6 ms·

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 wig

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 the highest or close to highest score, only slightly higher than those that did a constant -0.5%. I’ve always been apprehensive of how low interest rates dropped around 9/11 and nobody had the political courage to raise them after that, leaving little room for leverage. What I have learned from racing games is that in order to win, it’s not all about holding down the gas pedal the hardest. Its about keeping on the track first, which requires lower speeds to navigate complexity, and only using max speed in straightaways. Or to quote the eminent Charlie Sheen, right after his infamous ’banging 7 gram rocks’ he said, “I only have one speed, I only have one gear: GO.” History tells how well that worked out. That may work on a straightaway, but in this world, there’s people and there’s pandemics and wars and politics. Had rates been at a higher level they could have been slashed at the start of the pandemic, but there was no room to drop at that point.

tjr225 4y ago
Nice useless car analogy. Signal to noise.
myoffe 4y ago
I barely made any changes and resulted in 430K
- sunshinerag 4y ago
  Thank you for your hard work. Here is your salary and hard earned pension.
fartcannon 4y ago
I set it to 0 for the entire run and got the same as you.
- uwuemu 4y ago
  same here, set it to 0.25, around 440k...
Glyptodon 4y ago
I mostly responded to interest rate rate of change on my first run and got 443189.
leononame 4y ago
I tried to follow the natural rate as closely as possible so that no business would go bankrupt but increasing the interest rate to maximize GDP and ended up at 442k. All my subsequent tries Land in the same ballpark.
leononame 4y ago
At first, it looked to me like you could barely influence the economy. But a couple of runs later, I found wildly different results (e.g. having hyperinflation and huge economic crisis) depending on what I'd do. Since the income from the central bank's interest is paid out to the people (and vice versa, negative interest will be passed as debt), the challenge seems like finding the correct ratio to increase GDP: inflation and interest income. New money is only generated through loans, so if I understand this correctly, one should strive to have high interest rates? edit: After tweaking my strategy a bit to try to keep interest rates as high as possible without closing any business, I got to 443647. edit: up to 444823
- BenoitEssiambre 4y ago
  If you keep inflation low and steady you can get higher scores from reducing menu costs. I can get around 446k by trying to keep it around 1%. Note that it gets more difficult to keep steady when you keep it lower.
- eru 4y ago
  The model they use in the simulation is a bit weird. In reality, keeping a steady nominal GDP is a good idea. In fact, adopting a nominal GDP level target will make the market help you keep things steady. (By anticipating your central bank actions.)
  - BenoitEssiambre 4y ago
    I did include a graph of production in "coins worth per month" for those who would like to try to stabilize NGDP.
    - eru 4y ago
      Thanks! The game moved way too fast for me, perhaps I did something wrong. Is there a way to make it turn-based and only advance when you tell it to? Btw, the 'magic' of a nominal gdp level target isn't just in the stable gdp itself, but in announcing a target, so that economic actors can profit by anticipating the actions of the central bank. And that anticipation itself stabilises the economy already. See https://en.wikipedia.org/wiki/Rational_expectations https://en.wikipedia.org/wiki/Rational_expectations
eru 4y ago
> The best I found was to try to raise rates during the good times so there is wiggle room during downturns. Yeah, that's pretty silly in reality. There's no zero lower bound in reality. Negative interest rates work just fine. Or even simpler: buy assets that are not just short term debt. (In the extreme case: any positive price for a 'perpetual bond' corresponds to a positive interest rate. Or take inspiration from Singapore's Monetary Authority: they buy foreign exchange instead of bonds, and thus don't have to worry about interest rates at all.)
kortilla 4y ago
It’s strange to present an analogy without something linking it to the thing at hand. Why do you think interest rates and economy are like racing a car at all and not like launching a rocket?
- lupire 4y ago
  Most people mean "metaphor" when they say "analogy".
- jameshart 4y ago
  When you’re making an analogy, you get to choose which aspects of the metaphor are relevant. For example, are you aware that when launching a rocket, you want to avoid wasting fuel by going to full throttle in the thick, lower part of the atmosphere, where you’ll waste a lot of the energy you gain to air resistance? There’s a reason one of the checkpoints in a space shuttle launch sequence was “go for throttle up”. So even if you wanted to talk about economic management as being like ‘launching a rocket’ you could still make an argument for leaving some power in reserve for when the going gets easier.
  - kortilla 4y ago
    But why is any of it relevant? When you create if you’re supposed to explain why the analogy/metaphor is apt first. You use them to drive a point home, not to make the point in the first place. > are you aware that when launching a rocket, you want to avoid wasting fuel by going to full throttle in the thick, lower part of the atmosphere, where you’ll waste a lot of the energy you gain to air resistance? Yes, you’re referring to “max Q”. It’s still a completely different comparison though because you only have those events early on and then you go full throttle until you hit your first stage goal.
    - jameshart 4y ago
      The point is that the parts of the analogy that are relevant are the parts the person using it for explanatory effect chooses. They’re not proposing an isomorphism, they are making a comparison to motivate you to modify your thinking.
mrtksn 4y ago
Maybe one can argue that this funded the internet revolution? Maybe thanks to the obscene amounts of cash flooding the society, people got to experiment much more freely without expectations of profits from products but give these products away at a loss and use their securities as gambling assets?
- cmmeur01 4y ago
  Free stuff and gambling, the cornerstone of any sound economy.
  - mrtksn 4y ago
    Defiantly not sound or sustainable but it did spit out some interesting things.
Oberbaumbrucke 4y ago
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.
- belter 4y ago
  It's well known, that understanding how the economy works, was never a requirement for CB Governor: "Nobody Really Knows How the Economy Works. A Fed Paper Is the Latest Sign": https://www.nytimes.com/2021/10/01/upshot/inflation-economy-analysis.html https://www.nytimes.com/2021/10/01/upshot/inflation-economy-... Greenspan: There was a "flaw in the model of how I perceived the world works.": https://www.propublica.org/article/greenspan-says-i-still-dont-fully-understand-what-happened-1023 https://www.propublica.org/article/greenspan-says-i-still-do... "Greenspan Says I Still Dont Fully Understand What Happened": https://youtu.be/R5lZPWNFizQ https://youtu.be/R5lZPWNFizQ
moomin 4y ago
Given that I used a rather different strategy (typically 0, 4% in good times, slowly cutting back and running at -0.5 later in the game) and got 443419 maybe the lesson of the this is that central bank policy doesn't make as big a difference as we think?
- dwighttk 4y ago
  Has anyone gotten less than 400K? Heck, less than 440K?
  - dwighttk 4y ago
    Looks like if interest rates get high enough everything will shut down.
    - moomin 4y ago
      Okay, so I tried running the entire game at -0.5, and everything was hunky-dory until the yields shrank. Then things went a bit crazy.
MonkeyClub 4y ago
I ran it four times, with four different starting interest rates, that never changed throughout the 240 months. The best run was the 0% one: 442670. All results: 2%: 238773 0%: 442670 50%: 21106 (early crash) 4%: 255726 Edit: Forgot to note that, while the other runs got the +12% iMac trees and the -12% drought/disaster events, the 0% run also got a -10% "loss of faith in the market" event thrown at it as well. So, 0% interest rates and 0 banker interference is good enough in the SimCB model, and can normalize its way through random negative events too. Anyone else with results from other constant interest rates?
- lettergram 4y ago
  If you try to keep inflation flat (what the central bank is supposed to do). You can maximize score regularly in the 440k - 450k scores. I had constant very low unemployment and wages were very high. In reality, I agree though. Just putting to 0% and letting it ride required far less prediction ability and it worked out fine.
  - MonkeyClub 4y ago
    It gets weirder, I just got a 442181 run out of a constant -0.50% interest rate. It seems that the whole system tops off at a zero-effort 500K or something, and the best approach is to do nothing to mess it up, just keep things cheap and stay away.
mtoddsmith 4y ago
If interest rates are high then the typical borrower can no longer compete with the cash buyers buying up all the real estate. How does that play out?
- cheriot 4y ago
  It's a housing supply problem. Interest rates were just a bandaid.
- HWR_14 4y ago
  Cash buyers may literally buy in cash, but they are almost always leveraged. Either they then finance the house, have financing as good as cash secured, or something similar. Cash offers refer to the lack of a financing contingency on the sale, and less towards how that interacts with the debt market.
cortesoft 4y ago
One other big thing this game is missing is that a big part of what a central bank does is maintain confidence in the system and steer sentiment. Central banks move markets just by talking about what they MIGHT do in the future. They don’t even always need to move interest rates, just talking about maybe moving interest rates can change things. This is similar to strategic reserves. There is a really great planet money story about the rice shortage about a decade ago, which was completely artificial. There was plenty of rice, but a panic lead people to hoard rice which caused an actual shortage. The way they eventually stopped the panic was to announce they were going to sell rice from this huge strategic reserve… and just by announcing that, it caused the price to return to normal. They didn’t have to actually sell anything, just announce it. Markets are not purely rational https://www.npr.org/transcripts/169708534 https://www.npr.org/transcripts/169708534

tjr225 4y ago

Nice useless car analogy. Signal to noise.

myoffe 4y ago

I barely made any changes and resulted in 430K

sunshinerag 4y ago
Thank you for your hard work. Here is your salary and hard earned pension.

fartcannon 4y ago

I set it to 0 for the entire run and got the same as you.

uwuemu 4y ago
same here, set it to 0.25, around 440k...

Glyptodon 4y ago

I mostly responded to interest rate rate of change on my first run and got 443189.

leononame 4y ago

I tried to follow the natural rate as closely as possible so that no business would go bankrupt but increasing the interest rate to maximize GDP and ended up at 442k. All my subsequent tries Land in the same ballpark.

leononame 4y ago

At first, it looked to me like you could barely influence the economy. But a couple of runs later, I found wildly different results (e.g. having hyperinflation and huge economic crisis) depending on what I'd do. Since the income from the central bank's interest is paid out to the people (and vice versa, negative interest will be passed as debt), the challenge seems like finding the correct ratio to increase GDP: inflation and interest income. New money is only generated through loans, so if I understand this correctly, one should strive to have high interest rates? edit: After tweaking my strategy a bit to try to keep interest rates as high as possible without closing any business, I got to 443647. edit: up to 444823

BenoitEssiambre 4y ago
If you keep inflation low and steady you can get higher scores from reducing menu costs. I can get around 446k by trying to keep it around 1%. Note that it gets more difficult to keep steady when you keep it lower.
eru 4y ago
The model they use in the simulation is a bit weird. In reality, keeping a steady nominal GDP is a good idea. In fact, adopting a nominal GDP level target will make the market help you keep things steady. (By anticipating your central bank actions.)
- BenoitEssiambre 4y ago
  I did include a graph of production in "coins worth per month" for those who would like to try to stabilize NGDP.
  - eru 4y ago
    Thanks! The game moved way too fast for me, perhaps I did something wrong. Is there a way to make it turn-based and only advance when you tell it to? Btw, the 'magic' of a nominal gdp level target isn't just in the stable gdp itself, but in announcing a target, so that economic actors can profit by anticipating the actions of the central bank. And that anticipation itself stabilises the economy already. See https://en.wikipedia.org/wiki/Rational_expectations https://en.wikipedia.org/wiki/Rational_expectations

eru 4y ago

> The best I found was to try to raise rates during the good times so there is wiggle room during downturns. Yeah, that's pretty silly in reality. There's no zero lower bound in reality. Negative interest rates work just fine. Or even simpler: buy assets that are not just short term debt. (In the extreme case: any positive price for a 'perpetual bond' corresponds to a positive interest rate. Or take inspiration from Singapore's Monetary Authority: they buy foreign exchange instead of bonds, and thus don't have to worry about interest rates at all.)

kortilla 4y ago

It’s strange to present an analogy without something linking it to the thing at hand. Why do you think interest rates and economy are like racing a car at all and not like launching a rocket?

lupire 4y ago
Most people mean "metaphor" when they say "analogy".
jameshart 4y ago
When you’re making an analogy, you get to choose which aspects of the metaphor are relevant. For example, are you aware that when launching a rocket, you want to avoid wasting fuel by going to full throttle in the thick, lower part of the atmosphere, where you’ll waste a lot of the energy you gain to air resistance? There’s a reason one of the checkpoints in a space shuttle launch sequence was “go for throttle up”. So even if you wanted to talk about economic management as being like ‘launching a rocket’ you could still make an argument for leaving some power in reserve for when the going gets easier.
- kortilla 4y ago
  But why is any of it relevant? When you create if you’re supposed to explain why the analogy/metaphor is apt first. You use them to drive a point home, not to make the point in the first place. > are you aware that when launching a rocket, you want to avoid wasting fuel by going to full throttle in the thick, lower part of the atmosphere, where you’ll waste a lot of the energy you gain to air resistance? Yes, you’re referring to “max Q”. It’s still a completely different comparison though because you only have those events early on and then you go full throttle until you hit your first stage goal.
  - jameshart 4y ago
    The point is that the parts of the analogy that are relevant are the parts the person using it for explanatory effect chooses. They’re not proposing an isomorphism, they are making a comparison to motivate you to modify your thinking.

mrtksn 4y ago

Maybe one can argue that this funded the internet revolution? Maybe thanks to the obscene amounts of cash flooding the society, people got to experiment much more freely without expectations of profits from products but give these products away at a loss and use their securities as gambling assets?

cmmeur01 4y ago
Free stuff and gambling, the cornerstone of any sound economy.
- mrtksn 4y ago
  Defiantly not sound or sustainable but it did spit out some interesting things.

Oberbaumbrucke 4y ago

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.

belter 4y ago
It's well known, that understanding how the economy works, was never a requirement for CB Governor: "Nobody Really Knows How the Economy Works. A Fed Paper Is the Latest Sign": https://www.nytimes.com/2021/10/01/upshot/inflation-economy-analysis.html https://www.nytimes.com/2021/10/01/upshot/inflation-economy-... Greenspan: There was a "flaw in the model of how I perceived the world works.": https://www.propublica.org/article/greenspan-says-i-still-dont-fully-understand-what-happened-1023 https://www.propublica.org/article/greenspan-says-i-still-do... "Greenspan Says I Still Dont Fully Understand What Happened": https://youtu.be/R5lZPWNFizQ https://youtu.be/R5lZPWNFizQ

moomin 4y ago

Given that I used a rather different strategy (typically 0, 4% in good times, slowly cutting back and running at -0.5 later in the game) and got 443419 maybe the lesson of the this is that central bank policy doesn't make as big a difference as we think?

dwighttk 4y ago
Has anyone gotten less than 400K? Heck, less than 440K?
- dwighttk 4y ago
  Looks like if interest rates get high enough everything will shut down.
  - moomin 4y ago
    Okay, so I tried running the entire game at -0.5, and everything was hunky-dory until the yields shrank. Then things went a bit crazy.

MonkeyClub 4y ago

I ran it four times, with four different starting interest rates, that never changed throughout the 240 months. The best run was the 0% one: 442670. All results: 2%: 238773 0%: 442670 50%: 21106 (early crash) 4%: 255726 Edit: Forgot to note that, while the other runs got the +12% iMac trees and the -12% drought/disaster events, the 0% run also got a -10% "loss of faith in the market" event thrown at it as well. So, 0% interest rates and 0 banker interference is good enough in the SimCB model, and can normalize its way through random negative events too. Anyone else with results from other constant interest rates?

lettergram 4y ago
If you try to keep inflation flat (what the central bank is supposed to do). You can maximize score regularly in the 440k - 450k scores. I had constant very low unemployment and wages were very high. In reality, I agree though. Just putting to 0% and letting it ride required far less prediction ability and it worked out fine.
- MonkeyClub 4y ago
  It gets weirder, I just got a 442181 run out of a constant -0.50% interest rate. It seems that the whole system tops off at a zero-effort 500K or something, and the best approach is to do nothing to mess it up, just keep things cheap and stay away.

mtoddsmith 4y ago

If interest rates are high then the typical borrower can no longer compete with the cash buyers buying up all the real estate. How does that play out?

cheriot 4y ago
It's a housing supply problem. Interest rates were just a bandaid.
HWR_14 4y ago
Cash buyers may literally buy in cash, but they are almost always leveraged. Either they then finance the house, have financing as good as cash secured, or something similar. Cash offers refer to the lack of a financing contingency on the sale, and less towards how that interacts with the debt market.

cortesoft 4y ago

One other big thing this game is missing is that a big part of what a central bank does is maintain confidence in the system and steer sentiment. Central banks move markets just by talking about what they MIGHT do in the future. They don’t even always need to move interest rates, just talking about maybe moving interest rates can change things. This is similar to strategic reserves. There is a really great planet money story about the rice shortage about a decade ago, which was completely artificial. There was plenty of rice, but a panic lead people to hoard rice which caused an actual shortage. The way they eventually stopped the panic was to announce they were going to sell rice from this huge strategic reserve… and just by announcing that, it caused the price to return to normal. They didn’t have to actually sell anything, just announce it. Markets are not purely rational https://www.npr.org/transcripts/169708534 https://www.npr.org/transcripts/169708534