The MMOG Economical Flaw

[Margalis]

FFXI is a good example of inflation. Apparently it has a lot of both farmers and bots now. It's very difficult to buy good equipment unless you spend inordinate amounts of time farming yourself.

[Sunbury]

Asheron's Call 1 (in 2000) was an example of hyper-inflation, to such an extent that money (pyreals) became worthless for trading.  The player economy shifted to barter, either specific items for each other (Pre-patch GSA for a Mattty Robe), or new forms of 'money' arose:  motes, shards, and sturdy iron keys (SIKs).   Those items COULD be turned in for real value (a weapon, armor, random chance at weapons/armor), but mostly they just changed hands.

The difference was that cash was too easy to get, and nothing much to spend it on, while the new items were hard to get (all fairly rare drops on less common mobs), were wanted for themselves directly, and then later a medium for trade.

So in a way, the economy 'worked', without any intervention by developers directly, of course indirectly they introduced those items for other reasons later in the game, but they were not designed as a cash replacement.

[HaemishM]

How is that any different than the real world today?  How many of us on this board for example actually extract resources from the ground, the only real economic creator of wealth?  The number of farmers in relation to overall population is also quite small.  Miners, etc.  Most of us are simply doing nothing than pushing bits of stuff around or taking care of the people who do the pushing.

I'm not arguing your point that MOGs are overly simplified - these are games after all and not virtual worlds.  Just trying to get a feel for how you'd expand it.

Roac had a bit of it. The service industry. None of the MMOG's that I know of really have any mechanics in place for service contracts, in which one player can perform a service for another player. Sure, you can do it, but it's really almost a meta attachment to the existing games. There is no binding contract on the part of the players that the game generates. I mean, if other players are really content, why don't the games support that sort of thing? Why can't I hire someone to harvest skins for me in WoW, with a trade window type contract that both agree to? Why can't players provide quests for other players? Oh right, the whole "people would exploit it to level up too easily" thing. Which just points out again how fucking retarded level-based systems are for games that attempt any sort of "worldliness."

[Rhonstet]

I mean, if other players are really content, why don't the games support that sort of thing? Why can't I hire someone to harvest skins for me in WoW, with a trade window type contract that both agree to? Why can't players provide quests for other players?

Horizons had a 'consignment' system that was vaguely similar to this, where you could basically agree to pay X if a certain good was available.

In terms of WoW, the idea was to let the auctionhouse handle any kind of labor arrangement.

But in WoW, services do exist.  Go check out the business of Enchanters, lockpicks, alchemists, and blacksmiths.  I think those services should have more impact on the economy, but I'd rather see guildhouse instances, guild merchants, and guild relations implemented before service contracts.  Not that I expect to see either.

[koboshi]

Yes, inflation is destructive in some games in its current form, but not for the reasons that you mention.  Any inflation is taking away from existing wealth, but that's not always a bad thing - the issue is what higher inflation does to an economy,

I tried the ‘I'm ok, your ok’ crap but I can’t let some of this shit go!
ALL inflation IS bad. As is all deflation. Don't post yet damn it you haven’t finished reading! The only increase or decrease in money that is good is those which relate to the increase and decrease of wealth. When a guy makes a sword out of an ingot of metal that person has created something of more value. This increase is a factor which goes into calculating the value of all things in the economy. It is an increase in the wealth in the economy. Multiply that by a couple hundred other value creation acts and subtract the value lost when objects are lost or destroyed and you have the total change of the value of the economy. Let’s say that more was made than lost then there is more value with the same money supply. The money has been deflated (a dollar is worth more than it used to) so to keep things even the overall money supply should be increased to keep the money at the same value (so a buck will buy you the same thing today as it did yesterday). Now to be absolutely clear this means more money, not inflation! However in the real world when people think they have more money, which is to say they think the money increase is a function of wealth not inflation, they will invest more and cause economic growth. But this argument for loose inflation control doesn’t work in current MMOGs. Why? Because MMOGs don’t have real economies, they have a cardboard cutout of what a real one should look like.

...Devs almost always introduce NPC shopkeepers, whose primary benefit to the economy is to help flatline problems.  Normally they will buy just about anything, and sell basic supplies.  In general they represent the "feel" of a much larger economy than actually exists, since a very large economy would not be noticably impacted by local trends, since its size allows it to absorb small problems.  It's protection against too much supply or demand; they will buy at a minimum price, ensuring that nothing drops below a certain value, and sell basic required goods at a maximum price to ensure demand doesn't outstrip supply.

There is no external stabilizing macro economy. When you sell something to a vender the vender destroys the object then magically creates money out of nowhere and gives it to you. Ill use an example similar to yours, as it is quite useful, to demonstrate the problem with this. Let’s say that a shard is a city in an economy which expands beyond into a grander countrywide economy.

 Problem one: technological advancement. Let’s say in this city that some player has been cranking out bronze swords and has been selling them to make a living. A few months have passed and the crafters have been getting better and better and now produce not only iron but steel swords. The production of these higher quality products has become common place so much so that one may now buy an iron sword for what it used to cost to buy a bronze one. Now instead of upsetting their routine by buying new tools, new equipment, making new supplier contacts, and learning new techniques, the bronze sword producer decides that they can get by just selling their swords to the shopkeepers. Question, why the hell is this shopkeeper buying, not only one sword for this price, but a constant and large supply of these swords? Well the shopkeeper could be caravanning the swords to another city and selling them there... right? Wrong! The sword is just as out of date in that city as it is in this one.  If this doesn’t get across replace the swords with vacuum tubes vs. transistors, no one needs vacuum tubes in a transistor economy! Let me say this I know full well that there is a transition period between technologies and that less technologically advanced cultures will still be in the market for these products.  The problem is that the other city doesn’t exist! There are no market forces acting to reinforce this behavior, there is no one telling the shopkeeper when they don’t want anymore bronze swords.

Problem two: the trade deficit. So we have this one city which is now dealing with large inflation rates. The neighboring cities and states which are trade partners with the city should also be suffering from this inflation. Caravans regularly arrive with tons of cargo which they dump on the market. What’s so bad about cheap cargo? Massive unemployment, none of the citizens in the outlying cities can afford to compete with the central city. Now in a real economy this would mean that there are lots of willing workers just begging for new jobs as well as rich central city citizens who would have lots of money to spend on new business ventures. But central doesn’t spread the wealth (they can’t, the other cities don’t exist). eventually the trade partners do one of two things either they shut down trade with central to save jobs from being taken by central or they just keep waiting for central to bring investments until finally the outlying towns starve to death and atrophy. Either way the shopkeepers stop coming around and central is forced to become a self sustained economy. Simply put NPC shop keeps aren’t simulations of external economies if they were they wouldn’t exist.
 
But perhaps you're not talking about simulation of a natural economy; instead you're talking about subsidies. So what are the NPC shopkeepers subsidizing? Player happiness. They are paying players extra money so that they will be happy and wont leave. The problem is this happiness is bought with other players’ money (see the beginning of the article for full explanation). Every time a happiness subsidy is used the economy is forcibly changed. Like taking your finger and pushing down on one end of a balance scale, the balance will be disturbed for a while, but it will go back to normal eventually. That is unless you keep disturbing the natural balance, just as the players do by using the subsidy over and over again. In this case the laws of supply and demand, as well as all the other economic laws, don’t work. The economy is broken. This is only made all the more true by the fact that it is such a small group of actors in this economy and that much more unstable. Besides why are they trying to bribe their players anyway? Answer: the game isn’t fun enough! Bribes won’t fix that.

I also have to say this again Roac, making the gold sinks better just isn’t the answer.  Socialism failed. It will always fail. Man is simply not prepared to cast aside Adam Smith’s ‘invisible hand’ and manage the balance of the market themselves.  This was true when the brightest minds of all of Russia attempted it, why do you expect that a handful of devs will be able to?  No, if you want to have an economy then you need to play by the rules of economics.

[Pococurante]

I think you're trying too hard to fit real world concepts to a game world.

We're probably not in agreement on what inflation actually is - your definition is only one: Inflation as an indicator of price stability where currency itself is valued.  That doesn't make sense in a game world because Currency Devaluation reflects how external economies value the economy being examined.  Game inflation is always General Inflation, when money is more plentiful than goods.  "Too many dollars chasing too few goods"  One can never have true price stability in the real world simply because supply/demand is not really based on rational factors.

As you pointed out there is a subsidy for the fun factor.  This is non-negotiable - this is a game world that must be entertaining and most player's definition of entertainment is fantasizing they are incredibly wealthy.  Anything else makes the game economy zero-sum and that pisses off customers.  Well unless we're selling the economic equivalent of Shadowbane.

Any game world more than a year old experiences a phenomon when certain items become the real currency because they are truly uncommon or otherwise difficult to obtain.  This is alleged to damage the new customer experience (I mostly disagree) so typically devs approach this with sticks.  This is misguided - basically half the fun is taken out of the equation.  Actually human nature being what it is actually more than half.  We want to create "fun" when we siphon at least as much as when we inject.

Traditionally subsidy ensures more money is injected than siphoned off.  We want to keep the injections going - we have to or we fail to deliver "fun" so let's simply set aside the traditional (misguided) notion injections must stop, be slowed, or be replaced solely by players.  That leads to the question - how do we reduce the supply of money in the game and still sell "fun".

Goldsinks.  Otherwise we're just pushing the money around which leads to artificial scarcity and also damages the "fun" account.  The goal is to put in as many goldsinks as possible that also "subsidize" player happiness by reversing the injection.  Basically "fun" is created by money's flow into and out of the system.

You're chasing price stability in what will always be an environment that is too volatile to promise it.  In fact as a game publisher this is exactly the last thing I want.  Price stability can only happen with subscription stability.  That's irrational from the business perspective of game publishers.

Anyway I think the discussion is more constructive if we examine "fun" ways to siphon gold without damaging "fun" created in other parts of the entertainment service.  Don't tell me about fees and taxes - tell me about distinctive but purely cosmetic items, ways to advertise my services/sword, etc.

Edited to add:  Again to loop in the business perspective of the game publishers, you might want to read up on Monetary Theory and its basic assumption that mild inflation is good since it indicates an economy growing at a sustainable rate.  It's the most applicable to game worlds, with the devs basically serving the role of Government, and dovetails nicely with the game publishers' need to increase subs.

Devs just need to carefully plan drop templates (counter example: UO message in a bottle), attempt to thoroughly identify and remove duped items, and spend at least as much (if not more) of their time designing cool interesting goldsinks as they do new expansions that inject more into the same general economy.  This would mirror the actions of a Rational Government as proposed by Monetary Theory.

[Rhonstet]

ALL inflation IS bad. As is all deflation.

Read it. 

Given that a little inflation exists in the real world, I'm not certain that removing inflation from an economic model is a good design practice.  Even if you don't like it, it serves a purpose of keeping the economy functioning.

Also, inflation in the game world has an interesting side effect on game balance.  Inflation helps people recognize when an item is under or overpowered.  Granted, its not the best way to do this, but it works in theory.

For example: A Mob drops too much loot for the amount of work required to slay it.  People begin slaying that mob in greater and greater numbers.  Eventually, a server admin should note the unusual concentration of players around the mob, and fixes the problem by moving the loot gained into an appropriate range.  The player-driven economy suffers temporary inflation while the invisible hand steps in.

Question, why the hell is this shopkeeper buying, not only one sword for this price, but a constant and large supply of these swords? Well the shopkeeper could be caravanning the swords to another city and selling them there... right? Wrong! The sword is just as out of date in that city as it is in this one.  If this doesn’t get across replace the swords with vacuum tubes vs. transistors, no one needs vacuum tubes in a transistor economy! Let me say this I know full well that there is a transition period between technologies and that less technologically advanced cultures will still be in the market for these products.  The problem is that the other city doesn’t exist! There are no market forces acting to reinforce this behavior, there is no one telling the shopkeeper when they don’t want anymore bronze swords.

Backing up an assumption ("the shopkeeper could be caravanning the swords to another city and selling them there") with an unknown ("The sword is just as out of date in that city as it is in this one") doesn't make a very convincing argument.  People will buy what they can get, regardless of technology.  If all they can get are bronze swords, they will buy bronze swords.  Maybe that merchant is selling back what you loot to monsters, who knows?

Also, how do you know the other city doesn't exist?  Just because you've never seen it doesn't mean it isn't there.  Game worlds are notorious for doing that with expansions and sequels.

[koboshi]

In short, in order to even bother with trying to simulate a real economy, players have to have more to do than just be hunter/gatherers or nurturer/producers. What's the point of trying to craft a deep, dynamic and functioning economy when the players are given the choices of Cro-Magnon man?

I agree with you but I think you’re looking at this the wrong way; a functioning economy and a better job system require each other. That said there need to be more varieties of tools. I mean if all you can buy is a sword all you can be is a hunter. It doesn’t matter how many times you tweak it there will always be a best killing tool and all the rest. Just as there are the best killing tool makers and everyone else. But if you let players make a plow you’ll get farmers to harvest with them. if you let players make contracts you'll get police to enforce them. You make cars you'll get mechanics to tweak them. But as long as all there is swords and sword makers it is going to be a binary system.

[Sairon]

Just for clarification could you explain a bit more how you want currency to enter and how it leaves the system? I understand that you don't like gold poping up from every corpse which you kill, however there's still currency geting created infinetly from crafting if I understand it correct. If we scale gold reward from quests and NPC prices it seems like they cancel out each other and doesn't really have much effect. NPC vendors doesn't really take that much currency out of the system in most games I've played, since the end game where 90% of the economy is, there's nobody buying anything from them. It seems to me that the system would still inflate.

Also, I still think an optional money sink would stabilize the system when it reaches a certain point. For example in my blacksmith example people would destroy their money for equipment upgrade once the economy has inflated to the point where it's the most cost effective character development option.

[Strazos]

but I'd rather see guildhouse instances, guild merchants, and guild relations implemented before service contracts.

No, stop catering to the uberguilds.

[koboshi]

Backing up an assumption ("If all they [those who purchase the sword from the shopkeeper(?)] can get are bronze swords, they will buy bronze swords.") with an unknown ("Maybe that merchant is selling back what you loot to monsters, who knows?") doesn't make a very convincing argument.  If the shopkeepers were turning around and selling to monsters that would be great, except where are the monsters getting the money for the transactions?

I made myself quite clear that variables which affected technological dissemination were possible. However, NPCs don’t currently account for or simulate these variables, so you can’t argue that they might be.

Also, how do you know the other city doesn't exist?  Just because you've never seen it doesn't mean it isn't there.  Game worlds are notorious for doing that with expansions and sequels.

When I say that the other city doesn’t exist I mean that there is no hard drive full of data on the assets of the other town. There isn't anything recording what the city can produce, how fast, what it needs, or when. Also if, say, the town can't export medicine because its using it all because the monsters in that area are kicking their ass, I cant go to that town and drive down demand for medicine by defending it.  It just doesn’t exist.

But perhaps I am wrong, perhaps the games do make these calculations and comparisons. If they do I invite any of our board’s members who have worked on such a project to explain how the NPCs do work. I would be very interested to know.

[Roac]

ALL inflation IS bad.

Alan Greenspan would beat you to death with an ugly stick, if he were strong enough to pick it up.  Yes, I did read all of your post before responding.  Be glad Alan didn't.

I also have to say this again Roac, making the gold sinks better just isn’t the answer.  Socialism failed.

Tell that to China.  At present, their economy is growing quite nicely.  Granted they have swapped out some socialistic elements for capitalistic ones, but really that's the same thing we're talking about here - or mixing socialistic ones with capital.  Either way, no one has yet advocated a pure socialistic or capitalistic market for MMOGs.  Or you can try to tell that to UO, which although has had high inflation, has also had a functioning economy since the game came up.  Don't tell me it can't work when I can point to examples where it is.  I would agree that the economy would probably have been better off with less inflation, but it was far from collapse.

You're going on and on about trade defecit, inflation, etc - and you're forgetting that MMOGs aren't a fully functioning economy, they're a damn simulation of one.  Far as sims go, they (mostly) work fairly well.  There are cracks, there are problems, but I can still log in and play the damn game.  My character doesn't starve, and I don't have to enter into voluntary slavery because I can't afford my own gear.  That's what happens IRL when you have hyperinflation, but you haven't seen that in games.  Why?  Because the market receives some stabalization from NPCs, controlled drops, etc.  You're right in that there is no outside greater economy; it's simulated, which is what helps keep the whole damn thing afloat to begin with.  Unlike a real economy, a MMOG economy really can create wealth from nothing - the bread really can be free.  And if you really want to know the rub of it, a pure socialistic economy is EASY to do in a MMOG.  You (the player) are subsidized by the government to do whatever hero stuff you do, and the burden of effort is placed on the NPC citizenry whom you don't have to worry about.  It's the capitalistic aspects of gaming that's hard to work out.

[HaemishM]

The value of money/cash is created by a perceived exchange rate of goods and services for said currency. The MMOG's we are discussing have skipped a step in the process of creating a currency, that of the barter stage where certain goods become more valuable than other goods, in the case of most fantasy MMOG's, the rare metal gold. What creates the value of gold in an MMOG? It isn't the world's civilizations because a human gold piece in WoW is worth the same as an Orc gold piece. The value for the item is set by the invisible hand of the developers, instead of the march of history. Thus, MMOG economies with this as the basis will always be artificial.

Now if you were to start a game with no gold, with NPC's that barter for goods they need in a sort of ecosystem of supply and demand, and then eventually allow the various communities in the game that spring up to set their own unit of currency based on what they are trading with each other, THEN you can possibly have an actual economic system with little developer interference, and without artificiality.

But you won't have many people playing it, because building civilizations is hard.

[Roac]

I made myself quite clear that variables which affected technological dissemination were possible. However, NPCs don’t currently account for or simulate these variables, so you can’t argue that they might be.

Why in the hell would a dev/pub want to front the time and money to build that?  Like they're going to drag some doctoral economist in, to build this realistic capitalistic NPC world-market, so that what - the few thousand people in one city can have a "real" market that doesn't vary all that much from the one they have already?

Give it a rest, you're talking about whether anyone would want bronze swords.  Scrap, maybe?  As if the entirely fictional world of orc hunting, and the few thousand swords that are generated as a result, are going to appreciably affect a worldwide market for bronze?  At what point does FUN enter the discussion?  At what point do I, as a player, care whether the NASDAQ is being run on my game server (edit:) as a background process?

[tazelbain]

At what point do I, as a player, care whether the NASDAQ is being run on my game server?

They put ebay on the game server. And I am sure significant portion of players will like NASDAQ on the server also.  I enjoy the commodities markets in GW and PP, saves me from having to dicker with same numbnut over the price of parchment. Auctions work better for rare items and Stock markets work better for common items.

[koboshi]

Again to loop in the business perspective of the game publishers, you might want to read up on Monetary Theory and its basic assumption that mild inflation is good since it indicates an economy growing at a sustainable rate.  It's the most applicable to game worlds, with the devs basically serving the role of Government, and dovetails nicely with the game publishers' need to increase subs.

Devs just need to carefully plan drop templates (counter example: UO message in a bottle), attempt to thoroughly identify and remove duped items, and spend at least as much (if not more) of their time designing cool interesting goldsinks as they do new expansions that inject more into the same general economy.  This would mirror the actions of a Rational Government as proposed by Monetary Theory.

Ninth verse same as the first
A little bit louder and a little bit worse

In the real world inflation means good economy because it means investment is occurring. Money is coming out of banks and being circulated. The circulated money drives prices higher because stores see people can afford higher prices. Rich stores mean goods producers raise prices. With all the high prices workers demand higher pay and round and round they go until eventually the price bumps stop sloshing around and settle. Econ 101. But here’s the problem, in the game there are no investment banks, instead there are devs who chose who gets rewarded for each job and in what amount.  The problem is, as I have said before, this is fucking socialism and socialism doesn’t fucking work!

And you know what? I feel completely comfortable comparing real economics to "virtual economics" because like the laws of gravity and thermodynamics, economic laws are just that, laws. If you don’t want to play by them then there is no economy and things like supply and demand are just figments of your imagination. The truth is that the economies in these games ARE emergent. When people realize that their gold pieces aren’t worth the hard drive space it’s written on, they switch and create their own monetary system. A real economic system without the devs being asked to do anything. Why can’t the devs just let that happen in the first place?

To be clear I am not in favor of a totally free market. The bank idea from earlier is great!  Although instead of a money decay why not model the bank on The Fed?  I mean really, The Federal Reserve is arguably the best tool that America has in controlling its inflation rates. Changing the interest rates doesn’t take near as much effort as rewriting the source code for the game every time you want to tweak the economy.

And why, oh God why, don’t you want the devs just do what they were hired to do? Make a game! I don’t want them spending "half if not more" time on the economy I want them to spend all of their time making a game that doesn’t fucking suck! I don’t want more money I want more fun. It doesn’t matter if the bank account says 100 or 100,000,000 as long as I can buy what I need to play the game. If you don’t agree then here, 50 trillion koboshi bucks, will that buy your love?

[koboshi]

Tell that to China.

China isn’t socialist. They're union oriented capitalists.

[Pococurante]

But here’s the problem, in the game there are no investment banks, instead there are devs who chose who gets rewarded for each job and in what amount.

Sure there are - players themselves are the investors.  They invest in themselves and each other.  When I burn money into the goldsink of craft leveling I am investing in my future ability to spend and buy at greater tiers.  When I join a pickup group we're all investing in ourselves and each other to advance our characters to adventure at greater tiers.

China is still very socialist.  In another ten years that may be less so, but I posit that more democracies will have more socialist features in that future.  People may want to keep "what's theirs" but they also find the like living in stable societies with nominal crime and wind up forking out all over again to regain stability.  Sort of like where the US is starting to lurch towards crazily now.

You're most basic assumption is that socialism cannot work when all evidence is to the contrary.  Pure Socialism?  No.  But I challenge you to identify a pure Capitalist Economy anywhere on this planet.  Next time you see someone using foodstamps, collect unemployment, etc. you'll feel good knowing your home country is not a purely captialist society either.  Maybe you're thinking of Communism.  But even it "worked" until the corruption and power-mongering took precedence over empire building.  Systems rarely fail in and of themselves - people fail.

Anyway while I personally would enjoy a virtual world with a genuine economic simulator I think most people would not.  You're still approaching MMOG economies like an economist rather than as an entertainment provider.  In your last post you throw up your hands and say devs need to "make FUN" but you're not identifying the elements.

Economic theory is a necessary evil but all too often economists trap themselves in very unhuman abstracts, something the economist John Maynard Keynes wryly made fun of when he famously quoted "In the long run, we're all dead."

Not ragging on you - more like egging you on to make feasible entertainment recomendations instead of transcribing quotes from a university econ book... ;)

[Margalis]

Yesh, I have to say I actually read most of this thread and most of the PDF that was posted earlier. (OK, skimmed at least)

Where are the concrete suggestions? We all know it doesn't make sense that you can sell an infinite number of items to a vendor. Then again, I don't think that is the problem. The problem is this: Where are those items coming from, and why are people compelled to create them?

You can't compare real life economics to game economics without comparing the rest of real life to the rest of the game. In real life I can't go kill 5000 rabbits because eventually rabbits dry up. Trivial loot code (or what I understand trivial loot code is, no loot for trivial encounters?) does approximate this to at least some extent. In real life catching a single fish can take hours. In real life coal and other natural resources are consumed in quantities equaling how quickly they can be extracted.

Look at someone like a jeweler. Does a real jeweler practice jeweling creating 50 of the same object? In one day? And in real life instead of making 1000 of the same shift you create a machine to do that, or hire illegal immigrant workers.

I think you can break these down into two key areas: Collecting, which is mining, getting loot, etc, and crafting. You either have to make it impossible to do these things at a continuous high rate, or make it not worth the time. Eliminate either the ability or the incentive.

In most games the only way to get good at crafting is a make a bunch of stuff. So of course, people are going to make stuff. Maybe that paradigm should be changed. Maybe the way to skill up in crafting should be to go through an "adventure" of sorts as an apprentice. Or maybe it should be clear to people that the stuff they are making is not worth selling. Like, instead of crafting a pistol, make a low level crafter craft a broken pistol always, and allow them to break it back down and try again. Maybe inject a little actual skill into the equation as well. It could be as simple as letting people color their objects or texture them and try to sell them based on appearance.

[slog]

In the real world, the Financial word creates money through investing and lending.

If you had kept it simple, your point wouldn't have gotten lost. Your point was:


In MMORPGS, Currency is created out of thing air and taken out of thin air in bad ways that make MMORPG economies work badly.  They work like this because devs copy single player RPGS.


What you forgot was that only economy that really works at all is a frree market economy. Since devs can never duplicate the real world (nor would they want to), MMORPGS will always have fucked up command economies that work poorly.

The end.

[Merusk]

Eve has a fantastic economy.  Plenty of goldsinks to take care of farmers  when you actualy lose items/ stations/ ships. Consignment missions allow for player-created content (delivery missions) or bounties can be placed on other players for your 'kill' missions.  The NPC environment adjusts prices according to regional supply/demand (sell 100,000 units of something to a station and the price they'll pay for the  next load goes down.)

In all Eve's got one of the healthiest and most diverse MMO economies i've ever seen. Too bad the game is such a slow-paced boredom fest otherwise.

[Llava]

I haven't read the whole thread yet and probably won't have anything else to add when I have, because I'm not big into watching MMOG economies, but regarding the crafting thing:

I was a crafter in DAoC.  I only ever made money from it by purchasing Diamond or Sapphire Seals to buy armor in Darkness Falls, then salvaging that armor and turning the remains into trinkets, selling those to NPC merchants at a profit.  Outside of that, my crafting ability was strictly for convenience and to help out my friends.  Making a masterpiece was a pain in the ass, and it was generally difficult to try to talk a crafter into doing that.  Often they required exorbitant amounts in pay just to recover costs, let alone turn any profit.  In fact, I likely hurt the economy by taking up the profession with the intent of making masterpieces for myself and friends at cost.  That's less business other crafters will have, meaning less profitability for crafters as a whole, and another drop in the bucket towards making all crafters "guild only".

Outside of that, I did take a few orders, but never for masterpiece equipment- strictly 99% quality stuff (which I had often saved when trying to craft masterpieces, so I could just charge a flat price and have them ready instantly).  By the time Trials of Atlantis came out, of course, 99% quality stuff was completely useless.  I had a vault full of the stuff, couldn't sell it even below cost.

[Pococurante]

I was a crafter in DAoC.

You've summed up exactly why I quit DAOC in disgust.  My preferred playstyle is merchanting.  I simply could not compete against "guild mules" (not trying to be insulting) who viewed crafting as a necessary inconvenience subsidized by friends.  Nor was crafting at that time even much fun - it was the worst kind of crafting implementation I had ever seen in a MOG at that point.  DF was the final straw for me simply because at that point players overwhelmingly preferred "free" drops or there was someone like yourself just being a nice guy and helping friends out.  (I'm not ripping you - given the implementation your approach was more sane than mine)

I finally agreed "this was not the game for me" ( ) and moved on, never looking back.

[HaemishM]

in the game there are no investment banks, instead there are devs who chose who gets rewarded for each job and in what amount.  The problem is, as I have said before, this is fucking socialism and socialism doesn’t fucking work!

Possibly a minor quibble that someone else has pointed out, but we don't know that socialism doesn't fucking work, because it has never been tried on a countrywide scale. China is not a socialist country. North Korea, Vietnam, nope. Soviet Russia? Soviet Russia was not ever a socialist country. I've been reading up on the Revolution of 1917 just this past week, and they never got to the point of actual socialism, instead skipping steps in Marx's planned process of stepping from socialism to a communist state. They never had democratic elections whose results were followed, the Bolsheviks actually ignored the results of the elections that gave the majority of representation to the Mensheviks and the local Soviets. When the Civil War hit in earnest, they suspended pretty much any pretense of socialist democracy, setting up "temporary" emergency dictatorial power in the body of the Communist party, power which was never relinquished. State ownership was later forced onto industries. It may have been called the Union of Soviet Socialist Republics, but it was NEVER socialist. North Korea and China followed the model of the Russian Revolution when setting up their economic systems.

You'd have more success finding working evidence of socialist economic systems in MMOG's than you would in the real world.

[Pococurante]

In the real world, the Financial word creates money through investing and lending.

Quibble time... ;)  Actually these two activities do not create money, they create productivity and attempt to optimize money's flow points.  It's a quibble since of course money is just crystalized time, but their end result is simply money sloshing from one sink to another.  Money is made by printing presses.  Wealth is made by new materials extracted from the planet and turned into a finished good - everything else is just flow.

If I buy stock for $2 and sell it for $3 someone handed me a real dollar bill that in turn came from somewhere else.  If I buy a book at a garage sale for $2 and sell it on eBay for $3 again that dollar was not created but redirected.  If I borrow $2 from a bank and pay back $3 I'm simply redirecting a dollar to the bank.  In none of these scenarios was a dollar created, merely redirected.

[slog]

In the real world, the Financial word creates money through investing and lending.

Quibble time... ;)  Actually these two activities do not create money, they create productivity and attempt to optimize money's flow points.  It's a quibble since of course money is just crystalized time, but their end result is simply money sloshing from one sink to another.  Money is made by printing presses.  Wealth is made by new materials extracted from the planet and turned into a finished good - everything else is just flow.

If I buy stock for $2 and sell it for $3 someone handed me a real dollar bill that in turn came from somewhere else.  If I buy a book at a garage sale for $2 and sell it on eBay for $3 again that dollar was not created but redirected.  If I borrow $2 from a bank and pay back $3 I'm simply redirecting a dollar to the bank.  In none of these scenarios was a dollar created, merely redirected.

The transaction you describe has nothing to do with money creation.   A very simplel money creation transaction:  General Motors issues 2 Billion dollars in short term 30 day notes..  Everyone who buys this debt has 2 Billion dollars, and GM has 2 Billion dollars are well.  We started with 2 billion, and ended up with 4 Billion.

GM then deposits 2 Billion in their checking account, which their bank prompltly lends out 50% immediatly in mortgages.

GM still has 2 Billion , the Note holders still have 2 billion, and the mortgage borrowers now have 1 billion.

That's 5 Billion from the 2 Billion we started with.

EDIT: For a more coherent and newbie friendly explanation try http://www.recipeland.com/encyclopaedia/index.php/Money-creation_primer

[Pococurante]

You're talking about earning, not creating, money.  The very link you cite explains why your scenario is at best incomplete and more accurately just wrong.  Go back and read your own article.  GM does not create money - the government does and does it using printing presses to document a tax credit.  In fact this is one of federal government's purposes - creating money.  By the way your article is wrong but then it's an oversimplification off a cooking site which probably explains it.

Key phrase:  Base Money

Why doesn't your scenario create money?  It earned existing money which simply flowed from the coupon buyers to the issuers.  Interest paid back comes out of GM's revenue.  Interest from the mortgages came out of homeowner salaries.  All that money flowed from a bunch of small streams into GM's goldfish pond.  Nothing just appeared out of thin air.  It takes a printing press to do that.

Exception? I might convince you to take stock instead.  But hey even then when you exercise your options someone simply diverted existing money to give you.  So while *you* felt like money popped out of thin air it actually simply flowed from an existing pool.

If I convince you to lend me ten bucks where did your ten spot come from? Sure *I* feel like ten bucks came out of thin air.  But I bet your bank account didn't.  You definitely won't once your S.O. finds out you took it out of her purse.  If I pay you back $12 did those two extra bucks pop out of thin air?  No, they came out of my paycheck.  Which came from people buying overpriced candles/wicker with money their employer in turn extracted from someone else.

It's debatable if the government truly creates money... in fact it appears that money may really be created by that bogeyman which koboshi is certain is evil: inflation.  Here's a teaser quote...

Effects of Government Deficit Spending  

Government deficit spending means borrowing from the private sector.  On balance, such borrowing and spending has no effect on the amount of base money, though it does increase the net financial wealth of the private sector in the form of Treasury securities.  However contrary to conventional wisdom, there is no significant correlation between government deficit spending and price inflation.

If the government is unable to recapture its spending through taxes and bond sales, the base money supply will increase.  This occurs mainly as a result of corruption, revolution, or war.  Governments may then resort to printing money to spend.  If continued long enough, such spending can result in hyperinflation.  These pathological cases are quite different in origin and character from the low level inflation that exists in most fiat money systems today.

 

[Margalis]

The problem in MMORPGs that the original writeup was getting at is that in MMORPGs wealth creation is very easy.

Imagine if the US government was obligated to give you $10 for every twig and rock you turned in. Hello inflation! In a system like that, $10 becomes meaningless. A loaf of bread would cost thousands of dollars.

[slog]

You're talking about earning, not creating, money.  The very link you cite explains why your scenario is at best incomplete and more accurately just wrong.  Go back and read your own article.  GM does not create money - the government does and does it using printing presses to document a tax credit.  In fact this is one of federal government's purposes - creating money.  By the way your article is wrong but then it's an oversimplification off a cooking site which probably explains it.

Key phrase:  Base Money

Why doesn't your scenario create money?  It earned existing money which simply flowed from the coupon buyers to the issuers.  Interest paid back comes out of GM's revenue.  Interest from the mortgages came out of homeowner salaries.  All that money flowed from a bunch of small streams into GM's goldfish pond.  Nothing just appeared out of thin air.  It takes a printing press to do that.

Exception? I might convince you to take stock instead.  But hey even then when you exercise your options someone simply diverted existing money to give you.  So while *you* felt like money popped out of thin air it actually simply flowed from an existing pool.

If I convince you to lend me ten bucks where did your ten spot come from? Sure *I* feel like ten bucks came out of thin air.  But I bet your bank account didn't.  You definitely won't once your S.O. finds out you took it out of her purse.  If I pay you back $12 did those two extra bucks pop out of thin air?  No, they came out of my paycheck.  Which came from people buying overpriced candles/wicker with money their employer in turn extracted from someone else.

It's debatable if the government truly creates money... in fact it appears that money may really be created by that bogeyman which koboshi is certain is evil: inflation.  Here's a teaser quote...

Effects of Government Deficit Spending  

Government deficit spending means borrowing from the private sector.  On balance, such borrowing and spending has no effect on the amount of base money, though it does increase the net financial wealth of the private sector in the form of Treasury securities.  However contrary to conventional wisdom, there is no significant correlation between government deficit spending and price inflation.

If the government is unable to recapture its spending through taxes and bond sales, the base money supply will increase.  This occurs mainly as a result of corruption, revolution, or war.  Governments may then resort to printing money to spend.  If continued long enough, such spending can result in hyperinflation.  These pathological cases are quite different in origin and character from the low level inflation that exists in most fiat money systems today.

 

Wow. I weep for our school system. I'm so glad I don't teach economics anymore.....


Some more Primers for you
http://www.prosperityuk.com/prosperity/articles/howbcm.html
http://money.howstuffworks.com/bank1.htm

It's good to see that Schild has managed to keep the quality posters here....

[Murgos]

Whats funny is that in older MMOG's the rate of inflation is far outpaced by the rate of depreciation of goods.

The top end uber item at launch can usually be had by any rat-hunting newbie within the first couple of expansions.

[Pococurante]

It's good to see that Schild has managed to keep the quality posters here....

Ok smartass - if you can drag yourself away from the cooking and gee-whiz consumer info sites maybe we can get to real theory and not the crap kids have to unlearn when they get to econ 3xx.

When those business bonds are paid back where does the cash come from?  Which part of thin air did we see it appear from.  If money is really being *created* why the hell does a run on the bank crash the system?  Because that 10% onhand/90% credit is a fiction.  As soon as people want to see real money (bank run) the system crashes.  So pretty clearly we didn't create jack and shit.  Otherwise why the hell does the government have to step in covering those defaults - *because nothing backs up that 90% except the fed*.  That's not a money supply - it's a shared hallucination we all agree to pretend exists so we can enjoy a modern economy instead of carrying bags of gold coins.

If you'd have bothered to read the link I posted you'd know - you keep focusing on the forward facing actions of businesses, not the commercial banks themselves.  Business credit does not create money, it simply provides a sink.  What creates money is the commercial bank going back to the Fed.  It's backward facing to the government.  Not forward facing to their customers.  And that article makes it very clear - commercial banks (not fucking GM) work the machine to extract money from the government.  When that supply is too tight, when that machine can't work, that's when we see Weimer Germany style hyper inflation when the presses work overtime.

Instead of insulting handwaving and directing us to recipeland maybe you could, you know, address the issue.

Actually don't bother - it's not germane to game worlds at all.
 

[slog]

When those business bonds are paid back where does the cash come from?

The money that was created is removed from the system.  Then it gets lent out again, starting the whole process all over again.

  Which part of thin air did we see it appear from.  If money is really being *created* why the hell does a run on the bank crash the system? 

It crashes because, as you pointed out, the money is created out of thin air. 

Because that 10% onhand/90% credit is a fiction.  As soon as people want to see real money (bank run) the system crashes.  So pretty clearly we didn't create jack and shit.  Otherwise why the hell does the government have to step in covering those defaults - *because nothing backs up that 90% except the fed*.  That's not a money supply - it's a shared hallucination we all agree to pretend exists so we can enjoy a modern economy instead of carrying bags of gold coins.

The government steps in to save the economy.  That's a large part of why goverment exists.  Paper money is also part of the "shared hallucinatio"  Just ask any German who was around at the end of WWII. To a lesser extent, so were the gold coins. 

[HaemishM]

I'm no economist. I don't pretend to be even on the Interweb.

The value of money is guaranteed by the issuer of said money. That value is based upon something, which at one time was the supposed value of gold (or, the gold standard, which is no longer in effect). In its most base terms, the value of something is based on what someone will give you for said item, or the barter system. Money is issued by a government, therefore the government creates money, but to do so, it must back that newly-created money with something of value, which I suppose these days is the interest it pays on government bonds? I really don't know.

But in MMOG terms, that money IS created out of thin air, and has a set value in the NPC economy. But there are really 2 economies in MMOG's, one is the NPC economy, which is usually static, and the player economy, which is extremely dynamic. While a gold piece might buy you the same amount from an NPC at launch as it does 2 years later, it won't buy you the same items from another player or from the player-based markets. NPC items are generally worthless soon after release, starting from a certain value and going down as mob-dropped and crafted items build the player market, while player-based items fluctuate in value depending on perception and supply, or supply and demand. The natural tendency for player-based items is to inflate in price to a certain peak, and then gradually deflate, never to inflate again. Neither of these is even close to the dynamism of real-life economies.

But should they? I think Koboshi is trying to argue that a dynamic economy SHOULD be in MMOG's, but I'm not sure I agree. I would agree only if, as others have said, this makes the game more fun. If it just adds frustration, or is only fun for the minority of people that like economic simulators, I'm not sure its value is all that great.

[Roac]

Money is issued by a government, therefore the government creates money, but to do so, it must back that newly-created money with something of value

Not anymore.  US paper money is backed by nothing but the word of the government.  It only has any value because people believe it has value.  This is partly why the Secret Service get VERY FUCKING SERIOUS to any sort of counterfeit.  If people believed that the market was flooded with counterfeit money, it would destroy the economy.  Currency used to be backed by the gold standard, but this was done away with almost a century ago.

And yes, slog is right, investment/lending practices do create money out of thin air - it allows $1 to be multiplied several times, which dramatically increases the US economic strength.  Things can happen in the market which destroy much of this invented money - such as corporate collapse - but the US economy is diversified and large enough to sustain the collapse of a company such as Enron.

To recapture this for the MMOG games; it is utterly pointless to recreate this for a game.  The economy is far, far too small to be practical.  You can add things like the bottomless NPC vendors to try and simulate a larger, more stable market; but koboshi is already railing against that as the problem, but it is to miss the point.  You can't create an ecomomy the size of a country in a population of thousands or tens of thousands, which spends the vast majority of its time not participating in the market (ie, offline).  Nor can you recreate all the investment opportunities available IRL which is largely what creates the economy we have.  Nor is it practical to try and recreate the Federal Reserve, or something akin to it, which devs would be forced to maintain.

The best you could do is, as I said, create a NASDAQ-world-econ sim that runs entirely in the background (ie, players cannot affect it) - which is as I said before, would be an entire waste of an endeavor, since the end result would be just about identical to what you see now; NPC vendors who buy stuff endlessly, because a few thousand people cannot affect a national or world market.  Far as those few thousand people are concerned, money *is* created out of thin air, and you can't tell one whit of difference if that sim were running in the background or not.

[AOFanboi]

GM then deposits 2 Billion in their checking account, which their bank prompltly lends out 50% immediatly in mortgages.

GM still has 2 Billion , the Note holders still have 2 billion, and the mortgage borrowers now have 1 billion.

That's 5 Billion from the 2 Billion we started with.

You are blatantly ignoring that the mortgage borrowers also have -1 billion (plus interest) because of the debt.

Otherwise, person A and B could keep lending one amount of money to each other over and over again until the amount of money approached infinity. And if there's infinite amouints of money, how much does a bread cost? There aren't an infinite number of items to buy with that (fictious) infinite money.

Take a class on book balancing someday. Or even algebra.

Summary: If the Note holders give 1 billion cash away as a loan to someone, they do have 1 billion less cash.