Modern Monetary Theoryy

I have been watching some youtube videos of the game and I am really frustrated to see the same debt and deficit narrative put forward. It would be awesome to see the game incorporate elements of Modern Monetary Theory. See Stephanie Kelton’s book The Deficit Myth for information on MMT.

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Well its because GDP as number eventually stops growing.
That is you can’t have 1% deficit if growth rate is 0%.

If it could grow forever, or at least GDP size scaled debt/GDP ratio every turn, then you could remain at deficit.

I doubt MMT is going to find much traction with someone who actually was educated in economics lmao

I guess we could have super high debt cause inflation -> hyperinflation.


MMT has more respect for real world data than conventional economics does, by a mile. It has some predictions which it would be pretty complicated to simulate, though. For example, it says the various “print money” policies will not cause much inflation… until after they cause unemployment to hit rock bottom, at which point very suddenly, they very much do.

The theoretical basis of MMT is just a reiteration of some of the basics of conventional monetary economics, dressed up to seem profound. It’s basically Dunning-Kruger Effect: Monetary Theory Edition.

The reason conventional monetary theory disagrees with it is because conventional monetary theory has a great deal more nuance to it- MMT would have been impressive around the time of Keynes, but Keynesianism (and the basis of MMT) were rolled into the consensus along with various other paradigms decades ago.

Basically the game needs to simulate inflation and reserve interest rates to show whether the economy is running hot or has slack in it. Would make the economic aspects deeper.

Like in Democracy 3 I run deficits almost permanently. The problem is you hit the debt crisis event and that impacts on your economy. Unrealistic because if your economy is stable and unemployment low, the probability of businesses not investing in your country is low regardless of your debt. Look at the U.S and Japan for example.

Also I’d like to see policy options like a Federal Job Guarantee.

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Compulsory Work for the Unemployed and a high Unemployment Benefit might serve to approximate that, if it doesn’t get implemented.

Regarding investment- debt definitely isn’t necessarily bad, but enough of it would crowd out private investment in Democracy, since the player can always acquire more debt no matter what. The limitation cliff faces because of that is that he can’t really simulate the issue that real countries face when investors decide not to buy more bonds: whether to raise interest rates or print money. If that were in the game, the debt mechanic would be more realistic and there would be a way to permit people to try out their MMT ideas.

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Maybe we could expand “locally held debt” to all countries?

Whoah. MMT does NOT have more respect than conventional economics. Thats some serious cherry picking. I studied pure economics at LSE, I’m not unaware of the MMT debate, but I am very much firmly on the side of agreeing with pretty much every central bank in every country in the world, which is that deficits matter, debt matters, and no, you cannot endlessly print money as a way of avoiding dealing with deficits!

MMT massively handwaves away the entire issue of debt being held by foreign entities, or the flows of investment in and out of a country. To say thats simplistic is putting it mildly.

Increasing the money supply causes inflation, inflation causes devaluation, and devaluation reduces business confidence, esp with regards to foreign investment.

but… feel free to make a mod for MMT which makes the debt crisis never happen. I know its a popular topic, but no way would I change the game to reflect what is, to be charitable, a pretty niche view outside of youtube videos and twitter.

Sure. Now look at Greece and Italy. Not so rosy. The US is the global reserve currency (and this is explicitly modeled in the game) and a disproportionate amount of japans debt is held by domestic retail savers. This is also explicitly modeled (although TBH we may have under-done it). These factors are not true of the other countries in the game.

Can’t we just issue local debt as a policy to counteract the debt crisis to some extent?

Technically the MMT doesn’t apply on Italy and Greece since they can’t issue their own currency ,in which they take their debt, on demand (or at least not without the support ot the rest of the countries that use the euro).

Correct. Eurozone countries are not monetary sovereigns, they are currency users and not issuers being subject to the rules set by the EU.

My examples of Japan and the U.S are monetary sovereigns, the same with my county Australia.

However if the developer is unwilling to make changes I’m not going push the case for changes. It’s disappointing because because game is fantastic apart from that one bad assumption.

Has anybody here looked at Democracy 4 yet?
Can it frame an MMT scenario?

Cliff is not for it as such, but if anybody wants to make a mod for it, go ahead.