Show HN: A central bank simulator game with a realistic economic model
benoitessiambre.com
benoitessiambre.com
Here is a blog post that goes into further details: https://benoitessiambre.com/simcb.html
It's been maddening not being able to find a comprehensive model of how all the bits fit together, and I have many times wondered if the lack of existence of a game like yours meant that no such model actually existed. Happy to be wrong!
And of course a game is a brilliant way to build intuition whether you know the equations of the underlying model or not.
I haven't played it yet but am greatly looking forward to it, really hoping to answer various gaps in my knowledge. Thanks again!
Worth the caveat that Keen is a heterodox economist. So if you pull his off-the-shelf models you are not getting the current accepted “mainstream” theory. I don’t think Economics is a field as mature as Physics where you should have extremely strong deference to the orthodoxy based on an incredibly strong prediction record, but it’s worth keeping in mind.
In economies, people, politics, and their dispositions, their sentiments, dominate.
How do you model human responses to local, national, regional, and global events. How do you model human cascades?
Australian East Coast Saturday night wooo!
I guess you can make up your own definition.
Either you have this naive understanding that government is secretly printing money and hiding it from the auditors, in which case you are simply wrong.
Or you could have the more sophisticated opinion that, "yeah, I know that the so-called freshly printed money is actually already circulating money that government convinced people to give them in return for a promise in the form of a bond. But that's practically the same as printing money!"
But if you take that perspective, then crypto bros are ALSO printing money at a furious pace.
The money printing part is not the Treasury issuing bonds (and getting money).
The money printing part is the Federal Reserve buying bonds (and giving money).
But, and it pains me to say it, as someone with a bit of a background in economics, I dunno if realistic is quite the word i would use for your current model.
And I don't mean in a "all models are wrong but some are useful" kinda way. I think some of the limitations and simplifications might take away from the value of the model. I'd urge everyone to read the blog post to understand what's going on.
you've touched upon a lot of the apparent findings and paradoxes of macro, which is great.
to try to be constructive, I guess I would ask a rhetorical question to focus on a central (pun intended) issue: how are interest rates set by the central bank implemented? is it an independent variable that you kinda change, or is it implemented through changes in monetary + credit supply? I'm concerned that this is another one of those macroeconomic paradoxes built into the model that lessens its applicability: the idea that interest rates are a variable that the central bank issues by decree, as opposed to a rate that they target by adjusting other monetary/ policy settings?
anyway, good job. I love it when people actually code up and stimulate models :)
To study central banks you need those history before the model :-)
https://www.amazon.com/Good-Money-Birmingham-Beginnings-Coin... is also really interesting.
The rate of inflation is hardly more important than, for example, tax rate. From the Central Bank viewpoint, how much money is annually generated could be anywhere between 15-350%. The key to a good economy lies in proficiency in other sectors, like industry.
The bulk of money is generated through private bank loans, anyway.
Many, many years ago I typed a BASIC program listing for a macro-economics simulation from a computer magazine into a computer. As with your game, the only lever was the bank interest rate. The outcome (for me) was always economic catastrophe.
I'd love to play an economic sim that also has a taxrate input; I realise that's normally not set by the central bank; but then again, it's often not the central bank that really sets central bank interest rates; it's the government.
I.e. the US central bank doesn't answer to anyone.
In particular, the negative interest rate of SimCB does something very different from, almost the opposite of, what the ECB does (along with many other central banks). What they have is a negative interest rate on the deposit facility rate, which means that overnight deposits on a class of central bank accounts will incur a loss for the commercial bank of, say 0.5% yearly, which incentivizes instead investing those funds.
cf. https://www.ecb.europa.eu/ecb/educational/explainers/tell-me...
In SimCB, a negative interest rate makes everyone incentivized to take on a loan, as they will get free money at the expense of everyone else as long as they reimburse the principal, which is even easier when they don’t invest the money in orchards.
I’ve always been apprehensive of how low interest rates dropped around 9/11 and nobody had the political courage to raise them after that, leaving little room for leverage. What I have learned from racing games is that in order to win, it’s not all about holding down the gas pedal the hardest. Its about keeping on the track first, which requires lower speeds to navigate complexity, and only using max speed in straightaways.
Or to quote the eminent Charlie Sheen, right after his infamous ’banging 7 gram rocks’ he said, “I only have one speed, I only have one gear: GO.” History tells how well that worked out.
That may work on a straightaway, but in this world, there’s people and there’s pandemics and wars and politics. Had rates been at a higher level they could have been slashed at the start of the pandemic, but there was no room to drop at that point.
Since the income from the central bank's interest is paid out to the people (and vice versa, negative interest will be passed as debt), the challenge seems like finding the correct ratio to increase GDP: inflation and interest income. New money is only generated through loans, so if I understand this correctly, one should strive to have high interest rates?
edit: After tweaking my strategy a bit to try to keep interest rates as high as possible without closing any business, I got to 443647.
edit: up to 444823
In reality, keeping a steady nominal GDP is a good idea. In fact, adopting a nominal GDP level target will make the market help you keep things steady. (By anticipating your central bank actions.)
The game moved way too fast for me, perhaps I did something wrong. Is there a way to make it turn-based and only advance when you tell it to?
Btw, the 'magic' of a nominal gdp level target isn't just in the stable gdp itself, but in announcing a target, so that economic actors can profit by anticipating the actions of the central bank. And that anticipation itself stabilises the economy already.
It might be interesting to allow the expected trend to be changed by announcements and such as you suggested.
Inflation rised steadily as people ate all the apples in the market.
At the beginning it looked like inflation would never stop, but at some point an orchard managed to become profitable, becoming crazy rich ($22000) because apple prices were at $100. This made apple prices crash, going down to $0.02. This pattern repeated itself a few times.
GDP stayed very low, obviously.
Yeah, that's pretty silly in reality. There's no zero lower bound in reality.
Negative interest rates work just fine. Or even simpler: buy assets that are not just short term debt. (In the extreme case: any positive price for a 'perpetual bond' corresponds to a positive interest rate. Or take inspiration from Singapore's Monetary Authority: they buy foreign exchange instead of bonds, and thus don't have to worry about interest rates at all.)
For example, are you aware that when launching a rocket, you want to avoid wasting fuel by going to full throttle in the thick, lower part of the atmosphere, where you’ll waste a lot of the energy you gain to air resistance?
There’s a reason one of the checkpoints in a space shuttle launch sequence was “go for throttle up”.
So even if you wanted to talk about economic management as being like ‘launching a rocket’ you could still make an argument for leaving some power in reserve for when the going gets easier.
> are you aware that when launching a rocket, you want to avoid wasting fuel by going to full throttle in the thick, lower part of the atmosphere, where you’ll waste a lot of the energy you gain to air resistance?
Yes, you’re referring to “max Q”. It’s still a completely different comparison though because you only have those events early on and then you go full throttle until you hit your first stage goal.
They’re not proposing an isomorphism, they are making a comparison to motivate you to modify your thinking.
The best I found was to try to raise rates during the good times so there is wiggle room during downturns."Nobody Really Knows How the Economy Works. A Fed Paper Is the Latest Sign": https://www.nytimes.com/2021/10/01/upshot/inflation-economy-...
Greenspan: There was a "flaw in the model of how I perceived the world works.": https://www.propublica.org/article/greenspan-says-i-still-do...
"Greenspan Says I Still Dont Fully Understand What Happened": https://youtu.be/R5lZPWNFizQ
Heck, less than 440K?
The best run was the 0% one: 442670.
All results:
2%: 238773
0%: 442670
50%: 21106 (early crash)
4%: 255726
Edit: Forgot to note that, while the other runs got the +12% iMac trees and the -12% drought/disaster events, the 0% run also got a -10% "loss of faith in the market" event thrown at it as well.
So, 0% interest rates and 0 banker interference is good enough in the SimCB model, and can normalize its way through random negative events too.
Anyone else with results from other constant interest rates?
In reality, I agree though. Just putting to 0% and letting it ride required far less prediction ability and it worked out fine.
It seems that the whole system tops off at a zero-effort 500K or something, and the best approach is to do nothing to mess it up, just keep things cheap and stay away.
This is similar to strategic reserves. There is a really great planet money story about the rice shortage about a decade ago, which was completely artificial. There was plenty of rice, but a panic lead people to hoard rice which caused an actual shortage. The way they eventually stopped the panic was to announce they were going to sell rice from this huge strategic reserve… and just by announcing that, it caused the price to return to normal. They didn’t have to actually sell anything, just announce it.
Markets are not purely rational
EDIT: It would also be nice if the game paused around major events to give you more time to think & adjust. I found that the economy went off the rails if you don't react right away.
Sounds pretty realistic to me!
It is far from a fringe viewpoint in the finance world that central banks have contributed more to volatility than to stability over the last 20 years.
Wow - this is insanely inaccurate. Before the active central bank era (call it post-WW2), recessions lasted up to twice as long as they do during the modern era. Unemployment also peaked at much higher numbers: 25% during the Great Depression, for example. The pre-central bank localized agrarian and early industrial economic model leant itself to boom and bust cycles eg massive instability.
Glad to see we put those patterns behind us /s
The only decision the Fed could (and eventually did) take to allow the money supply to expand was removing the US from the gold standard.
Those issues were real and went o longer than they needed to but also weren't as deeply structural as the issues today. Our issues are different but not better.
Given the consequences of the Great Depression (WW2) it seems unlikely active central banks have been a net good.
The economy was in a permanent boom and bust cycle e.g. the Long Depression (or the first Great Depression) lasted close to a quarter of a century.
For example: the GFC. Central banks bail out bad actors which perpetuates the incentives that caused these actors to make bad decisions in the first place ("bad" meaning not optimal globally, e.g. selling bonds you know are worthless). If a gold standard was in use, this would simply be impossible. The government would need to increase taxes to bail out the banks, which would be rejected by citizens who are busy hoarding gold and cursing the banks, which means the banks that replaced the bad actors would be incentivized to avoid the mistakes their predecessors made. Alternatively, the GFC may simply not have occurred, because under a gold-standard the banks cannot assume they would be bailed out and this knowledge would cause them to be more risk-averse. "Every Battle Is Won Before It Is Ever Fought"
The use of fiat currency provides control over the economy, but we shouldn't assume that that control is always used in the best interests of the many. The reason a gold standard is so popular among libertarians is that no institution can have arbitrary monetary control over individuals via printing money.
Mortgage backed securities caused the GFC, but only a small part of the bank dealt with mortgage backed securities. It doesn't make sense to let that drag the rest of the bank and the economy down along with it, which is why the bailouts were necessary. It's not the job of central banks to punish bad actors. Their job is to prevent the next Great Depression. You don't blame the ER doctor who delivers a frightening dose of blood thinners to a heart attack patient. You blame the patient's bad habit of eating barrels of pork, which in this case would be Congress. If Congress did not force the treasury to issue so much debt, the Federal Reserve wouldn't have to buy so much of the debt back in order to lower interest rates.
I'm not saying that the GFC and huge Government debt are the fault of the Central Banks, but they are much more likely to occur because the Central Bank uses a fiat currency. If we had a gold-standard and the Government issued huge amounts of debt, eventually they would run out of creditors who trusted them, and they would be forced to change spending habits.
And if the C suit have such little control that their employees can collapse their company, they are simply incompetent and their losses should not be socialised.
It is really quite strange that one would consider the gold standard a source of liberty. Humans aren't made out of gold. They die at some point, creating an obligation that outlasts a human life is honestly sickening and perhaps worse than slavery.
Also, I don't understand why a gold standard would produce an obligation that outlasts a human life? A gold standard is seen as a source of liberty because the alternative, fiat money, gives huge amounts of power to the Government / Fed in ways that may not be good for society overall.
The real problem is a fall in nominal GDP. And that's a problem no matter whether prices are rising or falling.
Think about it this way. Germany keeps saving more euros. Greece and Spain are trading with each other. At some point all the money is in Germany, making it impossible for Spain and Greece to trade with each other even though they would have maintained balanced trade between each other. Greeks can't buy the latest gadgets produced in Spain even if they wanted to.
The value of currency fluctuated much more during most of the 19th century than it did between 1990 and 2020. It’s just that the periods of inflation were followed by years of deflation. I think for most people and businesses stable and predictable inflation os generally preferable to a permanent boom and bust cycle.
Relative value usually matters more than absolute value: if money is depreciating at 1% but you can invest in stocks for a 1% return then you would invest in stocks (ignoring risk). Google: alpha vs beta returns.
Risk/volatility and diversification also matter: putting all your wealth into a single asset class is probably a bad idea.
> bare minimum of apples needed for survival
Edit: People are not ideally rational spenders. Also depending on your age, you may value spending now more than saving for an uncertain future. At 70 your death probability hits 2% per annum[1], so saving 1% for next year might not make sense. At any age you may look at history and you might not trust that your money will useful next year (plenty of examples where stable governments have screwed the pooch).
Wait, that's really interesting! Where did you read that?
Apparently this has been the case for long enough that there's even an old Chinese proverb
> Wealth does not pass three generations
———
[0]: https://www.fa-mag.com/news/how-to-stay-rich-in-europe--inhe...
>> Maintaining inherited wealth has worked for generations of Frescobaldis over 700 years
The article gives a counter example (wealth passed 700 years is way over 3 generations), and tries to argue that this example is more than just an outlier?
>> heirs and heiresses make up about half of Western Europe’s billionaires.
You can save cash which does not result in additional investment. When banks refuse to lend money, saving does not result in additional investment, in fact that is the cause of QE. The government feeling compelled to invest because people in the private economy refused to invest.
Stuffing cash under your mattress takes it out of circulation. An inflation targeting central bank will 'print' more money to make up for the missing cash.
That new cash will be spend. (Or, if people keep stuffing it under mattresses, the central bank can just keep 'printing' money.)
In a few years, when you take the money from under your mattress and buy yourself a nice ice cream, the central bank will notice that total spending has gone up, and decrease the amount of money in the economy to keep inflation on target.
It's exactly as if you had lend out the money from under your mattress to the central bank.
(And by 'print money', I mean that they will buy assets with newly created money. Typically they buy government debt, but they can also buy stocks or gold or foreign exchange or rare Lego sets.)
In any case, it looks like we don't actually disagree on what's happening, only on how to interpret it.
I hold that stuffing money under your mattress isn't the problem here. Central bank monopoly on printing money is.
If you stuff privately issued money under your mattress, it's the private issuer that can increase its balance sheet. No government-run central bank required for this.
The Austrians are famous for committing extreme austerity before world war two.
First hand experience with tough deflation probably caused Hitler to leave Austria and move to Germany where he promised a quick fix through worker programs. His goal to conquer Europe was basically equivalent to trying to rebuild the Roman empire which was dependent on conquering more land to grow its economy.
The gold standard has no history of success, it lead to the rise of feudalism and countless of wars, revolutions and conflicts.
The only logical answer is to stop the articial price controls on the interest rate and let it fall negative when the economy declines.
The fall of empires in history can quite literally be traced in the % of gold in their coinage Eg. Byzantine, Rome. The problem with history is that one can claim fiat led to the Iphone and that users of gold in the 1500s had bubonic plague, but these links are very tenuous. Humans continue to make progress in science and tech. Revolutions were a result of crumbling economies that lost accountability to their own people. The 2 world wars were fought on debt and broke the gold standard[1]. All wars since have been debt wars [2]. Comparing gold to fiat is in my opinion similar to capitalism vs communism. Do people live on communism - yes. Does the system free up the market to chase efficiency - no. Similarly, making the Govt accountable and free market-y (ie not allowing them to dilute everybody's money via printing which is a hidden tax) will in my opinion bring about a step change in human progress
I am glad you bring up the interest rate price control part. I agree. That's one piece of the free market that is missing. The other is the gold standard making the Govt responsible in its spending instead of passing relief acts that package a ton of $ to unrelated expenditures under the name of helping families with children.
1: https://www.britannica.com/topic/money/The-decline-of-gold 2: https://bitcoinmagazine.com/culture/how-the-fed-hides-costs-...
Well you would be right if upu only averaged out yearly inflation over large periods of time. However this stability you’re talking about is just an illusion.
Year to year it was much worse e.g. during the 19th century yearly inflation in excess of 10% was much more common than after WW2 however it was usually followed by similarly high deflation when the current bubble burst.
https://www.in2013dollars.com/uk/inflation/1800?endYear=1914...
Which times and which economies are you talking about? There were different regimes that are often lumped together as the gold standard.
(Eg the 19th century Canadian monetary arrangement was very different to mid-20th century US arrangements.)
The problem with gold is that it's finite. It might be stable, but it's stable for a very small amount of money. The existing system allows us to create a huge supply of money that is used to drive the creation of these monster companies that end up doing things like inventing new microchip fabrication processes and iPhones. If you suck up all the money supply the economy might be stable in terms of inflation but it can't grow.
However, when we use money we don’t consume it. It simply changes owner. Sort of moving through the economy unchanged in form.
> If you suck up all the money supply the economy might be stable in terms of inflation but it can't grow.
How do you explain the solid economic growth in the 40-year period 1870-1910, which happened during the international gold standard?
Let's say you own 1% of the gold of the economy. Notice that you also end up owning 1% of the savings in the economy. If an enterprising individual increases productivity and his company produces more, the value of gold will go up, leading to unearned gains in the value of your savings. Since you own 1% of the economy and the gold standard artificially enforces this against the will of other participants, you will gain a 1% share in the improvements of the company even though you have contributed nothing and taken away potential income from the entrepreneur. If the invention caused the economy to grow by 1% then the entrepreneur would expect to receive a 0.9% in the economy. That share would require everyone to give up 0.9% of their savings. Meaning your savings must go down to 0.91% of the economy. Of course, this doesn't happen in a gold standard which massively hurts the productive economy and that is exactly why there is a constant need to mine out more gold, to let new entrants into the economy as the old ones don't want to give up their gold and let it circulate in the economy. The gold standard is effectively a tool for violence and extortion.
We don't all carry our savings in fiat cash (or central bank reserves) today, either.
You can save in bank deposits (denominated in gold, or fiat money, or whatever your bank offers), you can save by buying stocks, you can save by buying a house, etc.
This has worked really well in the past in eg Scotland and Canada.
Also, the price level can adjust.
You can have both, neither or either one.
After the 240 months I somehow ended with GDP 442999 and 1.53% inflation.
How come? Shouldn't I have a runaway inflation?
Edit: I guess it's not as fair to the player, but maybe there should be more randomness in there, or perhaps some kind of forcing function that makes things a bit less stable.
Another view from the neoclassical school has a similar conclusion dubbed the Policy Ineffectiveness Proposition.
But others say Fed policy does matter because in the real world contracts and prices are sticky.
https://en.wikipedia.org/wiki/Policy-ineffectiveness_proposi...
Low rates causes higher private lending, borrowing creates money (fractional reserve banking). QE also creates money by Federal Reserve buying Treasury's bonds with printed dollars.
Both of these are temporary, but we have had QE and low rates for over a decade now. QE was supposed to be unwound in 2018, but covid pushed it to new peaks.
Creditworthy demand for loans doesn't magically increase when rates change or the Fed buys bonds.
In QE, like with accounting, you debit one side and credit the other. Netting to zero.
The effects it all has probably are real in terms of steering where people park their money. And that matters in the long run.
But that would mainly amplify whatever underlying incentive structures exist for investment.
If you steer people to stocks, and the economy has only ponzi schemes to offer, it might be because they haven't figured out a policy framework that promotes actual production.
But you can't magically add production by rewriting the knobs so that they all go to 11. Printing is differently zero sum, but the analogy works there as well.
Somebody doing a cash out refi for 100k to add an extension to their house can certainly be inflationary
I will have to think about this.
This is fundamentally untrue. Projects that don’t make economic sense at a high discount rate do at a lower one. This is measurable with mortgages [1], alongside side a host of other cases.
[1] https://app.oarklibrary.com/file/2/f047273e-32ba-40f7-9b83-5...
Mortgages are one of the most annoying things to analyze in the economy, up there with healthcare, because of how much it is dominated by the government.
In the US a bank first makes a home loan, and then later gets money from the overnight market to cover the loan... likely from the Fed. They immediately sell the loan to Fannie and Freddie, GSEs that have actually been in conservatorship by the government directly since 2008. And every part of the market is protected and micromanaged and tax advantaged to oblivion. And every bank too big to fail, and loaded up with TARP funds and their bonds bought via QE.
Apply the principles of supply and demand to that, I dare you.
Businesses carry a lot of debt too, and can refinance lower and borrow more. Compare private sector debt levels today vs the 80s
Just because businesses can afford more debt, doesn't mean banks are going to give it to them. This is flawed logic.
Money and debt is like matter and anti matter. They both emerge from nothing when separated and disappear into nothing when they come into contact.
In any case, it is not the case here as private banks and bonds do not exist.
I assume it needs a bit of a tweak for negative inflations, or is limited by the events being fixed - 'people spend 12% less' is more likely to happen at higher interest rates for example. And in particular if we weren't leaving it fixed but had only just lowered it, (i.e. increased motivation to spend) that wouldn't really make sense.
If prices are falling fast enough, a negative nominal interest rate is still a positive real interest rate.
Started with 0.25% and when the random events happened, adjusted rate really fast to get inflation to no more than 1% for ~6ticks
Central banks do QE to increase total bank reserves which is an ugly bandaid for not having to cut interest rates below zero. Inflation then allows real interest rates to be negative. Inflation isn't the same for everyone though, resulting in unfair wealth transfers.
>The inverse happens with negative interest rates. If the central bank makes a loss on a loan, people are taxed to make the central bank whole in a kind of reverse seigniorage. Now in the real world this doesn’t tend to happen.
>It's difficult to create hyperinflation in SimCB (unless in the aftermath of high unemployment leading to low market inventory), when you lower interest rates, even to negative rates, the central bank takes a loss and you get reverse seigniorage, people's money is automatically taxed away, which offsets the inflationary effects of low interest rates and the system self stabilizes. This is partially due to there not being government debt to help fuel high inflation. I don't know how well this reflects real world economics.
>The other aspect that is missing from SimCB which could cause hyperinflation is the option for people in an economy to switch to another currency.
>(…) Now I could still have allowed central bank losses in SimCB's model. This might have made sense especially given that SimCB doesn't have a government to amplify central bank moves by borrowing. Central banks taking a loss, instead of taxing reverse seigniorage, might have simulated government stimulus, allowing the negative interests to act as little helicopter drops of money. Real world governments often borrow and spend during conditions that warrant very low rates (or under any other conditions really) to help put money into circulation. Something to try in a future version.
442,306 by just immediately setting interest at -0.5% and leaving it there entire time. Inflation varied widely, but seemed to correct itself around 12% and -4% and spent a lot of time near 0%.
Can anyone explain an economic theory why that happened, or is the game not reflective of reality?
1. There have been negative yields for short periods of time, but a yield isn't the same thing. Yields can go negative for technical reasons related to trading, but the if you look at rates on fresh bond offerings, they'll still be slightly positive.
2. There can be government laws that require lending, penalties and reserve requirments, etc that all change the cost to carry. So while the interest rates shows up as negative, after adding in these other items the adjusted rate is still positive. For example, German mortgages went negative a few years back, but it a requirements for some banks to original home loans to increase ownerhsip and the penalties would have larger the the rate charge, so they loaned out at -0.5% instead of taking a 1% hit (can't remember the exact numbers).
I don't know anywhere that there has actually been negative interest rates without some other sort of interventions pushing towards them.
You can reach higher scores (through lower menu costs) if you try to maintain lower inflation (like 1% or lower), however keeping it too low can make it harder to keep stable and you will be penalized through menu costs if it destabilizes.
Yeah, some of my more aggressive tries had this happen and got lower scores.
What’s the highest you’ve seen?
And thank you for building this!!!
Edit: New highest known score… 443,385, basically same strategy. 2.25% at beginning, down to 0% during drought, up to 1% when buyers spend less, then jiggle your way till end.
https://www.frbsf.org/education/teacher-resources/chair-fede...
Unfortunately, they took it down about a year ago.
https://web.archive.org/web/20180710122012/http://sffed-educ...
It's likely that's the reason why they took the game down.
Generally, non-monetary inflation/deflation is outside of a central bank's control and other policy levers should get pulled (e.g. Congress releasing stockpiles of material, for example).
Honestly, that's incredibly lame. Just stop promoting it and put up a message explaining why you believe it's inaccurate. That would actually be interesting.
Also, if you make them <button> elements instead of <div>, your page will be more accessible to users who depend on their user-agent to know what type of controls they are.
In accessibility, the scenarios you can think of are only the tip of the iceberg which represents all the possible scenarios.
Could you elaborate on this? Is this really what happens in the real world - interest on central bank loans going to the government? I was very much under the impression that this interest goes to the central bank (and is thus destroyed), and the fact that this would appear to contract the money supply seemed like it just increased the need for the central bank to increase the money supply in other ways. To be honest, I am still not clear on how the money supply is increased permanently by a central bank - all textbook examples of money supply changes appear to only do so temporarily.
> mumbo jumbo
It's very efficient mumbo-jumbo, though. I've spent years learning maths, but not economics, so just show me the equations!
In fact I'm going to have a heated Lamport Moment and say that Math >>>>>> Code in matters such as this.
I have a very short attention span and this page just looks like a blur to me. Evidence: It took me 2 skim-throughs to even spot the phrase I quote. Maybe I'm dyslexic.
LE: I tried another round. Put the interest rate at -0.5 and just left it there.
> I fought inflation in SimCB and my economy produced 442486 :apples:
It helps to slowly creep up interest rates up when the economy is going well so you have more space to lower them aggressively during shocks.
> You can prevent it if you manage to counter deflationary pressures fast enough.
Iirc, it was a matter of < 10 months from good to gutter.
I haven't looked at the code, but I guess it's fairly consistent then.
"One common experience for new players is they start the game, prices creep down, one orchard goes bankrupt, then the other ones quickly fall like dominoes and unemployment goes to 100%. This dynamic is exaggerated in SimCB. What happens is that when an orchard goes bankrupt, that's ten percent of the economy going offline. Not only that but if that business had loans, those loans get reversed by a negative dividend imposed on people. In a real economy this would happen through banks or other lenders who would be forced to take the hit (since you can't default on the central bank). In any case this results in an instant shrinking of the money supply. The negative dividend acts like a one time tax, people have less money in their bank accounts, spend less on apples, prices drop quickly which makes the other businesses less profitable and go bankrupt.
In a real economy, usually not 10% of businesses would go down in one go and the central bank would have more time to react. Governments might also take on debt, implement bailouts etc. to help smooth out the situation. I could have implemented some kind of automatic government stabilizer. Or I could have made an economy with a hundred businesses instead of ten, so that these effects were more gradual. Some things to maybe try in future versions. "
For example - let’s say the player is the chief of UNICEF. Or World Bank. Or U.N. Would be fun to play such a game, with real policies and real data.
I know I am not alone in finding economic topics dry and boring. But I might play games, than read a book on dry topics.
https://store.steampowered.com/app/1410710/Democracy_4/
https://cdn.akamai.steamstatic.com/steam/apps/1410710/ss_94f...
The US Fed has to ensure liquidity for all global USD users, to include USD derivatives, USD denominated loans and USD denominated trade instruments; and it has to do that at the same time trillions can sit nearly idle (not contributing to transactional velocity) on balance sheets worldwide.
Impressive, no doubt and good on you though!
Edit: while I'm asking for new features, two buttons with a step of .5 isn't enough to handle these deflationary spirals. Perhaps turn it into a slider with the step buttons.
Also some historical charts to show at the end of the game would be cool
Next game, I set the interest rate to -0.50% right away and left it there: Your economy produced 442411 apples. Inflation was 1.5% in the end.
Doesn't seem to matter too much what you do. Maybe in real life too.
Ended up in the same neighborhood 400somethingK
Honestly expected inflation to go up at some point
100% unemployment, nothing produced.
Might be a lesson there.
There was a lot of excitement about it being real and not just a model and real and not being statistical.
I'm looking forward to going through your code and design. It's a great addition to the set of games that help us get our head around these things.
Simple models have existed for a while that show the horizontal circuit can be stable.
Here's my correction of Steve Keen's initial horizontal circuit from 2010[0]
What you'll find is that the unemployment buffer stock that is disciplining inflation, not the interest rate. You can see this by setting the interest rate to zero permanently.
You don't need wonks in central banks - just very effective automatic stabilisers based around the labour buffer stock.
To that end if you hire the unemployed at a fixed wage paid by the central bank at an orchard that is slightly less productive at producing apples and sells its output at a fixed markup price you'll find that you get more overall output because the less productive buffer stock ends up being smaller than a completely unproductive buffer stock for the same price anchoring effect.
I explored that in my baseline economy model, a derivative of a mainstream model, which is still online.[1]. Code on Github [2].
What I also found is that when you introduce 'shops' rather than the mythical central auctioneer market, and people just go to the current cheapest shop near them things broke big time. [3]
Tap me up on Discord or Github if any of this is of interest.
[0]: https://www.debtdeflation.com/blogs/2012/01/11/guest-post-a-... [1]: https://new-wayland.com/blog/how-the-job-guarantee-fixes-mai... [2]: https://github.com/newwayland/baseline-economy [3]: https://new-wayland.com/blog/revealed-the-simple-change-that...
The most destructive form of buffer stock being straight unemployment with no compensation. Turns out starving people and letting their job skills rot is pretty destabilising. Who knew?
The buffer stock theory doesn't rely upon Job Guarantee. That's just the natural endpoint of trying to minimise the size of the buffer while retaining its stabilisation effectiveness.
But there always has to be a buffer stock somewhere. What form it takes is a political choice.
There are plenty of partial implementations. The UK Universal Credit system requires 35 hours a week looking for work that cannot exist in aggregate in return for a pittance of pay. The pay is too low, the job is punitive rather than constructive and you can't choose to go on it, but it has anchoring properties that a straight unemployment scheme doesn't have. People will tend to want to get off it and into a private job for example. However, without the balancing choice in the opposite direction it favours capital over worker.
E.g. a Department of Health could have a ToDo list that includes: "Collate information on Tropical diseases for use by Doctors." A qualified person, such as a biologist, would be given an existing list of diseases and a list of recent research papers. They could simply flag papers that have info not in the Government list. In this way, when the actual Department worker goes to update the Tropical disease file, the references are all ready to go if the worker wants them.
Spending 35 hours a week looking for jobs that may not exist seems incredibly foolish.
But in the end, the problems with most such models is that the outcome ends up being determined by the assumptions built into the model.
e: I see
> One of the 10 orchards is always in its preparation phase which means it doesn't employ anyone so the natural unemployment rate is one out of ten or 10%
It seems to mean you can't have a labour crunch.
The fixed (maximum) number of orchards also doesn't seem to be modelling anything realistic; if apple prices go up and labour prices go down, I'd expect new businesses to enter the market.
Of course, labour crunches and new market entrants would make the game less stable, and economic collapse would be harder to avoid.
[1] - https://www.increpare.com/game/american-dream.html
[2] - https://www.theguardian.com/technology/2015/apr/02/increpare...
* Target 2% inflation
* Target 4% inflation
* Target positive but little real interest rates
* Keep interests at -0.5% the whole time.
The result didn't change much (more or less between 430k and 440k) with the best being the latter one: it seems that QE is not as bad as they paint it :-P
https://www.frbsf.org/education/teacher-resources/chair-fede...
I achieved this by trying to keep interest rates as high as possible. I started out with 5% which gradually increased to 7%. During the prosperity, I was mostly fixed at 13% and then lowered to 6% just before the drought. I kept the interest rate wiggling between 6% and 8% for the rest of the game (though I probably could've gone much higher until the people spend 10% less).
Keeping the interest high is key, since it's (afaik) the only way to generate new money. Additionally, income from interest will be spread out between the population, so going for high wages is not absolutely necessary, since the investment income from the orchard will also reflect in the population's income.
edit: Just going to piggy-back on this comment. Are there any interesting, recent economic simulation games out there? Especially macroeconomics are fascinating and would make for a challenging game.
Another great article into central bank-caused recession is Rothbard's "Economic Depressions: Their Cause and Cure". It had explanation for phenomenas such as why the food sector is not as impacted, during the bust, as some other highly technological, heavy industry sector.
For a more visual concepts, I find Mike Maloney's Hidden Secrets of Money pretty good, although it's not as rigorous as the previous sources.
I'm not a professional economist. I honestly know very little about the subject (apart from taking intermediate micro / macro and having had an interest in the subject since childhood). I don't think I could argue against the view that "climate change is a hoax" either, because I don't really understand the science. There are many things in my life that I believe despite not being a PhD in the field - and yes, a lot of it relies on appeals to authority and my impression of the world, which we could disagree on. I'm just advocating that we all share a bit of humility when it comes to highly technical topics, and in doing so we should probably defer more to academic consensus. Otherwise, it's essentially like debating religions - fun perhaps, but no one really knows what they're talking about.
I think we can both agree with the statement that academic economists by and large dismiss Austrian economics. If not, let me know, and I'd be happy to debate that point. Of course, "Austrian" economists have made many meaningful contributions to the field, e.g. Menger's marginal revolution, Bohm-Bawerk's work, Schumpeter's creative destruction, etc. Hayek was a well regarded political and economic thinker.
However, modern day austrian economics is essentially a think tank that espouses a very hardcore version of libertarianism - claiming that modern economics is a farce, empirical methods are useless, and that inflation is the devil and we need to return to the gold standard. I remember reading Rothbard's The Case Against the Fed and parroting many of the points, having been impassioned by Ron Paul's 2008 presidential campaign. I remember railing against the Fed and its loose monetary policy, absolutely sure that inflation was coming post 2008 (it did not).
I can't really provide a detailed takedown of Austrian economics, again, because I'm not an economist. All I have is my life experiences of having believed in it ardently, and then not, and then asking myself why I was ever convinced in the first place. Bryan Kaplan, another extremely libertarian / ancap economist, has a critique here that some might find influential: https://econfaculty.gmu.edu/bcaplan/whyaust.htm. But most serious economists don't even address it, presumably because it's not a part of academic discourse at all. More pop economists from across the spectrum, like Krugman and Friedman, both disparaged it of course.
The thing to be wary about is that Austrian economics is essentially ignored by mainstream economists, but Austrian believers are extremely passionate and have built up a huge online presence - led by a handful of non-economist political bloggers. So if you google austrian economics, you'll find pages and pages of Mises Institute, Lew Rockwell, etc. It's very easy to fall down the rabbit hole. Meanwhile, academic economists are doing research, not creating pages and pages of "austrian economics is pseudoscience" articles. Listen, if you want to be a libertarian, that's fine by me - but upholding austrian economics to help justify your political beliefs seems a bit unnecessary to me.
Until the interest rate on capital falls negative and people start wars. Austrian economists start world wars for sport.
On wars, it's quite the opposite: this is often supported or prolonged by a central bank monetary inflation, or governamental debt.
Inflation, on the other hand, forces to make cheaper apples people can still afford.
Your game is only half done.
https://www.investopedia.com/ask/answers/12/inflation-intere...
*** GAME END ***
Your economy produced: 439918 apples.
"What has government done to our money" is a nice read to understand money, inflation, central banks, exchange rates between currencies, etc.
https://mises.org/library/what-has-government-done-our-money
It opens with describing what money is from the first principles.
The econimc model here couldn't be more supply side if it tried. It's a perfect analogy for how Republicans think economics work. Either you subsidize businesses to guarantee high profits, or the rich people will instantly take their ball and go home, and everyone will starve. Businesses don't instantly shut down if they think they won't post a profit for a quarter. Seriously, Amazon literally posted a loss every quarter for its first 10 years and they stayed open through investment so people would receive dividends after they finished establishing the scale they needed.
Whoever made this didn't put enough effort into thinking about the difference between a single product economy and real life. One market having a hicup doesn't cause 100% unemployment and a complete shutdown of all production in that market. This game fails to simulate a real economy for many of the same reasons the stock market rarely remains stable.
[1] Caveats apply!
The best way I can conceptualize it is running counter-cyclical monetary policy, essentially tweaking supply via cost of capital for orchards.
Rates fluctuated between 4-7%. I tried to keep inflation and menu prices between 1-2% consistently.
Feedback:
The log should have scrollback and/or be expandable. When a lot of things happen in succession it's impossible to keep up.
Pausing, and maybe stepping months, would be nice as well.
Where's the dam leader board ;)
Tried to stay around 3.5% inflation but furiously fought deflation and used the sliders a lot to pendulum around especially in crises
Central Bank is pretty much useless.
Mostly left it at 0% except for two inflation events where it went over 7%.
The goal is to create a company and go as big as you can if it’s what you want. Almost all major industries are there. You can be selling beds to being the next Apple. There is even a DLC for software company (that is also a must have because it brings the talents feature). You can do vertical market dominance if you wish or go horizontal. And learn their own challenges and their ins and outs. And you can even do trading and do some M&A!
If you ever buy it get all the DLC they are all worth it. They add even more realism and tools to the game. And if you really don’t like it I think they have a money back guarantee.
As a tip to truly learn stuff play it in “hard mode”. Even if you fail at first it’s fine because you will learn from a realistic perspective and gain a lot of insight and knowledge each time. In the game options turn everything to realistic, with average in import, good quality for import, max out the total number of cities and companies. You should end up at 340-380% in difficulty. And then build whatever you want! You don’t have to know it all or learn it all. But since it’s that realistic you can go with your gut instinct and it will probably be right. From the impact of inflation on your business, to how marketing or real estate work. Just dive in and have fun!
I’m a huge fan of this game. I learned so many things with it. From real estate to supply chain that I was not that familiar with. It’s so good.
Oh did I mention it’s still in active development? :)