Inflation stat seems underdeveloped

Democracy 4
1

From what I’ve seen, the only way for inflation to go up is by deliberately setting helicopter money and quantitative easing way too high, which can trigger hyperinflation. It is also tied to wages, but the results of that seem pretty superfluous either way. I feel like there are a lot of opportunities to expand upon it and make it a more central aspect of gameplay.

-Helicopter money and quantitative easing need serious adjusting. As it stands there is literally no reason at all not to have both policies in place at at least ‘low’ because they provide valuable benefits with little or no affect on inflation. On the flip side, having them higher than ‘low’ is completely counterproductive, because it causes enormous inflation with almost no additional benefit over ‘low’. Inflation should be raised at the lower end, and lowered at the higher end of these two policies.

-Minimum wage should be directly tied with inflation. With a high minimum wage increasing inflation, and a very low (or no) minimum wage reducing it.

-Welfare policies that simply inject money into the economy, such as child benefits and UBI should raise inflation, while rent control should reduce it.

-Voucher-based policies such as food stamps, healthcare vouchers and school vouchers should lower inflation, since they directly lower the prices of consumer goods and services without creating money.

Debt Monetization
-I suggest this as a new policy. It is a ‘money printing’ policy akin to helicopter money and quantitative easing. With it, the government essentially just creates money to reduce the deficit (or raise the surplus). It would produce direct income for the government similar to taxation, but raising it will cause inflation, lower currency strength, and severely anger capitalists.

Corporate Price Gouging
-I suggest this as a new ‘red button’ situation. If your country has competition laws favoring big business and lax consumer rights, large corporations will arbitrarily jack up the prices of good and services simply to increase their own profits. This results in artificial inflation, increasing prices for consumers. This situation increases inflation, angers the poor and middle class, lowers poor and middle earnings, and increases high earnings.

2 Likes
2

While I definitely agree that those 2 non-conventional monetary policies in D4 are badly designed, I think more inflation links need further consideration.

  • Minimum Wage: I do expect higher inflation in the end but it can have other effects depending on how it boosts inflation. For wage-push inflation, minimum wage will have an impact, which already exists as an effect of it (minimum wage - wages). If you meant demand pull inflation from increased disposable income of low-income workers, it will have short-term stimulus effects too.
  • Welfare: It is true that expansionary fiscal policies boost inflation but you should consider other factors. First, if a player decides to fund them through taxation, there won’t be any stimulus effect and thus can’t expect inflation to rise. Secondly, even if these programs are not backed by taxes, they won’t just affect inflation alone. Big spendings are stimulus in short term, whose effects will get eroded over time by inflation though.
  • Vouchers: I don’t think they will reduce inflation because people will effectively have more disposable income in the end. For example, food stamps will let people spend stamps instead of cash, allowing them to spend that cash elsewhere. They are not that different from other welfare payments except for A) recipients will spend them to specific goods or services and B) they will disappear if recipients don’t use, which isn’t likely to happen.

I personally think inflation can become more important & impactful with proper improvements. I’ve recently made a mod called Cost of Living, which tries to simulate possible downsides of high wages & inflation. With this mod, higher inflation does erode GDP in the long run by boosting wages even further and thus hurting productivity.

However, it still lacks control on inflation. I wanted to add stimulus effect (GDP boost and inflation push, resulting zero boost in a long run) but there were some technical limitations. It would be nice if fiscal deficit/surplus were an accessible simulation.
Further Reading: Mod Idea - Cost of Living (& Urban Density)

1 Like
3

Yeah, I’ve modded for myself Food Price to increase Inflation, as well as Inflation to raise Poverty. It doesn’t take much of an increase to make Poverty much harder to eliminate.

The issues with your point about Minimum Wage and Welfare is that it works on the assumption that minimum wage is already a living wage. If raising the minimum wage just means people can afford essentials, then it won’t raise inflation. It’s the same reason why Welfare doesn’t raise inflation; its purpose (in theory) is to cover the cost of living, so again, it isn’t really going to touch inflation. Child Benefits wouldn’t make any difference since it’s a tax break rather than a benefit per se.

I do like your Price Gouging idea though, and Helicopter Money does seem a little OP. However, with Helicopter Money, as with Benefits, at a very low level the purpose is to enable the absolute poorest to pay for cost of living, which won’t impact inflation.

1 Like
4

However, it still lacks control on inflation. I wanted to add stimulus effect (GDP boost and inflation push, resulting zero boost in a long run) but there were some technical limitations. It would be nice if fiscal deficit/surplus were an accessible simulation.

In many countries that isn’t something controlled by the government. For example, the UK has the BoE which largely dictates interest rates, and the US has the Fed Reserve. TBH, I don’t think QE should be a policy at all.

5

I agree that more indirect approach to monetary policies would have been more realistic. But players should have some say on inflation even with independent monetary policies. First of all, it is easy for players to feel frustrated if there is a stat which does exert considerable influences on gameplay but can’t be really controlled. There’s no point in adding more penalties to high inflation when inflation doesn’t rise that much (as the vanilla game does :P). Also no point when inflation can rise but no tool is presented to suppress it. It’s kind of inevitable for a videogame. You can make it costly or difficult but giving no choice is either a waste of contents or even frustrating for players.

Furthermore, lots of government programs or taxes can affect inflation. Just fiscal deficit alone is one of the key factors of inflation. Though it doesn’t work like setting inflation rate of the next year, that’s not what I meant by ‘control on inflation’ in my comment.