Capitalism and its foundation in monetary economics

[counting]

Although this game bare the name of Capitalism, and simulate the foundation of Capital structure pretty well, but neglect most upper level Capitalism structure . In Fernand Braudel's epic Civilization and Capitalism 15th-18th Century total 3 volumes, he describe the back story about how Capitalism structure emerged over the centuries from its ancient root. I strongly suggest if anyone interested in understanding how Capitalism works in modern day, should hear the story of how it was born.

I don't know how many players on this forum actually know about monetary economics, it's a much more specific subject to deal with some very fundamental questions and concepts in financials. But the first lesson most would learn from monetary economics is - money is like blood flow. It forms a cycle usually in reverse direction from goods flow and services (laboring work). We all know from the Capitalism game where firms pay workers with salary and then they in turn become customers with the money they earned to buy products from other firms. This process is analog to water cycle in nature, or circulatory system in human body. What comes always goes back. A classic picture is like below :

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This is the basic level and foundation of every economic activities or phenomena in a civilization. And this is where current Capitalism game does a great job of simulating. Although a lot of tycoon games, also simulated similar "production mechanics" and also do pretty good jobs themselves, but the pricing and auction based bidding competition mechanism is truly unique in Capitalism game, allowing players to participate in price equilibrium finding process, making Capitalism game a very good teaching aid for microeconomics class, explain supply and demand concept in a life-like environment.

This is the first part of presumably a long thread, we will talk about the structure above this daily economic activities and its counterpart in Capitalism game mechanics next.

[David]

We have been experimenting with a modified version of the economic simulation engine for the city sim expansion pack.

The availability of investment funds from the public and private investors are going to be tied to the GDP of the cities. Gone are the days when AIs could get unlimited funding for their startups, and could easily raise tens of millions of new capital by issuing new shares.

The banks will play a greater role in financing business expansions, and the government's influence on the interest rate will have a much more prominent effects on the economy.

Under this simulation model, growing the GDP will become a primary objective of the government, of which the player can take charge upon winning elections.

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On a related note, we have been pondering whether we should add Personal Savings Rate as an element of the simulation engine. It affects the amount of money that individuals have for investing, including investment into the stock market.

It is not something that is entirely easy to simulate as there are psychological factors that affect it rather than just economic ones.

Or should we just use a fixed rate for it and simplify the simulation (every city has the same constant savings rate in the underlying engine)

[Parkerrush92]

Shouldn't that just be some derivative of money supply+wagerate+consumer spending? I'm assuming here, that your talking about a seperate interest rate that would be applied to the populations spending capcity.