Wouldn't it be great to live in a world where nothing ever broke and it only cost a little cash to repair anything you owned? Just think about it for a minute... you never need a new washer, dryer, refrigerator, car, house, any type of tool, chairs, TV, DVD player... nothing.
Now sure, at some point you will want to upgrade your stuff, I mean you cannot be satisfied with the 32" flat screen forever. But, since things never break they also retain quite a bit of value, so sell the 32" for a decent price and grab the 50"... and know that you will have it for the rest of your life.
Perhaps it sounds like a sweet world, I mean in many ways it does to me. Our washing machine just started making a horrible sound and I am facing the very real prospect of having to go out and buy a new one or pay someone a substantial fee to fix this one. Though that may SEEM bad for me on first glance, it is actually very GOOD for me if I happen to enjoy living in a growing, successful economic world. (And I do.)
Perhaps it is my business background (HBP, UTAustin... the best around!), or the fact that money has just always been interesting to me, but I seem to focus on in-game economies in every MMO I have played. In fact, some games, like Lineage 2, ONLY held my interest for as long as they did due to some economic nuances. What continues to amaze me today is how SO MANY people just keep getting it SO WRONG. This is especially mind-boggling when you realize that they ALL have access to wonderful models. It is not as if there is NO game that has a good working economic model and that someone is tasked with the burden of creating some NEW thing that has never before existed. But, before we get too far, I want to throw out the basics of what I see about in-game economies and what makes them viable in the long-term (IE when everyone is max level/skill and has the highest items available in the game. It is bound to happen, it is just a matter of time.)
Pieces of Game Economies
Crafter - The person who takes Raw materials and fashions them into useful items. Can also be the person who repairs items using raw materials.
Harvester - The person who gathers the raw materials.
Market - This deals both with WHERE you sell items and HOW you sell them.
Currency - This deals with the exchange of items. Key issues are you type(s) available, its universality, and portability/accessibility.
So, with the given terms, let us talk about a couple of examples and see how they create their system. I will stay away from examples like L2 and other Eastern games... as they are rather clearly broken economies. For this discussion let us take WoW and Vanguard, since I have experience with both economies. At first glance people may think that the systems are different, but really they are almost identical (at this time).
Both systems have the crafter who makes items from raw materials and then sells them to players. Crafters are not part of the repair process at this time outside of perhaps supplying a "Repair Bot" or a "Repair Kit". Both systems also have the "Next best thing" model that says that once I am done with Copper items I will move to Bronze, and then Iron, then Mithril, etc. And, once I am using Mithril (Pyrite, Dark Iron... whatever it is), I have NO need of the lower level metals for ANY reason.
And so, we quickly move to mistakes number 1 and 2.
1) Crafters only create, they do not maintain. That means that Demand for crafted items (or crafter TIME) is limited by a rather simple linear equation which can explain (# of players on a server) + (average time to reach max level and acquire end game items). Now, I am not saying this will be 1 week, but it won't be 1 year either. And, in this model ONLY the power-crafters are really ever viable economically. They will make the best items for the lowest cost, and they will make them first. So entrance into the crafting market is VERY difficult and unappealing. Also, since supply of currency is limitless you will see prices escalate continually, especially once the majority of players reach the End Game.
If we instead had a model where Crafters were necessary for maintenance, or even where items needed complete replacement from time to time, then Demand for crafted items would follow an equation more like, (# of players on server) + (average time to reach max level and acquire end game items) + (avg. time played per player * (item repair/replacement)). This is NOT a linear equation, but one where time and activity help determine demand. In the first equation, the only way to build more demand is to have a constant flow of New players into the economy. In the second all you need is to have the current player base keep playing the game.
So, a system where Crafters are needed to FIX items as they wear down and perhaps even Replace items when they break helps create demand for crafters even when the "End Game" has arrived. This also creates a demand for Crafters in general, moving more people into that market (So supply of crafters increases as demand of crafted items increases... which helps guard against inflation.)
2) Entry-level materials have no lasting value. This is mostly a problem for the Harvesters as it provides almost NO incentive to enter that market. In the WoW, VG model that is not such a bad thing since we have a fixed Demand for crafted good, a fixed Supply of raw materials gives the illusion of a stable economy... for a while. Again, everything breaks down once the majority of players reaches max level. New players will not become harvesters because the time and effort it takes to raise the skill is greater than the reward to be gained from doing so.
[NOTE: I realize that both Vanguard and WoW do have a couple of professions that create consumable items, and those professions do not follow these same rules. That is even MORE reason for me to doubt the sanity of these game developers as they have some professions that are viable late game and others that are not and they still don't seem to make the cause/effect relationship.]
We covered some of this issue above, but it is worth its own section. In a game where resources and crafting have ANY place, there is a great potential for harvesting to become a good "entry-level" profession for new players. It provides them with an immediate way to become a part of something much bigger and to feel like an important part of the greater game world. This only happens if demand for beginner harvesting items stays high. Since most current games use the "Next Best Thing" system, you quickly find that the market for beginner level harvested items dries up... to the point where people just trash the stuff they harvest or sell it to vendors for almost nothing.
This means that most of the people who pick up harvesting late-game are NOT new players, but rather established players who don't need the money and are just interested in supplying their own materials. That is fine, they should be able to do so. But, the market should always be friendly to new entries as well, and should be available to beginner players.
When you think of an in-game market, what is the first thing that comes to mind? Well for the Eastern games we are not delving into it may be the horrible town scene of 1,000 player-stalls scattered all over. For games like WoW and VG it has more to do with they Auction House. For our discussion market will have two definitions:
1) The AREA in which you sell an item. This deals with the question of whether I should be able to sell an item to anyone from anywhere. The current WoW model says "yes" (in the old world anyway), and the VG model is close in that it says "yes" if you are on the same island. They have opted for near universal markets. This definitely has some benefit for players as it makes things much more convenient. But, it also kills a very viable, profitable, and often enjoyable part of the game... namely Transportation of Materials. Let us think through what would happen if materials were localized, meaning that they could only be purchased in the same area that they were put up for sale.
The first thing that would happen is that people would begin centralizing their crafting efforts due to efficiency. No crafter wants to spend half of their time running around gathering materials from all over the world. But, how do you go about enticing the harvesters to bring their materials to you instead of you going to them? Raise the price you offer of course. All of a sudden you get a new pressure on prices that allows for more competition. New decisions are entered into the equation. And, perhaps a completely new profession is birthed... the Transporter.
Also, often Crafting centers are not located next to Harvesting centers, especially in the current MMO world. And, since crafters want to craft (that is where they make their money) and harvesters want to harvest, neither of them is particularly interested in spending the time it takes to move resources from one area to the other. All of a sudden there becomes a new Demand that can be satisfied by a player who is willing to merely Move items from one location to another. This may not sound interesting, but think about it... WoW and VG already have you do this in their "quest" system, and the items you move have NO value at all. In an economic model, the items you move are very important. You become the lifeblood of the economy... like the modern day truck driver in America.
[NOTE: The idea of Localized markets also raises a LOT of PvP possibilities and problems, which we may discuss later.]
2) Market also means the actual Method of how items are sold. Again, take WoW or VG as an example and you have an Auction House where people put items for sale. It is very easy to use, to search, to compare prices, etc. Beyond the fact that these houses are much too universal, they also have one other HUGE, glaring omission; the Buy Order. We have a completely one-sided supply-demand equation going on where Sellers constantly have to compete with each other over how low they are willing to drop their prices in order to tempt buyers. If you put the option for Crafters (or anyone) to place Buy Orders, then all of a sudden you introduce a new supply-demand equation in which buyers compete on how HIGH a price they are willing to pay. Having both systems available on the same market interface helps regulate prices in the long-term and ends up creating a more viable market for all parties. It also makes things MUCH more convenient.
This is one thing that truly boggles me about the current Market system. The coding is already in the games for the Buy Order, but the developers choose to keep it out. Even if they limited buy orders to some of the basic harvestable resources it would be better than the current systems. But, most systems have such a robust search engine that you could limit it to things like, "Level 35 Blue swords", or even a range of "Level 30-35 Blue weapons". A simple construct like this makes a market 100x more fluid as items are able to be exchanged instantly from seller to buyer and back again.
Issues and Questions
One of the questions often raised when you talk about Localized Markets is, "How do we compare prices between markets?" There are a number of answers here, and all of them are good for the economy and game in general. The first option is, of course, to actually MOVE between the markets to compare their prices. This is what your average player will do, which encourages him to get out and see the world... if the economy is something he is interested in. The second option is to allow some sort of skill (in the order of a crafter/harvester) like Investor that allows someone access to a growing Circle of market awareness. Use whatever reasons you want to make it "realistic", say a network of ship captains or whatnot, but basically this person would have access to PRICES of numerous markets from Any particular market terminal. So, if I was in Ironforge I could also see the Market info as far away as the Wetlands if I had a certain Skill, perhaps as far as West Plaguelands if I had a higher skill. Different skills might actually allow these players to Buy items from such locations, or even set up Buy/Sell orders remotely. But, since the items themselves are localized, the Investor will either have to travel himself or higher a Transporter to move the item(s) he buys and sells.
Another issue often arises from people who play on PVP worlds, especially those with FFA type PvP in which anyone is fair game, even crafters inside of cities. The idea of creating Central crafting sites or Harvesting dump sites seems like it would just be a huge signal saying, "Hey... come PvP me HERE!" While that may be true, there are several, EASY ways to combat this. The first and easiest is some sort of faction system where players of High faction receive protection from NPCs and players with Low faction get harassed by them. So a dwarf crafting inside a Dwarf town will get some help if a group of Dark Elves or even Dwarf-killin Dwarfs try to come get him. The second way to combat this is for the Crafters themselves to band together and plan their own protection. This is not really as hard as it sounds... as in a meaningful economy the Crafters will be in High Demand, which equals High Value. If you have them all in one location it DOES make it easier for the bandits and such to know where they are... but it also makes it easier for the Protectors to watch over them. Generally you have a much smaller Bandit population than Protector (even in your FFA PvP worlds), especially if you are dealing with Localized Markets (This is assuming mass, instant transit is not easy/possible). So, the reason that the bandits seem so powerful is that they can hit Anywhere and Anytime. But, if there is only ONE location for them to hit, then there is only ONE location that needs to be defended. The bandits quickly find themselves killed anytime they even think about going near that location... forcing them to live as actual bandits, out in the woods and such. In any case, there is no viable PvP reason against localized markets.
Some people have tried to make the argument that any form of currency by default leads to an ever-increasing inflation for any in-game economy. This is simply not true. Anyone who lives in the real world should be able to see why this is not true, but I will spell it out here and then add a few additional remarks on currency.
Currency does not create inflation because currency is NOT a resource, it is merely the system we have for assigning value TO resources and for making the Transfer of resources as efficient as possible. Currency is to an Economy as Words are to a Language. The "money" gets its meaning from items it represents, not the other way around.
So, if you have a problem with inflation, it has nothing to do with your currency... it has to do with your economic model (those things we have previously discussed.)
I actually think the modern currency model is workable. It is fairly simple in that it allows people to move large sums of money across large distances easily. EQ1 had the brilliant idea to make Exchanging money and Carrying money difficult. Sure, it added some type of game play, but mostly that type was called "annoying". The modern system where after I loot 100 copper I magically have 1 silver appear and the 100 copper disappear is much more friendly and does not really have any bad side-effects as far as the economy is concerned.
Whereas I am AGAINST universal items as far as banking or marketing, I have no problem with universal coin transfer in either of the above. If items stay localized, then money need not do so. Some people have tossed out ideas of localized Coin that you can access anywhere in the world for a fee. The fee would be determined by distance from your Local Bank. I am not really against that model, but I do not see it as being necessary. Again, localized items/materials will solve most of your economy problems, making localized money unnecessary.