Norrath Economic Report Now Available

Edward Castronova writes "Some months ago, Slashdot posted a note about on a survey I was doing for a report on the economy of EverQuest. The report is done and can be downloaded (Scroll down for the Document Download button). Tidbits: Norrath's GDP per capita is higher than that of China and India; its currency sells for about a penny per platinum piece, which makes it more valuable in $US than the yen; a typical person can make about US$3.50 an hour working there by farming the bots and selling the loot; the deflation rate is almost 30 percent annually. There's also some microeconomic analysis and an overview of the MMORPG market. Comments and reactions appreciated. Thanks, Edward Castronova, Associate Professor of Economics, Cal State Fullerton."

Comments

Deflation rate?

[Qwerpafw]

Perhaps its because I dont play Everyquest regularly, but I really *dont get* how the EverQuest universe has a deflation rate of like 30% annually...

I mean, theoretically, as more people play and level up characters, wouldnt that increase the general money supply, thereby causing *inflation*?

Plus, from the macroeconomics courses I have taken it seems like deflationis really hard to pull off, and requires people not to be buying stuff and a *loss* of overall money as compared to overall goods/items.

Maybe deflation is possible if less and less people are playing everquest (less *active* money available, therefore prices go down) but from talking to my evercrack addicted friends it sure doesnt seem this way...

typo? or more explanation?

Re:Deflation rate?

[Moose4]

As a longtime Evercrackhead, I can give you some examples of why the economy deflates.

When the game started out, relatively mundane items were pretty powerful because no one as yet had gotten to the high-level areas with the "phat loot". Early on, a guy running around in simple bronze platemail was a rare sight. Weapons with a damage/delay ratio of 1:3 (or 1:2 for two-handed swords and the like) were godly and commanded godly prices--if they were sold at all.

As time went on there was inflation, as people gained thousands of platinum pieces (the EQ currency) and bid up the prices of those items. But the inflation reversed itself after a while.

Items don't decay in EQ. They don't wear out. The only way they leave the world is if they are destroyed by a player, on a character when it is deleted, or poof when a corpse poofs. So as time went on, more and more of the items entered the economy, and better and better stuff was found. Verant has added three expansions over the past two years, and each one has had better toys and phatter loot. As that stuff enters circulation, the former "godly" stuff becomes less valuable and typically gets passed down to lower-level "twinks" (alternate characters equipped with hand-me-down or purchased loot that's better than what they could get on their own) or sold.

Using an example--there's an EQ weapon called a Short Sword of the Ykesha. It looks like a Ghurka khukri knife, and will occasionally hit a target with a 75-point damage spell. In the early game, it used to be the bad-ass one-handed sword, a rare drop off a tough level 40ish monster in a very tough dungeon (Lower Guk). When they would be sold, which was rare, they would go for 8,000+ plat.

Well, since the Kunark, Velious, and now Luclin expansion packs, there's stuff out there that makes the Ykesha look totally lame--plus, the number of Ykeshas on the server gradually increased over time, as more and more people entered that dungeon and killed that particular monster. The price of the weapon spiked up on my server as people started scoring a lot of money, but once the better weapons entered the picture the price went into freefall. Now "Yaks" go for 1000 plat or even less.

It's an odd combination--people have more plat than ever before, but prices are simultaneously falling. The result is that there are level 5 twinks running around in gear that my warrior didn't have at level 40 18 months ago.

The same thing happens as new servers are brought online, but it happens faster there because people already know exactly where to go to maximize their income and their chance at items.

Verant has tried to introduce money sinks to reduce the amount of money in circulation (horses that cost 110k plat, for example), but that won't solve the deflation. Item decay might, but it's way too late in the game's lifecycle to introduce that. If I end up spending 15 hours of my no-life to camp the Frenzied Wumpus for the Ass-Kicking Widget of Doom, there's no way I want my widget to break or wear out in a couple months.

In short--the deflationary aspect in EQ doesn't seem to have much to do with the money supply, it's got more to do with the supply of items that people want to trade for.

Re:Deflation rate?

[Nicolas MONNET]

Player killing in a persistent environment is not as fun as it appears at first sight. When you play Counter Strike, and you encounter grief players, cheaters, stalkers, spawn killers or plain dumbasses, you can just connect to another server, or play with people you know, etc.

In a persistent world, when you encounter such situations, you have no option but to pull the plug. That's probably why out of 40ish EQ servers, only 4 of them allow PvP, and most of them are in the lower end in the number of players.

New games such as DAoC are trying to change this by allowing you to decide when you want to engage in PvP combat, which is probably a good way to go.

Admittantly, I haven't read the article...

[Kjella]

But usually in a (MMO)RPG, money has a very much more "come in - disappear out" existance than in real life. Money usually "appears" into society through finding treasure, monsters dropping gold (or items tradeable to gold) or value added (crafters making items) or rewards for quests/tasks, and disappears through every non-player, like healer services, merchants (buy cheap, sell expensive), leveling/training etc. Inter-player trades don't change the total amount around.

It's very possible that more money is spent than what is brought into the society. This would lead to deflation. Just like in real life I'd think this was bad for a game-world economy, but unlike real life Everquest has every opportunity to change it if they feel the need, so if it works for them, fine.

Kjella

Re:Need for interest rates like ECB

[johnburton]

You get money when you kill things, yes.

But the main reason for *deflation* is that fact that items that were rare, and therefore people would pay a premium for become more common over time, and therefore lose their value.

Prices become cheaper over time, not more expensive. Money needs taking out of the system to make prices stay *up* not to reduce them. This works because if people need money more, they are more likely to sell their stuff. Otherwise people don't bother.

Re:Inflation vs Deflation

[tiilikainen]

Sounds like the same problem with any type of computer gadgetry, really. New components outdate older components -- the SuperUber graphics accelerator replaces the older UberPlus model. The iPAQ that I bought in August for $599 is now worth $400 from a vendor, $300-$350 used. The Pentium III I bought two years ago for $1400 is now worth about $600-$700 or so, if that.

I would get better use out of the money by sticking it into a MMF and gaining 4-6% annual interest. But at some point in time, I will absolutely have to upgrade my computer to do everything that I want to do.

So, on some level, the EverQuest economy does mirror a certain segment of the "real" economy.

If you post here, you live in a deflationary econ.

[Anonymous Coward]

Yes tech-heads there is a deflationary economy. Its called high-tech. In 2000, a P4 1.4Ghz machine with 128meg cost $2000. This year, same machine brand new, $400. That is over 80% DEFLATION! And don't confuse that as devaluation, I am not talking about reselling a used computer with 1k of wear and tear. Goto Pricewatch, a BRAND new 1.4Ghz spec'ed as above

Complete sys - Pentium 4 1.4GHz, WIN 98 OS LICENSE . 1yr warr. 128mem,20GB HD, 8/32 MB AGP VIDEO, SOUND, CD-ROM NET CARD/FDD 2USB KB/MS/SPK MID ATX 300W $ 405

A brand new mid-size car costs %60 more than 1992 ($16000/$10000), a brand new high-end computer costs $2000 the exact same as my 486 in 1992. High tech is as massively deflationary as you could envision.

And they did mean EQ is deflationary. Shortsword of the Ykesha ran 5k plat 18mo ago, about 3500 a year ago,1k 6mos ago, and my friend got one for FREE last month because someone was tired of carrying it. Yikes!

Ecomonics 101 people

[Gaijin42]

The world of norrath has alot if inflation in fact, because the money supply is infinite. However, the individual items depreciate faster than inflation is going up.

The way to tell that there is inflation : Compare the tier-1 item prices at any given time.

For example, a year ago, what was the best one handed weapon, and what price did it go for. Today, what is the best one handed weapon, and what is it going for. The price is more correct? Thats inflation.

There is no deflation. There is depreciation, coupled with inflation.

Re:An Interesting Excuse

[The Raven]

Not exactly.

First, recognize that the original article is wrong. The game does not have deflation.

It has inflation, coupled with fast item depreciation. The depreciation occurs faster than inflation. Thus, you do not have the ideal situation in which to bank money... you have the WORST situation in which to bank money. Any goods you buy will be worth 30% less in a year... you did not gain money, you lost it.

Your best investment, as an EQ player, would be to sell your character, then buy it back in a year for 30% less than you sold it for.

Raven

Re:Exchange Rate?

[Anonymous Coward]

Actually, printing more money causes a different problem. Recall that the money we use is just a piece of paper with no inherent value. We all understand and agree that certain pieces of paper are "worth" more than others. The real value of the paper stems from the rarity of the printed paper itself. When you print more money, the total rarity of all money is decreased, thus it's value is decreased. Since the value of the dollar is decreased, it takes more dollars to cover the production of an item. In order to make up for that cost, retailers increase the price of the item to consumers. Inflation at it's finest.