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  1. #1
    IncGamers News Service
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    Diablo 3 Economy: Inflation?

    Thanks to SparkFour and Elly for pointing me to this article (also on Zero Hedge) tracing the history of gold inflation in the Diablo 3 Economy.

    I was eager to read it from the intro, thinking it would provide some penetrating insight into the workings of the game's virtual economy. Unfortunately it does not do that. I can't tell if the author doesn't know enough about the game to present a complete picture of the economy, or if he only focused on gold value to make his hyper-inflation parallels work, but it feels like a very partial work. It's informative about a lot of basic economic functions at least, albeit presented from an Austrian-themed PoV. Quote:

    Hyperinflation is the economist’s equivalent of an astrophysicist’s quasar cluster or a marine biologist’s dolphin “stampede”: a rare exhibition of a unique set of circumstances which arise infrequently and are closely studied when they materialize. Such events are exotic enough that they become legendary: many individuals knowing little about monetary policy are aware of the recent outbreak in Zimbabwe, or familiar with the defining instance in the post-WWI Weimar Republic.

    Economically, the tipping point in the transformation of inflation into hyperinflation is characterized by a profound drop in the outstanding demand for money: when holders of money expect the supply of money to increase — particularly without any sense of timing, bounds, or other guidance — monetary demand in the present drops in favor of surrendering money for vendibles.

    The focus of possessors of money, therefore, devolves into an effort to capture known, present purchasing power against the likelihood of its decline in the near future. Saving, in any event, delaying consumption, is chastened; and if a cycle of declining purchasing power and rapidly rising prices ensues, ultimately the propensity to hold money declines precipitously and may fundamentally disappear.


    The article is certainly correct that gold bots (and player improvements in gold harvesting rate) have increased the gold supply, but for the most part that has not caused the huge spikes in prices (inflation) that increases in the monetary supply create in real world economies. This is because players are constantly finding new items as well as gold, which is where the entire parallel to real world economies breaks down.

    In real life you earn money to buy toasters and pizzas and automobiles. When there's inflation, prices rise since there's more money in circulation, and thus each dollar is "worth" less. But in real life you never just find a toaster or pizza or automobile that you can use yourself and/or sell to others, and the equivalent of that happens all the time in Diablo 3. In fact that's the whole point of playing the game.

    Inflation occurs in the real world when more currency is chasing a finite supply of stuff. In a virtual world like Diablo 3 where an infinite amount of "stuff" exists, where all players can find the stuff, and especially in softcore mode where (almost) none of the old stuff ever wears out or breaks, prices can fall even as the gold supply increases.

    Which is where we are today, where most players in D3 complain about deflation, not inflation, and lament their inability to build up gold by selling gear since only the very top quality of items still has high value. And sure, the uber 99.9999% quality gear has constantly risen in price, but everything else is getting perpetually cheaper. Today you can outfit a character for success in Inferno for a fraction what it cost months ago. (Which will make you happy if you set a goal in concrete terms, but might lead to discontent if you evaluate yourself by the status of others.)

    So, are you guys happy with how the game economy is working these days? Or do you feel somehow victimized by inflation and deflation simultaneously, as everything you want seems to be increasing in price while everything you have (and find) is constantly less valuable?

  2. #2
    Ghostbit
    Guest
    Let\'s say i personally wouldn\'t invest my life savings in D3 gold.

    I think you can deal with these special traits that come along with D3s eco. You just shouldn\'t get frustrated about the circumstance that you have to pick up gold for 1000 hours or something to get 3$ of value.

  3. #3
    Faramis
    Guest
    Certainly not. The fiery brimstone price is ridiculous, when you compare it to starting price. Same goes for essences. Nowadays, there is no incentive to salvage any item, it far better to just vendor it. So you can say that inflation also killed item crafting.

  4. #4
    IncGamers Member WackBallsack's Avatar
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    yea i invested a 100 mill into brimstones when they were \"cheap\". Eventually the price dropped even lower, and my brimstones aren\'t worth anything :(

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  6. #6
    Gatsby
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    Interesting article Flux, but I think you need a lesson in economics. Hyperinflation refers not to an extreme amount of price inflation of all goods, but where there is such great inflation of the value of holding goods as opposed to saving/spending money, as to cause the value of a currency to rapidly decrease in value. If you even try to argue that prices on the AH are not exponentially greater than they were months ago (for all viable goods - see below), then youre kidding yourself.

    In terms of the real world parallel, you cannot say that people just \'find\' new items out of nowhere. The very process of farming is the production process, much like factories make toasters en masse to sell them. The only difference to the toaster industry is that the cost to enter the market is $60 and a computer, so there are many more suppliers in it proportional to consumers (pretty much 1 to 1 actually). This doesnt preclude hyperinflation however, in fact the very fact that all players can also \'find\' (or produce) money in the game means that inflation is caused not only by natural forces, but compounded by the fact that the \'toaster factories\' of diablo 3 not only produce toasters, but also have their own mints. This would be fine, the gold players \'find\' would be more or less akin to what a consumer earns as a living and then spends on toasters (you need money to begin with to buy things after all) were it not for one other problem. As players get to a certain gear level, the odds of finding what I called \'viable\' toasters get smaller and smaller (trifecta with main stat anyone?). To refer to another real-world analogy, it becomes as if everyone owns lamborghinis, while the cost of producing them largely remains the same (still takes the same number of farming hours on average - lets not pretend that MF paragon will continue to make a difference six months after its inception, economically speaking). Suddenly, any slight upgrade to the car (ie. new models coming out) get snapped up for a ridiculous price by the wealthy few, while your average toyotas (ie. junk items) sit on the market forever. This is what the article you speak of was on about, people \'holding on\' to goods (what their character(s) have equipped) rather than constantly upgrading at the same rate (because as I said, that becomes impossibly the better you get). Suddenly, item upgrades on the whole become rarer and rarer while the ability to farm gold stays constant. Suddenly youve got less people purchasing items, but still pumping out money from monsters at more or less a constant rate. Thus, hyperinflation.

    The situation in D3 now is that everyone is putting up sub-par goods (that yes, dont change in price that much), while still earning gold at the same rate. In real life this would be like everyone keeping their jobs and earning the same amount, but all toasters (and all goods)produced getting relatively poorer compared to what people already have. So people stop spending their money trying to upgrade, while the prices of the few superior toasters skyrocket due to their increasing scarcity. All the while, everyone keeps getting \'richer\' (on the whole) but not spending anything. Suddenly every dollar becomes more and more worthless. You also have ridiculous income inequality, just the same as in, you guessed it, Zimbabwe.

    If your point is that these sub-par goods keep getting cheaper and cheaper, that\'s true, and also a symptom of hyperinflation. It\'s one of those weird occurences in economics whereby despite having more money, people are forced to buy poorer goods. That\'s fine if you think that being able to beat inferno on mp0 is the epitome of happiness in the D3 world, but that would be like saying that being able to breathe is the epitome of happiness in zimbabwe (everyone can do it). The best indicator of hyperinflation at the end of the day is not comparing the prices of sub-par goods within the economy, but comparing the currency\'s strength on the foreign exchange. D3\'s foreign exchange is the RMAH, where gold has gone from $.25 per 1 million to just $.33 per 10 million! Just like in zimbabwe they have to constantly slash zeros off their notes, blizzard has been forced to do the same kind of thing.

  7. #7
    Gatsby
    Guest
    Interesting article Flux, but I think you need a lesson in economics. Hyperinflation refers not to an extreme amount of price inflation of all goods, but where there is such great inflation of the value of holding goods as opposed to saving/spending money, as to cause the value of a currency to rapidly decrease in value. If you even try to argue that prices on the AH are not exponentially greater than they were months ago (for all viable goods - see below), then youre kidding yourself.

    In terms of the real world parallel, you cannot say that people just \'find\' new items out of nowhere. The very process of farming is the production process, much like factories make toasters en masse to sell them. The only difference to the toaster industry is that the cost to enter the market is $60 and a computer, so there are many more suppliers in it proportional to consumers (pretty much 1 to 1 actually). This doesnt preclude hyperinflation however, in fact the very fact that all players can also \'find\' (or produce) money in the game means that inflation is caused not only by natural forces, but compounded by the fact that the \'toaster factories\' of diablo 3 not only produce toasters, but also have their own mints. This would be fine, the gold players \'find\' would be more or less akin to what a consumer earns as a living and then spends on toasters (you need money to begin with to buy things after all) were it not for one other problem. As players get to a certain gear level, the odds of finding what I called \'viable\' toasters get smaller and smaller (trifecta with main stat anyone?). To refer to another real-world analogy, it becomes as if everyone owns lamborghinis, while the cost of producing them largely remains the same (still takes the same number of farming hours on average - lets not pretend that MF paragon will continue to make a difference six months after its inception, economically speaking). Suddenly, any slight upgrade to the car (ie. new models coming out) get snapped up for a ridiculous price by the wealthy few, while your average toyotas (ie. junk items) sit on the market forever. This is what the article you speak of was on about, people \'holding on\' to goods (what their character(s) have equipped) rather than constantly upgrading at the same rate (because as I said, that becomes impossibly the better you get). Suddenly, item upgrades on the whole become rarer and rarer while the ability to farm gold stays constant. Suddenly youve got less people purchasing items, but still pumping out money from monsters at more or less a constant rate. Thus, hyperinflation.

    The situation in D3 now is that everyone is putting up sub-par goods (that yes, dont change in price that much), while still earning gold at the same rate. In real life this would be like everyone keeping their jobs and earning the same amount, but all toasters (and all goods)produced getting relatively poorer compared to what people already have. So people stop spending their money trying to upgrade, while the prices of the few superior toasters skyrocket due to their increasing scarcity. All the while, everyone keeps getting \'richer\' (on the whole) but not spending anything. Suddenly every dollar becomes more and more worthless. You also have ridiculous income inequality, just the same as in, you guessed it, Zimbabwe.

    If your point is that these sub-par goods keep getting cheaper and cheaper, that\'s true, and also a symptom of hyperinflation. It\'s one of those weird occurences in economics whereby despite having more money, people are forced to buy poorer goods. That\'s fine if you think that being able to beat inferno on mp0 is the epitome of happiness in the D3 world, but that would be like saying that being able to breathe is the epitome of happiness in zimbabwe (everyone can do it). The best indicator of hyperinflation at the end of the day is not comparing the prices of sub-par goods within the economy, but comparing the currency\'s strength on the foreign exchange. D3\'s foreign exchange is the RMAH, where gold has gone from $.25 per 1 million to just $.33 per 10 million! Just like in zimbabwe they have to constantly slash zeros off their notes, blizzard has been forced to do the same kind of thing.

  8. #8
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  9. #9
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  10. #10
    IncGamers Member stonerdoom's Avatar
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    well, all it would take is a viable option to cause a brimstone sink and you will come out ok. i would hold those brimstones. think of it like this what if the current BoA items suddenly charged double what they cost now. And frankly they should. Make no mistake Botters are the main culprit here. The economy was never going to be perfect as everyone has the ability to create money in the game. But botters and the inability of Blizz to eliminate these players/accounts [which is completely unacceptable and reeks of incompetence might i add] have cause the economic implosion that you see in just 12 short months.

    in terms of using the current economy, target your items at the 98th percentile on the cheap with the hopes of getting some steals on the 99th. BoA also gives viable options. If blizz gave paths to our own 99th type items [BoA maybe] but made it costly [think paragon leveling type costly] then who would really care about the auction house.

    first things first though. blizz needs to find accounts with 100s of billions and just close them because seriously. they keep track of sales, time played, etc. this would not be hard to track and thwart.

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