Economists Do It With Models

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Well, Fine, Be Like That…I Didn’t Want To Play Your Stupid Games Anyway…

July 16th, 2010 · 8 Comments
Macroeconomics

I’m beginning to think that Saturday Morning Breakfast Cereal has something against economists:

In my defense, I do not behave like this, although I may feel the need to point out that Monopoly is realistic in that rents go up once someone has a monopoly on a property… come to think of it, however, I haven’t gotten an invite to a game night in a while. Thanks guys.

So, is the board-game playing economist correct? This is yet another point of contention among macroeconomists- many believe that increasing the money supply stimulates production in the short run, but in the long run only results in inflation, though some believe that increases in the money supply have no effect on production and only lead to inflation, and a few others believe that changes in the money supply have sustained real effects on the economy. (For more on this, poke around on the interwebs for money neutrality.)

Glad we’ve cleared that up. At the very least, most economists agree that in the long run, changes in the money supply are reflected only in changes in price levels and not in changes in the overall real size of the economy. In other words, if the Fed increases the money supply by 10%, this is eventually going to just lead to everything being 10% more expensive rather than actually having more widgets and gizmos being produced. This would imply that scary SMBC economist guy is correct in at least one way, though he makes the situation sound much more ominous than I just did. Why is this?

SMBC economist guy isn’t just talking about regular run-of-the-mill inflation, he’s talking about hyperinflation, which is generally defined as inflation of 50% or more per month. It’s pretty easy to see how a society would be pretty screwed if prices increased by 50% every month- savings would become more or less worthless in terms of purchasing power, it would be very difficult to plan for the future, no one would want to invest in production in your messed up economy, a whole lot of people would follow Glenn Beck’s advice and buy gold rather than invest in anything that is actually productive, etc. So yeah, hyperinflation might not actually necessitate the use of monopoly money as sustenance, but it’s not good.

Okay fine, I am beginning to somewhat understand the lack of game-night invites. But, but…I bring cookies…hello? Anyone? Sigh…at least I have Gizmo:

(Editor’s Note: Gizmo is sitting on Parkology the Enviromentally Educational Board Game. I have no idea why I own this- I think it was left behind by a former roommate. As one who is not particularly board-game inclined, my choices were either that or the Sex & the City Trivia Game, also not purchased by yours truly. I don’t dislike games, mind you, I’m just more of, say, a Rock Band kind of gal…)

Tags: Macroeconomics

8 responses so far ↓

  • 1 morgan // Jul 16, 2010 at 4:14 pm

    If my mates and i had a board games night you would totally be invited. Though its a bit of a drive to Dallas :/
    Awesome blogifying as always. Keep it up 😀

  • 2 Justin Ross // Jul 16, 2010 at 4:29 pm

    Monopoly is realistic in that rents go up once someone has a monopoly on a property

    In what sense is it realistic to have the rents rise when the supply of housing increases? 😉

    You might like looking into the game “Anti-Monopoly”, which was designed by an econ professor to combat the lousy economics in “Monopoly.” I’ve never played but have heard good things:
    http://perfectsubstitute.blogspot.com/2009/07/anti-monopoly-book-and-game.html

  • 3 econgirl // Jul 16, 2010 at 4:43 pm

    @ Justin: ceteris paribus, dear, ceteris paribus. =P It is my understanding that all rents double, all else being equal, if there is a monopoly on the group of properties, which is the part that is at least directionally accurate. The situation about rents going up when houses or hotels are built is in fact a little perplexing, especially since they are more or less marketed as improvements rather than increases in supply. I guess I imagined the houses and hotels I buy as being nice shiny new ones that replace the old ones as opposed to being in addition to the existing housing stock.

  • 4 Amarsir // Jul 16, 2010 at 5:45 pm

    I always assumed I was renting the whole hotel, for myself and my entourage. What what.

    Anyway, Monopoly is a lousy game. Slow to play, passive between turns, and little decision making. Be grateful you’re not invited. (Though if you have friends who play Puerto Rico regularly, I recommend a little kissing up.)

  • 5 Justin Ross // Jul 16, 2010 at 9:25 pm

    I must have missed that they were improvements. I just always looked at it as adding a perfectly identical house to the same neighborhood, with the number of customers staying constant. From now on I will just assume that Amarsir is right, and you are renting for an entourage!

  • 6 Matt H. // Jul 19, 2010 at 12:44 pm

    I agree with the improvements conclusion. You take houses off the board to put up a hotel, thus it is a replacement of the housing stock.
    Man, Monopoly is getting no love in these posts. For those of us who didn’t drink and get teen pregnant in high school we’d love to sit around and ” ‘nop it up’ ” on a Friday night. The more serious and exaggerated you make the game, the more fun it is to play.
    Lastly, I wonder if I could’ve purchased some goods in Zimambwe with Monopoly money; at least before the adopted the U.S. dollar?

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  • 8 Jeff // Jan 12, 2015 at 2:25 pm

    “At the very least, most economists agree that in the long run, changes in the money supply are reflected only in changes in price levels and not in changes in the overall real size of the economy.”

    Ok, I disagree (with the sentiment, not the polling), but don’t really want to get into that at the moment.

    But I am curious. Has anyone ever seen hyperinflation in a country whose debts were denominated in local currency?

    I assume that no-one has ever seen hyperinflation decoupled from currency drops, if for no other reason, then because of the arbitrage opportunities that would surely come up.

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