I realized something the other day, while playing a video game. It is surprising what we can learn from games. In this case, what I learned was about economics. In the game, I can build houses for people. Each house I build increases the population of my city. Each time I improve a house, it increases the population it provides. Unlike traditional city sim games, this game just assumes that every space is taken. If a house can hold 8 people, then it does hold 8 people. I can put my population to work by building industrial buildings. At the top of the screen, there is an indicator showing my "available" population. This is the population of my city that are not currently working but can work. This is useful, because I can compare my available population to how much population will be employed by a building I want to build. This allows me to make sure I always have enough available population to build what I need to.
From a real world perspective, this is about unemployment. My houses provide living space for people, and every space is always filled. This provides me with a predictable labor pool. My industrial buildings use some amount of my labor pool. The remaining available population represents the people in my city who are unemployed. By definition, an unemployed person is a person who is not currently employed, but who is available for employment and desires employment. This describes my free population in this game perfectly.
Now, there are a few interesting things about my unemployed population (which is about 25% of my total population as I am writing this). The first is that I am strongly motivated to maintain a moderate level of unemployment. My unemployed population is an extremely valuable asset. Let's say I want my city to produce more wood or more steel. I might expand an existing facility or build a new one. In either case, I will need additional people to work at the new or improved facility to maintain an increased production. If I don't have sufficient free population, then I will first have to build a new residence or increase the size of an existing one. Now, consider this from a real world perspective. In the real world, there are a few more factors. For one city, those factors are sufficient housing, quality of living, cost of living, and a number of smaller factors. One big one is availability of work. Now we have a problem though. Before we can successfully increase the potential productivity of a city, we need more people, but before more people will come, we need to increase the potential productivity. Generally, in real life, there is enough flexibility that this is not a major problem, but the U.S. (especially the Eastern U.S. to the central states) is dotted with cities that were once industrial centers but ultimately failed, and this phenomenon seems to have played a significant role in their failure.
Back to the game now; the other interesting thing is that my unemployed citizens don't get kicked out of their houses; they don't starve to death; they don't even move out of my city. In fact, they are still paying rent to me for living in my houses. Now, I'll admit, there is a point where this starts to get unrealistic. The fact, however, is that my unemployed population is not suffering from their unemployment. They have shelter. They obviously have sufficient food to get by. They clearly have everything they need to survive. And, this is a really good thing. Economically, it means that I can maintain a big enough pool of unemployed laborers that if I suddenly need to expand my industries rapidly, I can do it without having to worry about whether or not enough people will immigrate to do the additional work that is necessary. If my citizens had to deal with the same consequences of unemployment that real live Americans do, the economy of my city would be much more weak and frail.
There are certainly some things about this game that are unrealistic. For example, the cost of living for my unemployed population is magically taken care of so that I never even have to think about it. That said though, there are some extremely valuable lessons to be learned despite that. The first is, unemployment is not necessarily a bad thing. Perhaps 25% is a bit extreme, at least, in the current state of our industries and economy, but 10% to 15% is not as bad as we often make it out to be. The reason unemployment is a target of criticism is that unemployed people in the U.S. cannot survive. This is not entirely true, but survival is a significant struggle for unemployed Americans. It does not have to be that way though. It is that way because we are too lazy, stubborn, greedy, or egotistical to let it be any other way. Unemployment would be a lot less bad if we made sure that the free portion of our labor pool was taken care of. This does not even have to be inefficient. Unemployed people just need enough to survive and maintain good health. The second valuable lesson is that low unemployment makes the economy more fragile and unstable, because it does not provide enough margin for sudden growth. Economic fluctuations are occurring constantly, but low unemployment limits potential increases. In short, low unemployment is actually bad for the economy. Of course, high unemployment comes with its own problems, but having a reasonable pool of available labor is good, because it allows for rapid expansion. Unfortunately, if we don't take care of our unemployed, they lose their labor value, either by immigrating or due to the negative health effects of poverty.
There is a business strategy very much like how this game works, that is successful. Utilities always maintain more capacity than their customers actually use. Power plants rarely run at full capacity, but they still carefully maintain all of their generators. Most power plants are only close to peak capacity during a few times each day. They might have peaks during meal times, as well as right when it starts getting dark, and nearly all of their customers are turning lights and maybe heaters on. During the rest of the day, they run well below capacity, and during the late night, they run at extremely low capacity. There are cities in the world with power plants that don't have enough generators to handle peak demand. Those cities tend to have brown outs in the early evening and some other times during the day, because more power is needed than the power plants are capable of producing. This is, of course, problematic, especially for businesses in those cities. In the U.S. and most of the more developed world though, power companies pay to maintain more generators than they need, so that they can handle sudden, unexpected spikes in demand. These companies are still in business, because despite the cost of maintaining "unemployed" generators, they are still profitable, and having a pool of available generators that are not being used allows them to consistently provide good service, even when unexpected situations arise.
Perhaps someday, I will make a city builder video game, where the microeconomics are a bit more realistic. I think this could be an excellent method of gathering data on the economics of unemployment. For now though, there are two things that I have learned: We need to make sure we maintain high enough unemployment to allow for economic growth, and to do this, we need to soften the penalties inherent in being unemployed.
No comments:
Post a Comment