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Simulating the Cost of Inflation

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Nicolas Villarreal
 Nicolas Villarreal
(@casperadmin)
Member Admin

So as I'm working on the new version of the social architecture model, I've added the capability of modeling changes to the money supply whether by just adding cash or adding in debt money. But one thing that isn't in the simulation is any kind of cost associated with price increases which become important in situations of hyperinflation. What might be a good way to include this?

 

For reference, here's my old post about the previous iteration of the SA model I made. This new version also includes firms producing actual products. 

 

The Social Architecture Model, now with fixed capital - CASPER Forum

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Topic starter Posted : 06/02/2023 7:43 pm
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SA Model simulation agent based model ABM
Tomas Härdin
 Tomas Härdin
(@thardin)
Estimable Member

The notion that increasing the money supply "causes inflation" is bourgeois political economy mixing its cards together. It is a popular Austrian talking point. It is related to other bourgeois myths like the "wage inflation spiral". You should always ask yourself "where does the value go?". If you print money and give it to workers then the wage share of the working class goes up. The bourgeoisie will attempt to compensate for this by either lowering wages or increasing prices, either of which will push the wage share down.

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Posted : 06/02/2023 8:39 pm
Nicolas Villarreal
 Nicolas Villarreal
(@casperadmin)
Member Admin

@thardin I'm not talking about the money supply in the Austrian sense, but the total budgets of agents in an economy. Right now in the simulation, increasing these budgets randomly allows firms to hire more workers, and wages lag behind. This causes both unemployment and worker's share of income to fall. Maybe this is a good simulation in some situations? I just feel that I'm not capturing any kind of cost associated with higher prices. 

 

Perhaps the problem is that I'm not taking into account the cost of lower consumption of those with less money? For example, by creating a threshold where if workers don't consume x amount of real goods they cannot create value?

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Topic starter Posted : 06/02/2023 8:51 pm
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