Friday, December 31, 2010

Late Night Thoughts on the Wacky WoW Economy

By the time I post this it will be New Years Eve. The genesis for tonight's rambling began months and months ago, and I suddenly felt it time to release these harrowing thoughts on my loyal readers (I think I just heard a cricket, and it's the middle of the frickin winter).

I went to Business school. More correctly stated, I went to UNLV and studied Finance and Real Estate in UNLV's Business College, because Universities are actually made up of...oh, most college people are on break and don't want to hear another lecture for a month or so, so I'll move on.

Anyhoo, as I was saying, while in business school you learn a thing or two about, well, business, but quite a bit more about people. After having a good 7-8 years in the real world I can honestly say that about half of what is taught is a load of crap. I am sorry to any college student reading this, I don't mean to make you feel like your completely wasting your parent's or your own money (or the government's, in which case is perfectly fine), I'm just saying what I feel is true. You see, in college I never had a professor talk about the emergence of FAKE economies. They based all their cirriculum on the "Real World"...bunch of idiots.

Then again, what is a "fake" economy. I have three names, a first, second and a last. All my life I have been known by my middle name. But when people find out that the name I go by is my middle one the question inevitably follows: "So then what's your REAL name?" After 35 years of this (I just had my birthday, and yes I'm now unemployed and 35, horray for me), I've found myself growing tired of the same question. My middle name is just as real as my first, it's just in a different position on my driver's license. But being the benevolent human that I am, quick to show pity to the mentally impared, I spare them a lecture and inform them that my FIRST name is [fill in guess here].

Where am I even going with this? It's the consequence of not writing a significant or thoughtful post for almost two weeks now, I'm going soft and taking my brain with me. Or it may be that it's 1am and by back hurts and I can't sleep and I'm a little too, uh, medicated. I believe what I'm trying to do is tie in the gorilla that is the WoW economy with some personal recollection of some past experiences to try to create some meaningful connection that you can understand as a reader and some idiodic point that I'm attempting to make as a writer. Oh wow, it's late.

Anyhoowahoo, in business school I learned about this little bug called inflation. What is inflation? Well that can be simple or complicated, depending on your previous studies and current, accurate knowledge. Basically inflation manifests itself in the form of progressively increasing prices in order to purchase the same item, whether that is a bag of corn, a gallon of milk, or a barrell of crude oil. So let's say you need milk. Today you go to the store and pay $2, tomorrow it's $2.05. Did the milk suddenly change its properties or chemical structure or something weird like that? Well whatever happened the price of milk "Inflated", or increased.

Many things affect whether prices of good inflate, one of which is a shift in the supply curve of money, artifically increasing the money supply of a country. Think of it this way, diamonds are supposedly valuable because there aren't billions of them up for sale, but the more diamonds there are the less valuable they become, not because some law of the universe dicates it so, but that's just what tends to happen when humans understand and can see that there is a shift in the supply of some good, they simply begin to value it less than the day before.

To watch the WoW economy operate at the beginning of this expansion is an economists wet dream. Economics has always been treated as a social science by Universities accross my country, added into business schools due to it's focus on financial systems. Economists don't just study the numbers, they are looking at behaviors of the people, or the psychology of the masses. And when they feel like winning some nobel prize they draw some graphs and do some math.

(By the way, I really do respect economists, I'm just having a bit of fun)

One of the things that interests me the most is watching the work of inflation in all its glory. What's interesting is as people play more, a simplistic theory would be that people, over time, will tend to accumulate money. There is no fed to pump money into the economy artificially, and there are mechanisms in place (aka gold sinks) that play a role in taking money out of the system from time to time. These are tools used to help regulate potential inflationary risks. How I see it, however, is there are more mechanisms designed by the game to take your money than to pump some back in artificially. So given common economic theory of money (yes, I know there are multiple definitions of money), there's a better chance for a supply shift in the opposite direction, a shift to the left on the graph, money leaving. That sort of shift would tend to raise the value of each piece of gold in the game, keeping prices low and inflation in check.

But prices are a funny thing, as unpredictable as the people's brains who play the game. I've noticed a couple things lately. First, there are no shortages of supplies of any good out there, yet I see leg enchants being sold for 4-5K gold. Raw green quality gems being sold for 150g, and their more perfect, cut counterparts for 15g. There are more bots than ever, so there's plenty of herbs and skins for everyone. But people are using the "there's demand, that's driving the prices up" argument that frannkly doesn't hold water with me.

You see, anyone who knows a lick about economics knows that there is a delicate interplay between supply and demand, and markets tend to fight to find an equilibrium price somewhere. But economies are run by people, and people are unpredictable, and people are selfish, and there's always some douche bag that is trying to sell one herb for 1500g. Cataclysm hit shelves and masses of people decided that they would post thousands of auctions for whatever price they could sell them for. And you know what, the economy seemed to work fine. There were plenty of really hard core players that had the gold to spend whatever, making more and more goods and services inelastic, far more (on a percentage basis) than any REAL WORLD economy could ever boast.

Just about everything can be sold for anything now, or so it seems. And I cannot explain it. Frankly, any economist would say that both supply and demand curves shifted, thereby NOT causing prices to increase, but there are people out there who want you to believe that supply curves have not shifted, or that demand is so high that its shift on the graph merits the insane prices. Personally I think it's everyone silently agreeing to make money, ya know, for the good fo the game. But as people make tons of cash and things slow down and prices fall, what happens to that new player who rolls around Azeroth with 1500g in his/her bag and would like to run heroics or raid but cannot afford their 10,000 per week pricetag to buy all the gems and enchants and repairs and all.

I honestly have no clue how the WoW economy works, no clue at all. I'm amazed it does, even as it defies some real world economic theories. I guess there's nothing much to complain about, people seem to do just fine, but I have this nagging thought in the back of my mind. Are we creating just one more "Barrier to entry" for wanna-be raiders by charging insane prices for raw supplies (even though there's no lack) and even more insane markups by the crafters for the required enchants, etc demanded by any good raid leader? If WotLK was an expansion about inclusion, everyone got epics, everyone ran ICC, everyone did this or that, are we helping to swing the pendulum just a little too far the other way (Blizz has already swung it in the direction of exclusion) by artificially inflating prices ourselves because we can get away with it?

I don't think the average WoW player runs around with 30K gold in his/her bag. In my guild there are a couple, but most run under 3-5K at ALL times. Are we preventing newer, less wealthy people from experiencing something? True, anyone can work at it and make money to fulfill whatever goal they want, I know that, but not everyone is as equally cunning as another, we're all different and have different levels of knowledge, skill, and salesmanship. Maybe I'm totally wrong, maybe I'm just making crap up because it's like, really, really late for me to be up, but nobody is awake, the home is silent, and I got to thinking.


Bronte said...

1. You're right, WoW economy is very strange.

2. No, the average player does not carry 30K gold on him. But gold, these days, is a very easy thing to come by. I remember even till The Burning Crusade, doling out 5,000 gold for epic flying was a painstakingly arduous process.

3. If you know how to play the market, you will never be out of gold. I am no longer playing WoW, but my main had close to 80K gold on him by the time I did.

Gronthe said...

@ Bronte: Re #2 - I guess sometimes it just feels like they do.

Anonymous said...

I couldn't agree more... I have only just started having rather loud and sometimes heated arguments with my guild's raid leader on this issue.

Their attitude is that Gold is no excuse for not having all your raiding enhancements and gems and mats etc... however as you have said, prices on the AH are out of control.

And I and a few others i know personally switch off WoW whenever we have to level a crafting proffession or grind/do dailies... yes I know its easy thats not the point... My issue is that its so mind numbingly dull to do it and thats not what I paid for, and personally I never had time for playing the Auction House either... as I said, its not what i'm paying to do.

I myself am no economic expert or have any kind of financial management training, so thankyou for writing this... it makes me realise that no i'm not going crazy and this is really happening