Show HN: A central bank simulator game with a realistic economic model • Hacker News Board

Re: Show HN: A central bank simulator game with a realistic economic model

#221

Post by thelamest » Sat, Jun 18, 2022, 9:23 AM UTC

lottin wrote: post #168

TheSpiceIsLife wrote: post #159

Earlier quoted context omitted.

But, aren't finical systems a sociological science, rather than a mathematical model? 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 ?

Mathematical models are that, models—a simplified version of a particular phenomenon. Economic models are no different, in particular they presuppose, among other things, that economic agents behave rationally [1]. [1] https://en.wikipedia.org/wiki/Homo_economicus

Economic “rationality” sometimes gets a bad rap, but it’s more defensible than it may appear and provides a well-circumscribed, workable general foundation to expand on. In simple versions: rational preferences (which include indifference) are transitive and complete, and people pursue these goals. That’s all. Symmetric violations wash away in the aggregate, and asymmetric can be included, e.g. as loss aversion. Criticism of “rationality” is often stuck in late 19th to mid 20th century debates that were since generally resolved.

Re: Show HN: A central bank simulator game with a realistic economic model

#222

Post by leononame » Sat, Jun 18, 2022, 9:26 AM UTC

imtringued wrote: post #207

leononame wrote: post #166

I think, as of writing, I have a new high score: 444823. 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 sp…

Play prosperous universe. It will make your head hurt.

Just had a look, I'm really intrigued. Definitely going to try this one out!

Re: Show HN: A central bank simulator game with a realistic economic model

#223

Post by thelamest » Sat, Jun 18, 2022, 9:34 AM UTC

yreg wrote: post #40

I tried to keep inflation between 1.5-2% for the first 50 months and then decided to find out what happens if I YOLO permanently fix the interest rate to -0.5%. After the 240 months I somehow ended with GDP 442999 and 1.53% inflation. How come? Shouldn't I have a runaway inflation?

You can be unprofitable at -0.5%. It stabilizes; for a runaway inflation you need to have a positive feedback loop. From the author’s write-up (https://benoitessiambre.com/simcb.html):

>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.

Re: Show HN: A central bank simulator game with a realistic economic model

#224

Post by brutusborn » Sat, Jun 18, 2022, 9:34 AM UTC

Aunche wrote: post #163

brutusborn wrote: post #147

Earlier quoted context omitted.

I follow your argument but I would argue that incentives to hoard money aren't necessarily bad. I agree with you that hoarding money leads to a reduced money supply, but I don't think this is necessarily a bad thing. 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. sellin…

Hoarding money isn't a bad thing if that's your normal state, but it's a bad thing to go stop lending and investing during a recession when that is what is needed the most. 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 nece…

Just to clarify, I wasn't suggesting that a Central Bank (using fiat currency) should punish bad actors; I was suggesting that if the Central Bank used Gold, the bad actors may not have existed, or if they did exist, would have been decimated to the point they are essentially replaced by better actors.

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.

Re: Show HN: A central bank simulator game with a realistic economic model

#225

Post by brutusborn » Sat, Jun 18, 2022, 9:38 AM UTC

imtringued wrote: post #196

brutusborn wrote: post #147

Earlier quoted context omitted.

I follow your argument but I would argue that incentives to hoard money aren't necessarily bad. I agree with you that hoarding money leads to a reduced money supply, but I don't think this is necessarily a bad thing. 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. sellin…

How about instead of enforcing your authoritarian money model which puts all the power in the hands of financial capitalists you instead abandon the idea of caring about the interests of the financial capitalists and just let people trad with each other without requiring permission from authoritarians? It is really quite strange that one would consider the gold standard a source of liberty. Humans aren't made out of…

When you say "just let people trade with each other", do you mean a Government policy where payment can be made in any form of value?

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.

Re: Show HN: A central bank simulator game with a realistic economic model

#226

Post by JumpCrisscross » Sat, Jun 18, 2022, 9:43 AM UTC

lottin wrote: post #169

fartcannon wrote: post #148

Earlier quoted context omitted.

Denial works too, I guess.

We're not in a financial crisis.

To add to this, we’re in a bear market and possibly recession. But not a financial crisis. (We’re also not in a currency crisis. The dollar is gaining against pretty much every currency. It’s also gaining against practically every crypto.)

Re: Show HN: A central bank simulator game with a realistic economic model

#227

Post by JumpCrisscross » Sat, Jun 18, 2022, 9:48 AM UTC

nwah1 wrote: post #136

adam_arthur wrote: post #118

Earlier quoted context omitted.

Suppressing rates via QE multiplies the spending power of a dollar, which has a very similar effect as creating more currency

We should consider a lot of this to be zero-sum. 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…

> Creditworthy demand for loans doesn't magically increase when rates change or the Fed buys bonds

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...

Re: Show HN: A central bank simulator game with a realistic economic model

#228

Post by kgwgk » Sat, Jun 18, 2022, 9:55 AM UTC

vintermann wrote: post #214

fartcannon wrote: post #108

Earlier quoted context omitted.

As in, scam people and then scapegoat 'crypto bros' for the current financial crisis that has more to do with printing money than anything else?

Nobody is printing money. 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.…

> already circulating money that government convinced people to give them in return for a promise in the form of a bond

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).

Re: Show HN: A central bank simulator game with a realistic economic model

#229

Post by Oberbaumbrucke » Sat, Jun 18, 2022, 10:08 AM UTC

reilly3000 wrote: post #137

After a rather dismal first couple of runs I read the blog post for some hints. The best I found was to try to raise rates during the good times so there is wiggle room during downturns. I was able to get 443,904 by raising to over 10% during the initial prosperity period and was able to cut rates in half as soon as there was a crash. Ultimately I stabilized at around 3.5%. As of the time of this post I think that is…

With your first comment you are already more qualified than most current CB Governors. This current crisis has most Developed Markets going into it at 0%

  The best I found was to try to raise rates during the good times so there is wiggle room during downturns.

Re: Show HN: A central bank simulator game with a realistic economic model

#230

Post by praestigiare » Sat, Jun 18, 2022, 10:16 AM UTC

The problem with this is that economic models are (to be kind) incomplete, so playing a game like this is essentially "how to make an economy work if economies worked how we think they work."