magic School idea: Transmutation

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I concur, right now the only means to upgrade non-commanders permanently is through blesses (which aren't technically permanent but might as well be) or very expensive means (Gift of Reason + items/empowerment/etc). One of the core ideas behind Dominions, for better or for worse, is that your recruitable troops stay the same for the entire length of the game. Changing that would throw off the basic design of the game.

There's also the problem that balancing one or two effects is not too hard, but balancing an unlimited number of them is very hard. That's why items are so expensive, slots are limited, and finding items that do all the right stuff in the right slots for what you want is so hard.

Or think of it this way: Alteration is already one of the strongest magic paths. Does it need to be made stronger by allowing the effects to be made permanent? Look how strong blesses are, and this seems like it would be even stronger than that.