Eve Economy

[Goumindong]

Ahh, but you see, you're thinking like an economist, and I'm thinking like a game designer.  In a classic economic situation, if a material is used for two products, and the demand for one of those products is causing the other to become economically non-viable, the second manufacturer can try to find alternative goods, they can try to redesign and use less of it, etc.  And if none of that works, then he simply can't make a profit making that product and he doesn't.  But I'm a game designer, I can do what neither the invisible hand nor the regulator can do: Ignore the laws of physics.  After all, I wrote them.

--Dave

I fully understand that we can change everything we want. That doesn't mean that it will have the effect we think it will. Players will do what players will do and all the economic and political theory is here to tell us what players are likely to do. We can't change how players behave, we can only change the input.

More salvage means lower salvage prices but it doesn't necessarily mean lower profits for salvagers and whether or not it does is based on the elasticity of demand for rigs. That depends on a number of things, but if its elastic, then salvagers will find their isk/hour increased. In the case of the rigs that suck that don't get used. That is due to low supply. There are a number of ways to increase that supply, one of them the one you described.

So if action of the developer is "increase the salvaging rate" we simply get our model and shift supply of salvage components to the right and extrapolate what is likely to happen. This is why i was trying to impress on you that we were not necessarily dealing with that situation.

Goumindong is making the exact same mistake that nearly all of those versed in economic theory, including CCP's own resident economist, Dr.EyjóG, seem to make when discussing EVE (or any other MMORPG for that matter):

Their theories and discussions are all based on modern capitalist economic theory. And EVE's economy is not a capitalist economy.

No. You are making the exact same mistake those that are not trained in economics do. Dr. Eyjog is making the mistake that bad economists do(which is to assume that there is some ideal and attempt move towards it, rather than examine what is happening in the economy and move around it). Economies are not capitalist or communist or fascist or anything. These are attributes of governments that make regulation over economies. Economies just are. They are the aggregate of all values of a society or system that trades with each other. Economies behave the way that we think they do because people behave in that way.

People are capitalist. Therefor economies are capitalist. There may be modified risk/reward, but we can see and monitor that modified risk/reward from the real world and plug it into the model. So long as we define what we are looking at correctly. We will get accurate predictions.

MMORPG's have a strange breed of artificial economy where everyone is essentially some kind of petit bourgeoisie member creating profit for themselves out of nowhere

When you perform services, you "create profit for yourself out of nowhere". Holy shit, the U.S. economy is a petite bourgeoisie member of the international economy! When you take a product, perform work on it, and then get something better you do as well. Holy shit, China is a petite bourgeoisie member of the international economy. When you take a product out of the ground so that it can be worked on, you do the same! Holy shit, Africa is a petite bourgeoisie member of the international economy! Everyone is bourgeoisie, fuck this place rocks!

Yes, that's a simplification, but let's not get into stupid pedantry and ignore the main point of my argument here - that capitalist economic theory, which is so piss-poor at explaining the actual, real-world, undeniably capitalist world economy, is of almost no use whatsoever in explaining what goes on in a fake, restricted, controlled and artificial non-capitalist economy like EVE's.

No. Some economists who haven't a clue what externalities are or believe that they simply cannot exist and the market will correct for it are terrible at explaining the real world economies. But they are bad because they are fundamentalist idiots who cling to a simple economic ideal rather than actually looking at what is happening. They read a book by this guy Adam Smith, decided it was cool, and haven't changed their ideas for three hundreds years.

But eves economy is actually a lot more simple than a real world economy. Because we can, and do, control everything. And that reduces externalities. And there are very few public goods. And that reduces externalities. And the public goods we do have are typically understood to be distributed by shooting each other and if we just ignore those externalities because shooting each other is the point of the game, then that reduces externalities. And all of our public goods that aren't terribly over-supplied are all infinitely elastic and often at zero cost(docking for instance)

I am not sure if this is cool here, but i am tired of posting logical arguments and not getting through to people. You're retarded, you have no education in the area and this shit doesn't make sense to you because you're retarded and uneducated. Go to school and come back when you understand this shit, or read a book.

The trouble is that, once you get enough salvage in peoples' holds, supply exceeds the upper end of the demand curve: there's just nothing anyone can usefully do with the extra salvage.  At that point, prices plummet.

This is why you attempt to figure out where the demand curve is likely to stop being elastic and start being inelastic. Then you know how far you can increase supply before starting to hurt producer welfare.

Currently it's very easy to make rigs and it seems the current profit margin is so low only the specialists are making them

Profit margin on a very popular rig(that Specops produces for specops) is currently 300% in Jita. Though how well that transmits into other areas i am not sure. But I am willing to bet that a lot of the prices for rigs simply aren't moving towards equilibrium very fast due to low activity.

Its the same for invention mainly iirc. Profit margins are actually pretty good. People just don't think they are and so are less likely to get into the game.

[Amarr HM]

Aye Goumin I had the common T1 rigs in mind when I said this the profit margins on a CCC isn't exactly glorious or the armour rigs for that matter. I'm not sure which ones you are talking about but Im sure demand is quite low for them.

This is why you attempt to figure out where the demand curve is likely to stop being elastic and start being inelastic. Then you know how far you can increase supply before starting to hurt producer welfare.

I agree we can speculate til the cows come home, but the fact is everyone knows there is a huge demand for rigs thats not being satiated cause the prices are so high. It really has to be tested its not hard you just gradually increase the salvage amounts  over a couple of months 10% here 10% there see how the market reacts. As martin said changing the material cost is another way to make them more available probably the best.

[Endie]

Joe, I take it back.  You were right.

[apocrypha]

I am not sure if this is cool here, but i am tired of posting logical arguments and not getting through to people. You're retarded, you have no education in the area and this shit doesn't make sense to you because you're retarded and uneducated. Go to school and come back when you understand this shit, or read a book.

It's things like this that ensured you didn't get elected onto the CSM goum. You are very like jade in several respects, one of the main ones being that you think you're smarter than everyone else in the world and you're arrogant and abusive about it too.

You don't post logical arguments - you attempt to browbeat everyone else in any discussion and ignore every single word anyone else says unless you want to ridicule it.

From reading your rant there, it is my opinion (notice that bit, that's how to engage in discussion, which should be a 2-way process) that you don't know what socialism and capitalism are but have simply swallowed the free market bullshit that you were fed at University and have never thought to question it nor compare it to the real world. But of course, other people's opinions are irrelevant aren't they, because we're all "retarded and uneducated". You'll be calling us all "faggots" and "noobs" next, cos that's clearly how proper educated people discuss things isn't it?

Please, take the schoolboy internet abuse back to SHC.

[IainC]

Joe, I take it back.  You were right.

Is this about the game not recalculating rig penalties? If so then shit! Under what circumstances does the game recalculate them? Do I need to contract my ship to an alt and then contract it back every time I ding another level in the relevant rigging skill?

And not to get too far into the economics debate, I salvage a lot and I looked into what skills I'd need to make rigs and sell them at the current market prices. As far as I can tell a lot of the rigs are being sold for a loss (especially things like CCCs) if you price the salvage required to make it at the market value. That's the reason why I'll be dumping all my melted cap consoles onto the market rather than spending a few weeks training up industry skills.

[lac]

Joe, I take it back.  You were right.

Is this about the game not recalculating rig penalties?

no, that other thing

[bhodi]

I am not sure if this is cool here, but i am tired of posting logical arguments and not getting through to people.

It's totally cool. Especially after you take someone's argument apart bit by bit.

When you get bored of this, come down into politics.

We all float down there...

[Thrawn]

When you get bored of this, come down into politics.

We all float down there...

It's a trap!  Avoid that waste of space like the plague. 

[Goumindong]

Aye Goumin I had the common T1 rigs in mind when I said this the profit margins on a CCC isn't exactly glorious or the armour rigs for that matter. I'm not sure which ones you are talking about but Im sure demand is quite low for them.

Actually i was talking about tech 1 rigs. I am just not going to tell you the rigs i am talking about because it increases the likelihood that people will build those rigs, increasing what i have to pay.

I agree we can speculate til the cows come home, but the fact is everyone knows there is a huge demand for rigs thats not being satiated cause the prices are so high. It really has to be tested its not hard you just gradually increase the salvage amounts  over a couple of months 10% here 10% there see how the market reacts. As martin said changing the material cost is another way to make them more available probably the best.

Absolutely increasing the availability or changing the material costs slightly will achieve the same goals. All that is is accepting that we don't know right where the demand becomes inelastic and so making smaller changes more often is less likely to produce a negative result.

Econ Stuff: Don't to read if you don't care

The statement about "demand not being satiated" is a disconnect though. Demand is a line which represents the aggregate value that people place on a good. One axis of the line is price, and one axis of the line is quantity demanded. What it means is that "at this price, people in the economy will buy this amount of good, and at this other price, people in the economy will buy this amount of good". When demand is increased, it means "people in the economy will buy more of this good at any price". I.E. The line is moved to the left.

Supply is the same thing, except instead of "buy" its "sell". So when you overlap the two lines supply meets demand and people bargaining eventually brings the price towards that intersection. Saying "there is a lot of demand that isn't being satiated because prices are high" means either nothing, because people will always consume more as prices decrease(I.E. if stuff was free you would consume it at an infinite rate*) or it means "demand is elastic, small changes in price will produce large changes in quantity"

*A lot of people equate "free" with "no price" this is not true. If Bananas cost 0 dollars at store people would not consume them infinitely. They would not because going to the store costs time and energy and this is part of the cost of the banana. If Bananas cost 0 dollars and materialized right next to people whenever they wanted one, they would not consume them infinitely because doing so would make them fat and the peels would need to be disposed of. Both of these are costs which are included in the "cost" of the banana. So a if Bananas cost 0 dollars and materialized right next to you whenever you wanted one, they would still not be free.


Petty Bickering: Don't to read if you don't want to be entertained

that you don't know what socialism and capitalism are but have simply swallowed the free market bullshit that you were fed at University and have never thought to question it nor compare it to the real world.

I know what socialism and capitalism are. I am about as close to a socialist as you can get in todays world. They are methods of managing economies by managing the means of distribution. The basis of economic models doesn't give a shit about the means of distribution. It doesn't give a shit because it don't flow from the means of distribution it flows from individual choices. Means of distribution are modeled as regulations upon the way in which people act. Saying "but Eve isn't capitalist" is retarded, it doesn't matter if Eve is or isn't capitalist. Capitalism is a theory of how to manage an economy to achieve the greatest general welfare. So is communism, so is Socialism, so is Keynesian economics, so is laissez-faire. None of these things are useful to eve. Because as MahrinSkel points out, in Eve we have the power to change anything. If there was a housing price crisis in eve, CCP could just delete houses until the price stabilized. We have direct control over supply and demand which is something no one in the real world does.

The only way that economics breaks down is if

1. People stop making choices based on costs and benefits(note, costs and benefits are entirely subjective and economics takes this subjectivity into account)

2. There is no two

People are greedy, make cost/benefit analysis all the damn time, and in general are not retarded. When economists get things wrong is usually because they lack the complete information to model the situation or apply the wrong regulations because they are stupid and/or disingenuous.

You don't post logical arguments - you attempt to browbeat everyone else in any discussion and ignore every single word anyone else says unless you want to ridicule it.

Bull. I don't post full quotes because it takes up a lot of dead-space.

It's things like this that ensured you didn't get elected onto the CSM goum. You are very like jade in several respects, one of the main ones being that you think you're smarter than everyone else in the world and you're arrogant and abusive about it too.

Its more likely that I didn't get elected to the CSM because i don't usually attack people back(and goonswarm). It was this forum that showed me just how effective attacking the person really is. When people attack me personally I usually address the issue and explain to them how attacking me is irrelevant to the discussion. Which is probably more than they deserve.

Now, i realize that i called you stupid and uneducated, and this may have been a little harsh. But you have to understand that you came in here and simply declared economics wrong. You gave no argument and only "this is the truth"


The important Petty Bickering: Where someone gets called out to make an argument

Why do economic models have no bearing in Eve? Why do they have no bearing in the real world? What is wrong with them? Do you know? Or do you only "know" that they are wrong? How can you expect me to refute a argument that economic models are wrong if the argument doesn't exist?


/The important Petty Bickering: Where someone gets called out to make an argument

You can't just come in here and say "but they're wrong" that is shit that Jade Constantine pulls. He walks in and says, "you're wrong, because i said so!". No, you need an argument.

Now, i understand that what I am saying might seem a bit esoteric to someone who has no education in economics. But you really cannot expect me to educate you on the subject when you are unwilling to learn, declared it wrong out of hand, and doing so is a large time sink with no reward for myself.

[Viin]

I don't suppose someone wants to summarize all of these posts in 20 words or less? tl;dr

[Jayce]

I agree about Politics.  I avoid it because I actually like some of you people.  I feel pretty sure that would change about five minutes in if I read that forum.

Apocrypha, as an uninvolved third party, the only person I see throwing schoolboy insults and posting unsubstantiated crap is you.  Goughaoiageset has provided a fair amount of pretty convincing (and not tail-chasing brain-aching Jadeist) arguments for his points.  So far all you've given us is propaganda to the effect that economists are stupid. Can you provide some more detail on that one? 

[Goumindong]

I don't suppose someone wants to summarize all of these posts in 20 words or less? tl;dr

Two discussions:

1st: What would happen if salvage rates were increased? A: It depends + explanation

2nd: apocrypha: "Economics is a LIE!"

Not part of the 20 words

Apologies if I mischaracterize Apocrypha's position, i only had 20 words to work with.

[ajax34i]

So, ok, wall-of-text posts trying to edumacate us about economics in a "Factional Warfare Overview" thread.  Whatever, we can skip over the stuff.   But at which point do you give up?  Cause, I mean, we're not agreeing or we're retarded or whatever, but you're just going more and more into it.  Public speaking/posting 101:  you've lost your audience.  Stop.

[Phildo]

I haven't read it fairly closely and I definitely haven't studied the applications in Eve, but from what I can tell Goumindong's right about supply/demand and all of that.

Where I see a bit of an issue with the capitalist theory is: how many people actually manufacture rigs?  It's a very small portion of the market, yes?  And even if the cost of materials become cheaper, why would they lower their prices significantly if there isn't much competition?  The Jita market may hit a lower equilibrium, but the non-hub markets will still have ridiculously high-priced rigs.

Unless I'm wrong and there really is a perfectly competitive market for manufactured rigs.

[Jayce]

Maybe someone has sufficient admin-fu to split this thread?  Because there are apparently people who want to talk about it, but you definitely don't get what you bargained for considering the thread title.

[Viin]

Too much work, just use the FW Experiences thread instead. Someone can change the title of this one to 'EVE: Capitalism Economy or Socialist Dictatorship?'

[IainC]

All we need now is for Prokofy Neva to turn up and tell us that the EvE economy is a Stalinist aberration and the thread will be complete.

[Endie]

All we need now is for Prokofy Neva to turn up and tell us that the EvE economy is a Stalinist aberration and the thread will be complete.

Prokofy hates me.  I know that doesn't make me special or anything, but it is true.  H/She/It is also one of the main reasons I joined goonfleet.

[eldaec]

Hay guyz, I heard there's fighting in this patch?

[lac]

Are you talking about that second life nut?
Please don't, we are on google and we have filled our nut quota for now, thank you.

[Amarr HM]

I haven't read it fairly closely and I definitely haven't studied the applications in Eve, but from what I can tell Goumindong's right about supply/demand and all of that.

Where I see a bit of an issue with the capitalist theory is: how many people actually manufacture rigs?  It's a very small portion of the market, yes?  And even if the cost of materials become cheaper, why would they lower their prices significantly if there isn't much competition?  The Jita market may hit a lower equilibrium, but the non-hub markets will still have ridiculously high-priced rigs.

Unless I'm wrong and there really is a perfectly competitive market for manufactured rigs.

He's fairly correct, although something free in Eve IS free cause unlike buying bananas from the Grocers in real life there is no fuel costs. Unless you want to get philosophical and state time as a fuel/commodity please I beg you don't go there. Hey Goumin I think they are right I think you need to paraphrase a little more if something is overlooked you can fill in the gaps later. I really want to know what T1 rigs you can make 300% profit from all the ones I have looked at have been low profit margins.

[Phildo]

Time translates to convenience which IS an economic factor.  If I have to travel 10 jumps to get something for slightly cheaper, I'm gong to (probably) pay the premium and buy it closer to home.  Unless I'm a cheap-ass or value my time SO lightly that spending 30-45 minutes just traveling doesn't bug me.

[MahrinSkel]

I make most of my money because people will pay for a time savings.  I make one trip with a load full of stuff, and people pay my markup rather than run to a major market for it, they sell me their stuff because the margin they can get on a trip to the market to fill a buy order isn't worth it, and they can't do what I do (put it up on a sell order and wait for it to clear).  Time *is* the only non-fungible commodity from most people's viewpoint, time spent doing non-fun things is something they will pay to do less of.  This applies most strongly to the "retail level", but I do a fair business in niche production materials as well.  Lower margins, so I stick to the midscale stuff (stuff people buy in moderate amounts as part of a bigger project).

--Dave

[Endie]

You used the present tense: are you back, Mahrin?

[Amarr HM]

Yeh you are right it was a slightly erroneous argument on my part. But the banana analogy is bugging me still what if they were Air-dropped on to your front porch are they not FREE then? or is opening your front door a cost factor?

Aye Mahrin I used to do the same haul stuff to 0.0 and sell it at 50-100% markup, the larger the item the more you could charge, Cloaks are a good seller haven't done it in months though. If anyone would like some advice on it ask me I know a bit about the market in providence. I made about 200-300 mil every couple of weeks it's kind of cool way to make money. You just watch it rollin once the haul is over only thing you need to do is make sure you aren't undercut once a day. 0.0 markets seem a bit more relaxed though it might be more intensive since I did it.

[Chenghiz]

Oh my god. Is this patch good? Will it make me want to play EVE again, after having given up trying to have fun because it takes too long?

[MahrinSkel]

You used the present tense: are you back, Mahrin?

Not really.  I move freighters around occasionally and set 90-day orders.  I'm deliberately avoiding getting involved in 0.0 or cooperative economic ventures.  Faction Warfare is a little tempting, just to observe, but the actual shooting parts of PvP were never all that attractive to me and it has nothing else.  I don't have the faction ratings, and the thought of doing that many missions is the deal-breaker.

--Dave

[Viin]

Oh my god. Is this patch good? Will it make me want to play EVE again, after having given up trying to have fun because it takes too long?

Maybe?

Come try and tell us!

[Kitsune]

You used the present tense: are you back, Mahrin?

Not really.  I move freighters around occasionally and set 90-day orders.  I'm deliberately avoiding getting involved in 0.0 or cooperative economic ventures.  Faction Warfare is a little tempting, just to observe, but the actual shooting parts of PvP were never all that attractive to me and it has nothing else.  I don't have the faction ratings, and the thought of doing that many missions is the deal-breaker.

--Dave

You're crazy-rich, right?  Then just buy pirate tags off the market and turn those in for sufficient faction.  Just take about an hour.

[Goumindong]

Yeh you are right it was a slightly erroneous argument on my part. But the banana analogy is bugging me still what if they were Air-dropped on to your front porch are they not FREE then? or is opening your front door a cost factor?

Opening your door is a cost factor, its just very small. Going to the super-market is also fairly small. Going to Jamaica to get them would be fairly expensive. Even if you walked(and swam) to each place. Time, energy, infrastructure, acquired knowledge, pollution, i am sure there are more, are all factors of cost.

There is also the external factor of cost. Which is costs that the seller nor the buyer account for(there are also external benefits). In the case of the bananas, the pollution from the plane that dropped the $0 bananas at your front door would be an external cost, because you would not be accounting for it regarding the benefit of eating the banana and the seller would not be accounting for it because he doesn't have to pay for it.

Oh my god. Is this patch good? Will it make me want to play EVE again, after having given up trying to have fun because it takes too long?

That depends what did you do in Eve when you were playing? If you were a pirate this just might, there are likely to be more targets all over low-sec all broadcasting their position with beacons on the overview. If you were an empire roleplayer or war declarer this also might since there will be lots of targets. If you were a hauler this will open up new opportunities as market hubs become less viable for certain factions. Gallente and Minmatar will have a hard time going to Jita for instance. Which should increase the size of Rens.

If you are a mission runner this probably holds little for you. Missions are afterthoughts of factional warfare and don't actually contribute to whether or not an area becomes captured(iirc) and so for the people wanting to fight they are kinda pointless and for people wanting to make money they are big risk machines when they could be doing level 4s in empire or level 5s in low-sec that didn't broadcast your location for everyone to see. I ran some level 2s and they actually seemed harder than the level 2s i did in back when i was a newbie in a maller(as opposed to now in a t2 fit Navy Omen on test), but that might just be too high expectations. With low initial payouts because CCP is still too stupid to start mission payouts on the expensive side rather than the cheap side, mission rewards are likely to stay low with the only tangible rewards being tags and salvage. Add in high chances of failure due to the distance you have to travel to do missions and its not likely going to be very populated.

[apocrypha]

OK I've re-read this and been thinking about it some more. First off yeah, I did wade into you Goum, unfairly and I apologise for that. However, repeatedly calling someone who just has a different opinion from you retarded is a really unpleasant way to go about things and it's that arrogance that I've never been able to stomach from you. My response to your posts is, as a result, usually tainted by my extreme distaste for the way you talk down to anyone attempting to join in a discussion with you. I'll try and leave my bias out of it here.

So, let's leave the bickering aside, I think it's fair to say it's not very productive.

Secondly, I'm not an economist, that much is obvious, I'm a biologist (and some other things too) but my view is that the way economics works is based on mathematical models of how people make, buy and sell things in the real world. The decisions people make in the real world are totally tied up with the system we live in. Economists seem to me to always reduce things to cost/benefit analysis being carried out subconsciously in people's heads, but people don't work that way, we're emotional creatures with drives and desires far more complex than simple cost/benefit.

Branches of psychology that apply economic-type motivations to human interactions are fraught with risk because they attempt to ascribe predictable behavior to individuals based on their own internal emotional cost/benefit mechanisms - transactional analysis is the most commonly applied method and this can work well as part of cognitive therapy but it's not very good for predicting large-scale behaviors. Digressing a bit here.

My point is that the way people act in the real world isn't just determined by personal cost/benefit analysis and doesn't always conform to predictions made by economic theory. In online games this can happen to an even greater extent because the risks & benefits that players experience as a result of their in-game economic decisions are removed from reality by another step. A good example of this is the whole "minerals are free" manufacturing types who price the ships they make lower than the value of the minerals they used to make them because they perceive that those minerals cost them nothing because they mined them themselves.

Economic theory seems to me to be particularly bad at predicting how things work in the real world. If economics was really any good at understanding the markets then I don't believe we'd have quite so many people who are supposedly experts in it being completely blindsided by economic crashes, sudden downturns in markets, collapses in banking systems etc. I mean, the British government has just spent a sum of money equal to out entire annual NHS budget on propping up a single failing bank. Getting these economic models right in the real world has major impacts on people's lives. If they fuck up so badly when applied to the actual system they're designed to model and understand how can these theories be useful when applied to a completely different system?

I think that the type of system we live in, capitalist in the case of the real world, artificial pseudo-capitalist in the case of EVE, has a large effect on the personal decisions people make and limiting them just to questions of supply, demand and consumption is reductionist and not very useful. What I would like to see would be some economically trained and savvy people attempting to re-evaluate modern economic theories specifically to apply to MMORPG economies, not just slavishly attempt to apply them irrespective of different underlying systems.

Edit: away for the weekend now, will come back and see how badly my opinions get torn apart early next week :D

[MahrinSkel]

All we need now is for Prokofy Neva to turn up and tell us that the EvE economy is a Stalinist aberration and the thread will be complete.

Prokofy hates me.  I know that doesn't make me special or anything, but it is true.  H/She/It is also one of the main reasons I joined goonfleet.

Prokofy hates just about everybody.  She will make a great show of liking you, until you disagree with something she says.  Then it all degenerates into a whirlwind of polysyllabic insults and general nuttiness.

BTW, Goum, generally the best rule here is to ignore the first insult, express disapproval of the second, and *then* you start swapping punches.  And when somebody admits fault and stops, go to your corner and wait for the ref's decision.  It's not the best place for the thin of skin, we tend to include the occasional gratuitous ad hominem just because it fills out the paragraph and supplies emphasis.  And we've had some truly epic flamewars.  But generally the level of discourse is about 50 IQ points above Eve-O.

--Dave

[Goumindong]

Secondly, I'm not an economist, that much is obvious, I'm a biologist (and some other things too) but my view is that the way economics works is based on mathematical models of how people make, buy and sell things in the real world. The decisions people make in the real world are totally tied up with the system we live in. Economists seem to me to always reduce things to cost/benefit analysis being carried out subconsciously in people's heads, but people don't work that way, we're emotional creatures with drives and desires far more complex than simple cost/benefit.

There are no models of how people make things. Only how they value things. There are two parts then to economics. The first is the theoretical. Which simply says "value", which encompasses all value ascribed by humans, the second is the practical(econometrics) which is actually measuring these things so that we can use the data(E.G. measure the change in quantity relative to the change in price for a good when the price isn't changing and/or you don't know what all the factors are in making the price change when it does turns out to be fairly difficult) in a predictive manner.

The mistake you are making is in thinking that this "value" doesn't encompass all the emotional drives and desires that people have. It does, it just ends up quantifying that as a measure of price. E.G. A person goes to buy a car, there are all sorts of cars and he decides which one to buy. He can buy a car in pink, a car in green, or a car in blue. The mistake that is commonly made is that these three items all have the same "value" when in fact they do not. If they had the same value the person buying the car would have to flip a coin or roll a die in order to decide what to buy. They might have the same value to the person selling, but probably not the person buying. You can determine how much this is worth to them by seeing at what price they would change their mind. I.E. lets say i had these three cars and you wanted the green one. If i increased the price of the green one above the blue and pink one i could find out how much you valued green(on that particular make and model), by the difference in price you were willing to pay.

The assumption that people value things differently and for varying reasons is implicit. And it is in fact why trade works. If people all had the same values then trade would not be reasonably possible. Trade is only possible because when i buy something I value what I am buying more than what I am spending(how much more, is not necessarily known), and the guy selling values what I am giving more than what he is selling.

To bring this back to the issue with rigs. People value them differently, but they still value them in the same way. If you valued a particular rig at 5m isk, and you would by 3/month at 5m isk, but if it was 1m isk you would by 6, and if it was at 0m isk you would still by 6. Then if the price were 10m you would by zero. And if the price were 3m isk you would by 3, and if the price was 1m isk you would buy 6. And if we add that together with all the other values that all other people have, we get the demand line for rigs. Its the same for supply, but its the cost at which you would sell those products rather than buy.

The only way that you can reasonably say this is not so is if there is no person in the game who would by more zealots at 15m isk each than at 400m isk each, replace Zealots with any good in the market and it will hold true. As things are cheaper we buy more of them. As things are more expensive, we buy less. As things are more expensive we sell more of them, as things are cheaper, we sell less. As things change in value, demand shifts(people will buy more at any given price as value goes up, and buy less at any given price as value goes down), as things change in availability, supply shifts(when there is a more stuff people will sell more of it for any given price. When there is less stuff people will sell less of it at any given price)

My point is that the way people act in the real world isn't just determined by personal cost/benefit analysis and doesn't always conform to predictions made by economic theory. In online games this can happen to an even greater extent because the risks & benefits that players experience as a result of their in-game economic decisions are removed from reality by another step. A good example of this is the whole "minerals are free" manufacturing types who price the ships they make lower than the value of the minerals they used to make them because they perceive that those minerals cost them nothing because they mined them themselves.

This is false. Economic theory fails when it doesn't have the data to predict what is happening. People still act in accordance with the theories. In online games the risk/reward is different, but still exists. Players are less risk adverse in online games than they are in real world. Oftentimes there is much less risk in the online game which compounds the problem of comparing them directly because less risk means less cost and less cost usually means more inelasticity(E.G. if candy bars cost a dollar then changed in price to 2 dollars you are more likely to buy less than half you would have at 1 dollars than you would be likely to buy less than half of what you would at 1 penny if the price increased to two pennies)

Why is this true? Opportunity cost and decreasing marginal returns.  Opportunity cost is essentially the concept that "the cost of something to the individual is what you have to give up to get it". The cost of going to a movie is 7 dollars plus the cost of playing eve for 2 and a half hours, chatting on a forum for 2 and a half hours, masturbating for 2 and a half hours, working for 2 and a half hours, going to a bar for 2 and a half hours, playing golf for 2 and a half hours, listening to music for 2 and a half hours, going shopping for 2 and a half hours, etc. Decreasing marginal returns means that the value you get from doing anything decreases per unit of time/effort as you continue to do it(there are exceptions to this, but we can ignore them for now because they wont apply in this case and the decreasing returns always end up applying in the end). So if i work for 10 hours working the 11th hour will be less valuable than the 10th was. This means I am more likely to spend the time doing something else.

In eve, the easiest way to see this is "man, i can't rat anymore lets go kill some people" or when you stop playing for a time, or when your logistics director burns out and quits telling someone else to go do it.

Economic theory seems to me to be particularly bad at predicting how things work in the real world. If economics was really any good at understanding the markets then I don't believe we'd have quite so many people who are supposedly experts in it being completely blindsided by economic crashes, sudden downturns in markets, collapses in banking systems etc. I mean, the British government has just spent a sum of money equal to out entire annual NHS budget on propping up a single failing bank. Getting these economic models right in the real world has major impacts on people's lives. If they fuck up so badly when applied to the actual system they're designed to model and understand how can these theories be useful when applied to a completely different system?

Part of this is the weather thing. Climatologists can tell you that if you increase the energy of the system there will be higher highs and lower lows, more hurricanes, more dry spells, more cold areas more hot areas. But they can't tell you there will be a hurricane until it forms. And once it does form they all get to bicker about how strong it will be when it hits the coast.

Its the same way with economics. They can tell you that pigovian taxes are great to correct externalities and that capital taxes are typically more inefficient than other taxes. That sales taxes encourage saving and income taxes encourage spending, that at some point increasing taxes is likely to decrease revenue and that lowering taxes will increase the GDP over what it would have been otherwise barring any externalities.

The housing crisis was predicted around 2000-2002. There just wasn't anything anyone could have done to stop it. Speculators wouldn't stop buying because fuck have you seen how high prices have become? Shit, buy buy buy, turn it over in a year and make 40%!!! The economist sees this happening and says "welp, this could be bad, better bunker down and weather out the storm" in the same way the climatologist says "welp, Katrinas going to be a big one, lets just hope it doesn't hit anything too important". Economists are just as powerless to change the values that people place on things as anyone else. They are just as powerless to change the amount of stuff floating around just as anyone else is.

They can only look at the system and say what will happen when things change. That isn't to say that economists can't do things that make it worse(and they have, many times), but that is down to the individual competence and honesty of the individual economist rather than the system itself. Probably a great example of a lack of competence and honesty is "the republican party". "The Laffer Curve" is a theory that as you increase taxation revenue will increase towards a point and then decrease after that point(possibly many points) and that there is an optimal amount that you can tax to receive the most revenue for the government. This Curve is defined by the elasticities of supply and demand(I.E. how much value changes). The more inelastic(I.E. the less that quantity will change with a change in price) that these are the greater the revenue that can be gained from taxing the good is and the longer it will remain so as you increase taxation.

Now, the republican party got a hold of this and said "see, this proves that decreasing taxes will increase revenue, lets decrease taxes!". Now of course, decreasing taxes will only increase revenue if you are "over the hump", otherwise it will decrease revenue. The Pubbies decreased taxes, revenue fell, and the deficit increased to a point never before in the history of the United States, not even during wartime(when govt expenditures are typically higher). This is a case of someone getting a hold of the theory and being disingenuous.

Another example of disingenuousness(and irony) would be pigovian taxes. Pigovian taxes are taxes on a good that has a negative externality(which is to say it has a cost that is not figured by the people who are buying or selling. E.G. This big long wall of text has negative externalities because its going to impart costs on a bunch of people reading it and i play shortstop) in order to correct that negative externality. By increasing the cost of doing the action that causes the externality the general welfare is increased as the externality is then corrected. Now the democrats generally support regulation and the republicans generally support pigovian taxes. This is ironic because the democrats generally support "pro government" issues and the Republicans generally support pro corporate issues. But the application of a regulation gives the surplus to the producer and the application of a pigovian tax gives the surplus to the government.

The real reason that dems support regulation and pubbies support pigovian taxes? Because when changing the regulation the pubbies can then reduce the amount of reduction in quantity creating a greater benefit for the corporation, while the democratic base is to reactionary and ignorant on the effects of taxation and anyone who says "I'm going to tax this product or activity until they end up producing no more than the same amount as imposed by the current and/or more stringent regulation that we would like to see pass" isn't going to win anything with anyone. People will hear "taxes and lots of taxes and no regulation" even if it makes sense to do it and you have made everyone angry rather than anyone happy.

I think that the type of system we live in, capitalist in the case of the real world, artificial pseudo-capitalist in the case of EVE, has a large effect on the personal decisions people make and limiting them just to questions of supply, demand and consumption is reductionist and not very useful. What I would like to see would be some economically trained and savvy people attempting to re-evaluate modern economic theories specifically to apply to MMORPG economies, not just slavishly attempt to apply them irrespective of different underlying systems.

This is a big mistake. MMOG economies are easier to manage than real ones. Because you can have control over more variables. The economies will behave in roughly the same way(with different values for everything of course). But in an MMOG we have the power to set prices in a way that is not detrimental to the general welfare. In an MMOG we have the power to simply increase the supply of goods that are not plentiful enough and decrease the supply of goods that are too plentiful.

In the real world we have a way of adding money to the economy and subtracting money from the economy. But we have to be very careful with its use. Not using it could cause drastic problems, but using it stupidly could cause other drastic problems. And we have no way of adding or subtracting stuff.

Now, in eve, we have a way of adding and subtracting money from the economy and a way of adding and subtracting stuff from the economy.

Imagine a machine that could take an infinite amount of any amount of energy or stuff and convert it into cash at some ratio. And another machine that could take an infinite amount of cash and convert it into stuff or energy at some other ratio.

We have that in eve, except not only do we have that, we have our hands on the dial where we can tune the ratios of stuff to money as we see fit.

We have control of so much more and it makes figuring out what will happen so much easier, because when a hurricane comes along you can just start deleting wind and adding sunshine until its gone and when a drought comes along you can just start deleting sunshine and adding rainclouds.

In Eve, we do this dynamically by letting people choose when to buy and sell using these converters(NPC sell orders, and insurance mainly) which is even better since it manages the economy naturally and simply increases benefit to all parties.

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[Hellinar]

As things are more expensive we sell more of them, as things are cheaper, we sell less.

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Not true. Its only true if you are thinking like a trader. I think that is the core of my problem with over applying classical economics to game worlds. The core currency of a game world is, or should be, fun. If people have fun making stuff, and don’t need money, the market price is irrelevant. They make stuff while it is fun to do so, and stop when they get bored.

This was particularly true in “A Tale in the Desert”, in a small game world where some people enjoyed the mini-games involved in making stuff. And simply gave the stuff away, or at a random nominal cost. I monitored supply and demand pretty closely in that world, and prices did not shift greatly with supply, demand or even tech changes. The dominant factor in production was whether it was fun to produce goods or not.

Applying classical economics to a game world does tend to be a self-fulfilling prophecy though. The trader mentality dominates. Which is good if you enjoy trading, but turns the game into a job if you don’t.

[Goumindong]

Not true. Its only true if you are thinking like a trader. I think that is the core of my problem with over applying classical economics to game worlds. The core currency of a game world is, or should be, fun. If people have fun making stuff, and don’t need money, the market price is irrelevant. They make stuff while it is fun to do so, and stop when they get bored.

Fun is a value that indicates high supply. Price can be low, even zero(or close to it, because you have to figure transaction costs) if supply is high enough.

This was particularly true in “A Tale in the Desert”, in a small game world where some people enjoyed the mini-games involved in making stuff. And simply gave the stuff away, or at a random nominal cost. I monitored supply and demand pretty closely in that world, and prices did not shift greatly with supply, demand or even tech changes. The dominant factor in production was whether it was fun to produce goods or not.

So what you are saying was "Supply was high and very inelastic"

We have now modeled your situation. All other modeling is just defining how high it was and how inelastic.