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ECON 4024 - Macro-Economics in Virtual Environments

Columns By Red Thomas on February 11, 2016

ECON 4024 - Macro-Economics in Virtual Environments

I love exploring the in-game economies of MMOs.  To me, spotting the quirks of those systems and exploiting them for virtual profit is one of the most enjoyable aspects of trying out new MMOs.  I also have a great deal of fun talking with various developers about how they envision the economy working in their games, and analyzing the pros and cons of various systems over coffee with fellow gamers.


I know that the subject is likely dry enough to bore most folks within the first few phrases, but economics done well can form a virtual battlefield of far more complexity than even the most heavily developed PvP combat system.  It's a game component that's ruled by spreadsheets, simple equations, and basic weight statements.  With far less effort, a developer can create an amazingly complex system of economics that can drive other aspects of a game to be far better than the component coding might otherwise indicate.

A clear example of this is EVE Online.  EVE is a game that has grown a great deal, but still I don't think anyone can claim great sophistication in any of the skill or combat systems built into the game.  Systems that are certainly better than adequate, but hardly anything truly pioneering when you look at each in isolation.  What the game does have, is player-driven economy with the power to create story by virtue of its very existence.  To really understand how economy has pushed an otherwise fairly simple game like EVE to being a common benchmark, we need to first understand what makes economies in games work.

A Socialist View

The idea for this article was spurred by a conversation with Starr Long and Chris Spears from Portalarium, developers for the MMO Shroud of the Avatar.  The conversation centered around a rough drawing Chris threw up on a board for talking about how they envisioned their economy working.  The drawing showed inputs from harvesters and PvE players, while PvE players and PvP players were outputs for the system.  Crafters were inside the circle as facilitators to the economy, but didn't actually introduce anything to the system.

Chris’ diagram, but redesigned to look slightly more professional…

In a sense, he's not entirely wrong.  Crafters take in materials from harvesters and players engaged in PvE, and then output products back to the PvE players and the PvP players.  To make that system work, PvP needs to generate enough currency to pay for all the things they'll want to purchase from crafters, and PvE needs to generate that same revenue minus the value of the goods they earn from their questing and hunting.  Skins and scrap weapons have value, but as only a portion of the material needed to outfit a given player, it can't be economically neutral as an input to the entire system.  Thus, there needs to be some additional revenue, and there is in the form of money looted from dead mobs.

So Chris didn't use an invalid model, it was just a bit too simplistic to really capture what makes a good in-game economy.  To paraphrase an old Marxist idea, the value of a product is measured by the labor required to produce it.  I'm not even remotely a socialist, but it's an important model to understand when it comes to video games.  The true value of things inside video games is time, which is analogous to the Marxist treatment of labor.  The time it takes to produce an object or a service is the true measure of its value, and the in-game price is simply an abstract representation of that value.  That is to say it's true in a player-driven economy.

A Capitalist Implementation

While socialist ideology is a good tool for expressing the value of goods in an MMO and important to the initial design of the system, the best choice for the implementation itself is good old fashioned capitalism.  The freer an economy is to grow and mutate in its own time, the more complex that economy can be.  Creating rules to artificially influence the economy may seem like a good idea, because after all an economy on rails means developers can always calculate the impact of minor changes on the system with some accuracy.  However, those rules tend to slow the growth of the economy and I believe create a sort of entropy that has to be fought through more effort using the other systems of the game.

Left open and unrestricted, the economy can actually drive other systems of the game, but we'll look at that more in the next section.  What we want to explore now is how much easier it is to implement a free system during the development of a game.  This is part of how EVE fits into this initial conversation.  Economically, EVE's early development consisted of the introduction of new resources and recipes for new ship equipment.  By simply increasing or decreasing the availability of specific resources, the economy balanced fairly quickly to new equilibriums.  Implementing a new production stack requiring a given resource will impact the price of that resource, inflating the cost to early adopters of the new widget. 

Marxist concepts of economics could be handy for analyzing in-game economies.

It's a model that's incredibly true to real world analogs.  If you know Samsung is coming out with a new TV that will require more Cadmium, then a producer of Cadmium might increase production to meet that demand.  Of course, if that TV turns out to be a bust, the influx of Cadmium causes a drop in the chemical’s price.  Then the sellers of the chemical might take a hit, but the drop in price helps soften the blow to Samsung.  Locking prices prevents any of those interesting events from happening, and that means the whole story would have never had a chance of happening.

Worse, it's actually harder to control the economy.  It takes a lot more developer investment, because not only do developers have to create systems that allow artificial control of the economy, but then they have to invest time in making those systems as invisible as possible to the players.  After all that, they then have to invest time in play tests to balance prices, which often miss the mark and later need to be tweaked post-launch.  It's also the gift that keeps on giving, as each new addition to the game requires a subset of the same cycle to manage the economic effects of new gear and/or resources.

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