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Diablo 3 Economy: Inflation?

Discussion in 'Diablo 3 Market & Economy Discussion Forum' started by Hound, May 23, 2013. | Replies: 35 | Views: 12561

  1. Hound

    Hound IncGamers News Service

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    Thanks to SparkFour and Elly for pointing me <a href="http://mises.org/daily/6435/A-Virtual-Weimar-Hyperinflation-in-a-Video-Game-World">to this article</a> (also <a href="http://www.zerohedge.com/news/2013-05-21/diablo-3-case-virtual-hyperinflation">on Zero Hedge</a>) 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 <a href="http://en.wikipedia.org/wiki/Austrian_economics#Criticisms">Austrian-themed</a> PoV. Quote:

    <blockquote> Hyperinflation is the economist’s equivalent of an astrophysicist’s quasar cluster or a marine biologist’s dolphin “stampedeâ€Â: 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. </blockquote>

    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 (<a href="http://us.battle.net/d3/en/forum/topic/8414741425?page=3#58">almost</a>) 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 <a href="http://en.wikipedia.org/wiki/Keeping_up_with_the_joneses">evaluate yourself by the status of others</a>.)

    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. Ghostbit

    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. Faramis

    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. WackBallsack

    WackBallsack IncGamers Member

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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. Gatsby

    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.
  7. Gatsby

    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.
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  10. stonerdoom

    stonerdoom IncGamers Member

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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.
  11. PearlJamaholic

    PearlJamaholic IncGamers Member

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    If the issue is to get brimstones to have a fair value, since they are linked to legendarys, a simple fix to create another brimstone sink is just require brimstones to repair legendarys and BOA items. As long as they dont make items break permanently if their durability is reduced to 0 this wont effect repair costs in the every-day, just once in awhile cause you could wait to repair those items.
  12. yovargas

    yovargas IncGamers Member

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    I am perfectly happy with the economy because I don\'t participate in it. :D
  13. Tom_S

    Tom_S IncGamers Member

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    So make monsters drop less gold? Or otherwise get more gold sinks to increase gold rarity maybe?

    I dunno, i just play because i actually (still) enjoy the game :p
  14. Brandon

    Brandon Guest

    First, I want to say the Wikipedia criticisms of Austrian economics are funny since game theorists\' models tend to support the Austrian argument on taxation and government spending.

    Anyway, your argument about why D3 is different than real life is not quite there. Finding an item is analogous to providing labor. And finding gold is just a way for money to enter the economy.

    Really, the only significant difference I see between D3 and real life, as far as economics goes, is that most people don\'t provide a service in real life when the market for that service is already saturated. You hit on that by saying finding items was the point of the game, but you seemed more concerned that more stuff was being produced, which happens in real life too.

    Basically, I\'m saying, in real life people only produce so they can trade for goods. In Diablo, people produce because it\'s fun. And that\'s why your supply is going up while demand is not.
  15. Brandon

    Brandon Guest

    First, I want to say the Wikipedia criticisms of Austrian economics are funny since game theorists\' models tend to support the Austrian argument on taxation and government spending.

    Anyway, your argument about why D3 is different than real life is not quite there. Finding an item is analogous to providing labor. And finding gold is just a way for money to enter the economy.

    Really, the only significant difference I see between D3 and real life, as far as economics goes, is that most people don\'t provide a service in real life when the market for that service is already saturated. You hit on that by saying finding items was the point of the game, but you seemed more concerned that more stuff was being produced, which happens in real life too.

    Basically, I\'m saying, in real life people only produce so they can trade for goods. In Diablo, people produce because it\'s fun. And that\'s why your supply is going up while demand is not.
  16. Lorderan

    Lorderan IncGamers Member

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    This 1000+
  17. Terenas

    Terenas IncGamers Member

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    Good read. Thanks.
  18. KingMofo

    KingMofo IncGamers Member

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    I feel your brimstone pain.

    I was halfway out the door and about to quit when that big crafting patch notes were about to be announced. I was positive that brimstones would be used, speculated like many others that they would be the limiting factor in item crafts since they were saying brimstones needed more use and value.

    Invested the 250 million I had saved for months, bought as many brimstones as I could at a price of about 25-30k gold each.

    I was so sure Blizzard would put in a larger brimstone sink to get the over abundance of them out of the economy. I haven\'t played since. Not really because I lost my Witch Doctor\'s life savings in a bad investment, but this was one of the tipping points.

    Took forever to save up 250 mil gold, this was earned by selling many many 500k - 1mil gold items. All the while watching my lucky RL friend win the lottery every other night and find a 50 - 100 million gold item every other night. He had earned over a billion in about half the hours played as it took me to save up my 250 million.

    This is what made me throw in the towel. Win the item lottery to get your gold for an upgrade or you won\'t progress much. Only other option if you are an unlucky bastard is to use your credit card.

    I just can\'t see being able to afford any upgrade for many months if I were to come back and play again.
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