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Keynesian Economics (White Giant)

Simcountry: Simcountry Bulletin Board  Keynesian Economics (White Giant)

John Gresham (White Giant)

Friday, April 01, 2005 - 01:27 pm Click here to edit this post
Buying quality and effectivity upgrades is investing in corporations, as is injecting cash into corporations or establishing concessional trading arrangements between your corps and the country.

1) Concessional trading arrangements between your corps and the country, if modeled correctly, would be a sterile transaction. No gain or loss from trade; what could be gained by the corporation through exportation is denied, and wealth that would be lost by the nation from importation would also be denied. (Wealth goes from the right pocket to the left pocket.) In the current model, if your object is to lower prices to avoid materials penalty, you lose tax revenue at a greater rate than any savings. If the opposite, the problem is that charging higher prices doesn't tend to lower consumption. That constitutes another one of those "Hey everyone, look, free money!" kinds of things. Materials accounting is incredibly inadequate. Any system that doesn't have consumers making decisions about what to buy based on individual market prices is going to be inadequate in a similar fashion.

2) Injecting cash into the corporation is investment that would have occurred anyway through the use of what are now incredibly cheap loans. I am unconvinced that nearly any additional investment is stimulated by any fiscal policy. The decision to create a new corporation (ignoring which industry it is, assuming that it will be the best one or one of the three best the president knows of) is based entirely on whether there is labor available. Q&E investment will occur automatically in a player-run corporation nearly all the time, and if it doesn't, it is not because they don't have enough money to do it.

3) Buying Quality and Effectivity Upgrades also stop at a point: 70/70. Really, I wish they'd get rid of those altogether and add raw materials cost bonuses (especially if natural resource scarcity was added!) to labor cost bonuses for effectivity spending and production capacity increase for buying capital equipment. Quality is rather irrelevant on the scale we're talking about and in a model where certain amounts of nearly all things are required no matter their quality.

If you are still not convinced JG, the income stream from a profitable corp can fund the building and improvement of an identical business. Aren't these examples of buisnesses investing in themselves?

In many ways, that illustrates another of the problems of the structure of an enterprise or group of state corporations. There is an almost complete lack of economies of scale (the only one that really applies is the flat cost of a production plant and going from 10 to 100% production), and as well a nearly complete lack of diseconomies of scale. The diseconomies of scale that could potentially happen are ruined fairly well by the simcountry policy of breaking the laws of physics by adding goods to the market (and fraudulently stating that this does nothing to the market price.)

A president can build more roads to "boost his economy" (though in reality its a drain on country profitability). More roads means more road maintenance. If the president owns a road maintenance corp he can establish trade contracts between his corp and the country, even above the amount of road maintenance that is actually required. A boost in consumption of road maintenance means an increase in the supplies used to produce it, namely building materials, chemicals, services and HTS. Which boosts demand for BM, Chem, Srv, and HTS. The effect has been multiplied.

Ignoring some of the vocabulary issues I've noticed-- that are completely understandable, as vocabulary of economics is somewhat nuanced-- AD policy that you describe is too international for it to be a good national policy. It will not tend to increase production locally, which is the goal of AD policy in a recession; local production is almost entirely a result of a president's decision to make use of labor, since the vast majority of corporations are state corporations. AD policy therefore is not advantageous in this model. Local aggregate demand is not what stimulates GDP growth in Simcountry-- international aggregate demand is. And the government that ignores local demand and free-rides on the international demand is at an advantage due to the fact that it can gain tax revenue from exportation while pursuing contractionary fiscal policies. Every good president in this game works to have a budget surplus and rightly so: deficit spending is almost always not the right decision except at the very beginning when education must be propped up or when the military must be increased, concerns which are independent of recessions.

The aggregate demand is international and so is the aggregate supply. The automatic buying and selling as well as the lack of barriers to trade make management of one's own economy simply a game of setting up automatic settings and making a few clicks each month. That's all very well and socialist, but it doesn't really jibe with the reality. On the earth of today, only 24% if I remember correctly, of production within all nations is traded between nations. In simcountry, I would estimate that that number is between 90% and 99%. The difference there is quite extraordinary, and highly illustrative of the problem of this game: the lack of any sort of barriers to trade, within the nation or between them. (I agree that the road/rail/water treatment system is a joke, but that is such an easy target it is hardly worth mentioning.)

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