Business And Economy Archive

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Lauraleigh wrote:

How about "SWG for Dummies."

Although that has probably already been written.

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From what I know about economics, the only cause of inflation is an oversupply of the commidity of money (credits). I belive new players without the Total Experience are now starting with 75,000 credits? I don't know for sure since my characters are all a half to full year old, but it is definitely more than the 250 we were endowed with circa early 2004. When people buy commodities from other players, this does not affect inflation at all since the money is simple flowing from one soure to another. The only thing that really matters is the quantity of money being created in the form of 10k bol missions, quest rewards, missions, looting NPCs, missions, etc, and the comparative amount of money leaving the game in the form of harvester/vendor/rent/vehicle repair payments. Now really, how many people in this game truly struggle to make these payments? Ignore the expenses that players make to others - for armor, weapons, hides and resources, buffing services... I mean how many people struggle to meet the required outflow of money in the game? The fact is that even though ABSOLUTE prices have remained fairly constant, the RELATIVE prices of goods has dropped immensely. Credits enter the game, but stay in the bank accounts of the multimillionaires and even billionaires that have been accumultating their fortunes since launch. These funds trickle down to newer players in the form of guild help, lavish tips, andoverpaying for nostalgic collectibles like Jabba loot or Polished Krayt skulls. Cash is far from as scarce as it once was. Because it is no longer scarce, it has lost its value. Thus, there IS inflation.

-Valkiro Rupa

Kettemoor since Feb 2004

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VMA wrote:

From what I know about economics, the only cause of inflation is an oversupply of the commidity of money (credits). I belive new players without the Total Experience are now starting with 75,000 credits? I don't know for sure since my characters are all a half to full year old, but it is definitely more than the 250 we were endowed with circa early 2004. When people buy commodities from other players, this does not affect inflation at all since the money is simple flowing from one soure to another. The only thing that really matters is the quantity of money being created in the form of 10k bol missions, quest rewards, missions, looting NPCs, missions, etc, and the comparative amount of money leaving the game in the form of harvester/vendor/rent/vehicle repair payments. Now really, how many people in this game truly struggle to make these payments? Ignore the expenses that players make to others - for armor, weapons, hides and resources, buffing services... I mean how many people struggle to meet the required outflow of money in the game? The fact is that even though ABSOLUTE prices have remained fairly constant, the RELATIVE prices of goods has dropped immensely. Credits enter the game, but stay in the bank accounts of the multimillionaires and even billionaires that have been accumultating their fortunes since launch. These funds trickle down to newer players in the form of guild help, lavish tips, andoverpaying for nostalgic collectibles like Jabba loot or Polished Krayt skulls. Cash is far from as scarce as it once was. Because it is no longer scarce, it has lost its value. Thus, there IS inflation.

-Valkiro Rupa

Kettemoor since Feb 2004

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nice try...almost 1/2 way correct.

i don't want to strip you of an education..so go take an econ class

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VMA wrote:

From what I know about economics, the only cause of inflation is an oversupply of the commidity of money (credits). I belive new players without the Total Experience are now starting with 75,000 credits? I don't know for sure since my characters are all a half to full year old, but it is definitely more than the 250 we were endowed with circa early 2004. When people buy commodities from other players, this does not affect inflation at all since the money is simple flowing from one soure to another. The only thing that really matters is the quantity of money being created in the form of 10k bol missions, quest rewards, missions, looting NPCs, missions, etc, and the comparative amount of money leaving the game in the form of harvester/vendor/rent/vehicle repair payments. Now really, how many people in this game truly struggle to make these payments? Ignore the expenses that players make to others - for armor, weapons, hides and resources, buffing services... I mean how many people struggle to meet the required outflow of money in the game? The fact is that even though ABSOLUTE prices have remained fairly constant, the RELATIVE prices of goods has dropped immensely. Credits enter the game, but stay in the bank accounts of the multimillionaires and even billionaires that have been accumultating their fortunes since launch. These funds trickle down to newer players in the form of guild help, lavish tips, andoverpaying for nostalgic collectibles like Jabba loot or Polished Krayt skulls. Cash is far from as scarce as it once was. Because it is no longer scarce, it has lost its value. Thus, there IS inflation.

-Valkiro Rupa

Kettemoor since Feb 2004

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VMA wrote:
If it costs the same number of credits to buy the same things as before, why have they continually raised the pricelimit for the bazaar? I remember when chitin chestplates sold for 3000 credits and that was digging deep into my little pockets! Even CDEF weapons are rarelynear 50 credits any more... like back in the day when you could beg as a noob and be thrilled with a 1000 credit tip.

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They raised the bazaar cap to alow for more items to be placed on it, like swoops have always sold from 10k - 20k on my server, now i can get one from the bazar from a guy who paid a fee to place it there so the credit sink takes more money out of the game.

The reason chitlin isnt selling for 3000 anymore is that chitlin isnt noob armor anymore, just like bone, or mabari chitlin now has a use. CDEF weapons are rarely sold since you get all the weapons when you start as a noob now, and i get the feel they are destroyed instead of sold alot of the time or sold to junk dealers.

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VMA wrote:

From what I know about economics, the only cause of inflation is an oversupply of the commidity of money (credits). I belive new players without the Total Experience are now starting with 75,000 credits? I don't know for sure since my characters are all a half to full year old, but it is definitely more than the 250 we were endowed with circa early 2004. When people buy commodities from other players, this does not affect inflation at all since the money is simple flowing from one soure to another. The only thing that really matters is the quantity of money being created in the form of 10k bol missions, quest rewards, missions, looting NPCs, missions, etc, and the comparative amount of money leaving the game in the form of harvester/vendor/rent/vehicle repair payments. Now really, how many people in this game truly struggle to make these payments? Ignore the expenses that players make to others - for armor, weapons, hides and resources, buffing services... I mean how many people struggle to meet the required outflow of money in the game? The fact is that even though ABSOLUTE prices have remained fairly constant, the RELATIVE prices of goods has dropped immensely. Credits enter the game, but stay in the bank accounts of the multimillionaires and even billionaires that have been accumultating their fortunes since launch. These funds trickle down to newer players in the form of guild help, lavish tips, and overpaying for nostalgic collectibles like Jabba loot or Polished Krayt skulls. Cash is far from as scarce as it once was. Because it is no longer scarce, it has lost its value. Thus, there IS inflation.

-Valkiro Rupa

Kettemoor since Feb 2004

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Good point Iadao. I didn't think about the swoop thing. Meditate on this, I will.

/signup intromacroeconomics

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VMA wrote:
If it costs the same number of credits to buy the same things as before, why have they continually raised the pricelimit for the bazaar? I remember when chitin chestplates sold for 3000 credits and that was digging deep into my little pockets! Even CDEF weapons are rarelynear 50 credits any more... like back in the day when you could beg as a noob and be thrilled with a 1000 credit tip.

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I'm not an economist either, so anyone who disagree with what follows is free to offer his own theories.

1. "Inflation" Defined by Example

All "inflation" means is that the value of an individual unit of currency decreases over time for most available goods. If 10 credits today is worth half of what it was yesterday, then an item whose absolute value was generally agreed to be 100 credits yesterday will cost you 200 credits today.

So while the money supply is the main thing that determines whether your economy is experiencing inflation or deflation, it's not the only thing. The supply of goods to be purchased also matters, because scarcity or oversupply affects the perceived value of a good.

Suppose you have a fixed amount of money circulating in your economy. Now, slowly cut back on the kinds and numbers of goods being created in that economy, or add a lot of new people to the economy without also increasing production. Over time, the prices of goods will generally increase as people consider goods to be worth more (i.e., as demand increases). As prices rise for the same goods over time, an individual unit of currency is worth less and less... and that's inflation. (This particular type of inflation is called "demand inflation" or "demand-pull inflation" to distinguish it from the variety caused by an insufficient supply of money.)

Note: There's also something called "cost-push inflation," which you get when the costs to produce goods rise generally. This kind of price increase is usually caused by things like increased wage costs (as through "minimum wage" increases or hikes in corporate taxation) that are passed on to consumers.

SWG is unlikely to experience any of these types of inflation for very long. Here's why:

A. Standard Inflation

Standard inflation (the money supply kind) happens in SWG when a lot of money gets created beyond what a normal person can create through normal labor. When this happens (and it has happened), it's due to a credit duping exploit. But because the operations folks can see this when it happens, can stop it (by fixing the code that allows the exploit), and can quickly yank most of the funny money out of circulation, it doesn't wind up having a long-term effect.

B. Demand-Pull Inflation

Demand-pull inflation doesn't happen in SWG because each person entering the economy has the chance to be a crafter. As long as enough people decide to craft goods, supply will rise to satisfy demand, and prices will as a result tend to remain stable. (This, by the way, is one of the reasons why it's very important for SWG's current developers to keep crafting fun for crafters.)

C. Cost-Push Inflation

And cost-push inflation doesn't happen in SWG because the costs to produce goods are basically static. Since it remains insanely cheap to harvest raw resources, and since "taxes" haven't increased, and since producers are all basically sole proprietorships (no wages to pay!)... there's been no push from rising costs to make prices rise as well. Ergo, none of this kind of inflation, either.

2. The "Market Basket"

Inflation is usually calculated by considering the prices over some period of time for what's called a "market basket" of goods. These are items that span a wide swath of the kinds of things that consumers typically buy: things like clothing, groceries and household goods, but excluding items such as shelter, transportation, and medical care that tend to spike in price for transitory reasons.

What this means for SWG is that if you really want to see whether inflation is happening, you need to pick an equally appropriate market basket of goods. You can't just look at weapons to know whether prices are tending to rise -- you'd do better to watch the prices of a broader range ofitems, such as Tailor-made clothing, Chef-made foods, and Architect-made furniture.

If prices forthose kinds of goods are generallyincreasing, you know you're probably experiencing inflation.

3. Circulation Matters (and "The Rich" Don't)

That word "circulating" is important. Although a lot of money enters the SWG economy over a given period, and although a lot of that money goes to a few people, not all of it contributes to the economybecause it doesn't circulate.

Instead of making money so they can spend it,people are trying to become the richest on their server. So they do the equivalent of sticking it under their mattress.

That's almost the same as not putting money into the economy in the first place. So just becausea few playershave huge bank accounts, that doesn't automatically mean there's going to be inflation. If they don't spend it (and can't save or invest it -- see the next section), ithas noeconomic effect.

4. Unemployment and Interest Rates

There are two other important differences between SWG's economy and a real-world economy that are worth mentioning hereas theyrelate tomonetarism as an approach to fighting inflation: employment and interest rates.

The problem with using the money supply to control inflation -- up until Milton Friedman showed that it could be done and Alan Greenspan actually did it -- is that for a long time it was thought that low inflation was always related to high unemployment. The theory was that accepting a "reasonably high" amount of unemployment was an evil that was necessary to maintaining low inflation.

Then came the 1970s and "stagflation" -- a period of both high unemployment and high inflation. Well, if was possible to have high unemployment and high inflation, maybe it was possible to have low unemployment and low inflation...?

And so it proved. Controlling the money supply and interest rates allows a national government to regulate the formation of capital, which in turn affects unemployment (more new businesses = more jobs available) and production (more new business = increased supply of goods).

But SWG doesn't have unemployment -- heck, it basicallydoesn't have "employment" at all.Nor is there anyneed for banks in SWG, assavings and investment aren't required for capital formation since it's dead easy for individuals to create wheelbarrows full of money with a little effort. So there's no needto set or stabilizeinterest rates.

So active monetarism isn't really necessary in SWG -- the devs don't need a Federal Reserve Bank. All they need to do is watch the ways that money is being created by large numbers of people, and tweak the input factors (such as destroy mission payouts) slightly over time for those money-generating actionsso that the amount of money created generally matches the amount of goods being created through crafting or loot.

Poof -- no inflation.

Wasn't that simple?

--Flatfingers

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Lycanthropic wrote:

composite armour pre-CU = 80 000 credits

composite armour after = 800 000 credits

That looks like inflation to me.

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Message Edited by Bockeroo on 07-31-2005 10:33 PM

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