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Simcountry is an Online Digital World where you are the President of a country.
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What is Simcountry?

Keynesian Economics (White Giant)

Simcountry: Simcountry Bulletin Board  Keynesian Economics (White Giant)

John Gresham (White Giant)

Friday, April 01, 2005 - 12:39 am Click here to edit this post
AD policy is impossible more because of my second reason; your examples do not outweigh that one. As well, the rigid nature of businesses in this game tends to make your examples of AD policy not worth much, since the multiplier effect is almost always absent. AD policy is effective because it requires deficit spending of a lesser amount than the recessionary gap, and a budget surplus of a lesser amount than an inflationary gap. MPC, the marginal propensity to consume*, which applies both to producers and consumers, has an effect on growth in the real world by providing for the multiplier effect. In simcountry, the consumption of materials to produce goods and services is capped at a fairly low flat rate per business. This produces these unlikely situations (that are incredibly common in simcountry) where business just sits back and takes profit without reinvesting. In the real world, a successful business goes far beyond their "100% hiring and production" by buying more capital equipment with their profits. Instead, NO profits that they make are reinvested into the business; instead, they are passed back to the government, private owner, or stockholders, all of which are controlled by players or are C3s. In very few of those cases do additional profit affect decision-making very much; since businesses have such low barriers to entry in this game, new corporations are made regradless of the financial situation of the government or enterprise. Worker levels are taken into account-- that is the only real example of scarcity of a resource in this game-- all other scarcities are fundamentally due to either a lack of employment of labor or a lack of labor; in the real world, we can run out of oil or oxygen or clean water or trees; not so here, where if there are people to perform the task of logging them the space for trees creates itself, and the trees are automatically mature and ready to cut. This game disobeys the laws of physics.

*the multiplier effect is this: the person who sells something will buy something else, and the person who sold them that will buy another thing-- the marginal propensity to consume is the number between 0 and 1 that indicates how much of any additional income a person receives will be spent and how much will be saved. The amount spent is what multiplies the effect of aggregate demand policy because, when the government buys something or gives someone money, that person will save only a portion of it and spend the rest of it. The cyclical nature of that effect is fairly easy to see.

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