Unemployment should drop GDP...shouldn't it?

Interesting points. I guess we sort-of-model this with regards to stuff that feed into unemployment.
For example, if an increase in technology boosts automation, and causes unemployment (effect a), GDP should go down… and yet the the boost in automation boosts productivity, and thus GDP goes up (effect B).

Economists will win nobel prizes based on predicting if a>b or b>a…

The trouble is we currently model B, but not A, so it may be that technology is overpowered, economically, in the game right now?

Yes, but, unemployment should not lower GDP. GDP is “gross domestic product”. Unemployment may affect private consumption, but it does not affect productivity or gross product.

In the “Game Solution” thread, the game state showed a zero unemployment economy which performed a lot better, in the game, than it should. If the game is struggling to catch up to reality in terms of modeling the effects of full employment, it needs to make them even more inefficient and painful, not add another reward for full employment which does not even make sense.

In the real world, there is no way to have full employment without causing a skills shortage. In the game, this is offset by highly educating everyone - but you would still have a skills shortage, because everyone would have skills, but they would all be employed and there wouldn’t be enough of them.

In raw gameplay terms, education and technology are the strongest ways to quickly fix the economy. Education is stronger, because it can be consolidated with just the “University Grants” policy. It’s very easy to win the first re-election, which is the hardest re-election, without bending over backwards to any particular constituency, and just flattering “Everyone” with immediate “education” and “health” effects on human development.

For both game balance and realism, greater inertia should be added to these effects. It takes four years of public investment in “University Grants” for these to begin to render any returns on education, so any politician that does this is going to be running for a four-year re-election at a point in which he has spent significant public money on such a program, but has not yet seen returns. It takes much longer than four years for such a policy to exercise its complete effect on the education level of the workforce.

Technology should also be much more inert. Technological advances have, and should continue to massively increase human productivity - if anything, the magnitude of technology effects in the game is underpowered, because the game doesn’t (and for simplicity, shouldn’t) attempt to model economic paradigm shifts on the order of industrial revolutions. For the United States, technology is fine, it just needs much greater inertia.

For other countries, particularly Spain and Italy, their access to technology will depend more on foreign relations than on local investment. The technological strategy of NATO/EU vassals, is to wait for the Empire to make technology, and then to beg for it. However, I think that game development would be over its head in trying to accurately model the effects on international dependencies on less-played countries, and it would make them boring to play, because really, so much of what goes on in these societies is beyond the ability of national policy to control. They are ships at the mercy of the sea.

So, my vote is to leave Unemployment:GDP alone, obligate “Skills Shortage” at or near zero unemployment or add a new “Labor Shortage” crisis, and if your inertia cap is 8 years, cap out the inertia for all “Education” and “Technology” policies. This will make the game, which I now consider to be too easy, harder and more realistic.

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Economists will win nobel prizes based on predicting if a>b or b>a…

It’s amazing how poorly public policy used to be managed, and it seems like people didn’t really understand it for the longest time.

The greatest technological advancement in the field of economics is, hands down, the personal computer. This allows systems models to be constructed and played with, so it makes the the cost and duration of experiments significantly lesser. Previously, the cost and duration of economic experiments was at the magnitude of “America, 1783-1861” or “The Soviet Union”. Games are cheaper.

Frankly, most of what goes on in think tank world is the luddite rolling of boulders up cliffs, and a lot of their time would be better spent trying to do what you’re doing here. We are still waiting for boomer mass death to overcome the inertia effects for these new advances in analytic methods.

If it (unemployment) effects private consumption, then it effects GDP.

GDP = C + I + G + (Ex - Im)

If “C” changes, then GDP changes.

If Unemployment lowers “C”, then it stands to reason that it will reduce GDP
(If we assume all these relations to hold true and all else being equal).

I think you’re forgetting that Cliff is almost a boomer himself, he’s around 50-52, so he was born just 6-8 years after the last boomers were supposedly born (1964). You could call him a late boomer (:wink:) or an early Gen X.

  1. [Generation timeline - Millennials - Wikipedia]
  2. Baby boomers - Wikipedia

So mass death of boomers would’ve meant or would mean an 86.2-100% chance of Cliff either never having existed or ceasing to exist, pretty high odds. And hence no new advances in analytic methods as you mentioned about what Cliff is doing here and those that you seem to desire.

I can’t seem to fathom why people can’t seem to get mass death out of their heads? I brought this up with Cliff too (the conversation about Retired and pensions), we need to reorient ourselves away from such thinking.

Sure.

Even if you leave the State out of it, unemployment doesn’t necessarily lower “C”. Gross disposable income drives C. If it’s cost-effective to fire an employee, then the enterprise itself will have higher income, and distribute that as additional disposable income to owners, if it doesn’t invest it.

I wouldn’t mind seeing the entire GDP = C + I + G + (Ex - Im) model go into the game, with “GDP” being unable to reach 100% unless each of these inputs is maxed.

It doesn’t even cause a recession, in the game, to tax people to oblivion in order to build a dragon’s horde surplus.

I can’t seem to fathom why people can’t seem to get mass death out of their heads? I brought this up with Cliff too (the conversation about Retired and pensions), we need to reorient ourselves away from such thinking.

Economics is the business of mass death. War criminals, step aside - you are like little babies. “I have a new economic theory!” is a coffin industry signal.

Sales Tax can undermine your GDP and so can Capital Gains Tax at high values. Same with Corporate Tax, Payroll Tax and Income Tax at high values do it as well.

Economics is not the business of mass death(unless you’re opening a cemetery), that’s awfully cynical, it’s like saying nuclear science is the science of world destruction. It’s not the knowledge which matters, it’s what humans do with it.

I think that model is largely in the game.

Well business investment also drives GDP, that employee fired is now consuming less, hence, lower consumption, so lower GDP. Has the business invested more into the economy than it has made the economy lose through the loss of consumption it just carried out? Can it do so in the future?

Can it replace that job with automation (or another worker)? Because not all jobs can be replaced by automation (and not all workers can spontaneously materialize out of nowhere like as if they’re a deliveryman, there’s no shortage of them, I’m being facetious here). If it can’t then its productivity will fall as a result of that action, and if it’s productivity falls, so does its economic output and so does GDP.

But all this discussion could be moot if Cliff decides to stay neutral on this.

You need to discern Employment → Disposable Income → Consumption → GDP from its simplified version of Employment → GDP. If employment is the single dominant factor in disposable income, you may be right but it’s not. I also don’t think C+I+G=Y is in the game since having 100% unemployment and no welfare doesn’t hurt the economy (I’ve tried :P).

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Yeah, I mentioned that it’s largely in the game, I don’t know what the full formula is for GDP in the game.

What is the dominant factor in income for most people who are not wealthy? It would be employment or their parent’s allowance (which is basically untaxed income).

I guess the real question is Cliff, was there more unemployment after you started the game, or less, if, all else being equal, unemployment is lower than when you started the game, then GDP should be higher, if unemployment is higher than when you started the game, then GDP should be lower.

Although we at this moment don’t know what your formula for GDP is (i.e. how have you redefined it). So, it would be helpful to know that.

:slight_smile:

Just go and check the disposable income screen in the game. There are so many factors outside unemployment/wages. Just Unemployment Benefits alone makes an exception of ‘anything that increases unemployment should decrease the GDP’ and it isn’t the last thing on the list.

Regarding the current GDP factors, some public spending programs do boost the GDP while the others don’t. If the GDP model considered C+I+G=Y, then state healthcare & schools would have been effectively massive stimulus packages. I guess that D4 sees the GDP as a measure of production capability and thus the single-biggest factor here is the Productivity. However it can still be argued that employment should affect the GDP since Real GDP would be smaller than Potential GDP if the economy is not in full-employment. (of course you can’t just achieve the level of potential GDP by forcing everyone to work)

I mentioned it as all else being equal. State Enterprises increase the wages of state employees, so I imagine that’s one way how they increase GDP (asides productivity). They are massive stimulus packages, just their effects are not entirely how we would expect them to be in the real world.

Full employment would also prevent hiring, so it’s not preferable for an economy.

Yes, I could look at all the values which increase disposable income in game, but it would be easier, if Cliff could write the formula here, with a legend for all the inputs.

Can you bother taking some time to actually search what Potential GDP is and understand it doesn’t mean zero unemployment instead of saying ‘the assumption of GDP at full employment is useless as it will prevent hiring’?

It would be also glad if you can tell me how did you misinterpreted ‘unemployment/wages are not dominant factors of disposable income in this game’ and reply it with ‘I could look them but want to know how they affect the GDP currently’ when I mentioned that the game currently has the Productivity as the single most-important factor of GDP. There’s simply no CIG=Y in this game just productivity rules because Cliff assumed the GDP is about production, not consumption.

It could be argued that most countries have exceeded potential GDP, as most countries have inflation.

Full employment is defined as virtually (~100) all those who can work, are working, which is as good as saying zero unemployment, because even if only a few hundred people are left unemployed, they are not nearly enough people to ensure that employers can have a sufficient number of people if they need to. I never said that GDP at full employment is useless. I said it’s not preferable, I did not say that it’s not useful, it is useful, it keeps people busy and out of radicalization, it mitigates poverty, it boosts wages, it does many other things, but it reduces the fluid movement of labour in an economy.

My response to

was not

it was

As per your statement:

If you raise Sales Taxes (which is essentially a tax on consumption) high enough, it really reduces GDP, which reflects that in game Cliff has assumed that GDP is also about consumption, not just production. He is after all an economist and C + I + G + (Ex - Im) is Econ 101.

I would like you to please read what I have written, instead of just attacking me. Attack my words if it’s warranted, but don’t do it by misquoting me and putting words in my mouth. Or if you’re going to do those things, atleast do it in a way that I can’t easily refute them.

Saying Potential GDP to be not preferable cuz it’s not actually efficient isn’t that different from “nominal output of machines is useless (or not preferable) because it costs more to eliminate losses so that you can reach there”. That’s how your words sound like. What’s the point of arguing ‘max potential’ to be inefficient except for nitpicking?

Also, you have said “Although we at this moment don’t know what your formula for GDP is (i.e. how have you redefined it). So, it would be helpful to know that.” and then “Yes, I could look at all the values which increase disposable income in game, but it would be easier, if Cliff could write the formula here, with a legend for all the inputs.”. It definitely sounds like you are linking disposable incomes with the GDP since there’s nothing to be called ‘formula’ for disposable income.

Sales Tax or Value-Added Tax reducing the GDP doesn’t mean the consumption is factored in its calculation. If you regard that as a proof, you can also say pollution is a source of GDP since Pollution Control also reduces the GDP. The fact Sales Tax has a negative impact on GDP just reflects losses incurred by taxation in the markets. C+I+G=Y just means parts of Gross Domestic Product are consumed by the people, not consumption contributes to the production (GDP) directly. You need to produce or earn more goods & services if you want to consume more anyway.

I’d also like to remind a comment written a month ago.

https://forums.positech.co.uk/t/adding-a-model-of-mental-health-to-the-game/18197/6

I never said potential GDP is not efficient. All I’m implying is that not all jobs can be automated and if you employ almost everybody you’re going to slow down hiring in an economy no matter what. That’s all. It’s up to policymakers what they value more, full employment or smooth labour flow.

There are no physical or abstract goods and services in D4, they have to be abstracted in some form, that’s GDP and Disposable Income.

except disposable income. That’s just how goods and services are distributed not produced.

Also you are still misleading my points. Tell me the sentence I said goods & services are in the game.

I never said that you said that, just that there needs to be an approximation for them, which is GDP.