way2slo's Journal: Economics of MMOs

Time = Money is not the only reason. And it is not simple. And it is a design flaw, though not directly evident.

MMO economies are very dynamic, more so than real life. I've read a few papers, grad students I believe, on trying to analyze MMO economics. One of the papers said most MMOs have issues with rampant inflation because they do not have enough money sinks. IRL, we all spend most of our income on Shelter, Food, Clothing, and Transportation. These are all vast money sinks, mostly due to maintenance of items or its use it and it's worthless nature. (food you have already eaten or clothing you have worn out) Basically, IRL we destroy wealth every day we live. At the same time we create wealth every day we live by performing a job whether it be producing something physical or performing a service. The difference is inflation (a net increase of money supply) or deflation (a net decrease of money supply). In the MMOs, wealth creation is as easy as finding a chest or slaying a mob. But the money sinks are few and far in between. The result is massive inflation which is the less worth a stack of gold coins has for a player because things cost more on the AH. The game designers built in the inflation, though they did not know they were doing it.

Another issue is a shift in the Supply/Demand principles as a byproduct of the wax and wane of the MMO player base over its life. Early game life sees high demand and low supply, mid life sees high demand and high supply, and late life sees low demand and high supply. Economic changes made to fix issues in one phase tend to cause issues in the following. For example, in early life the players complain that things are too expensive and they are constantly broke and cannot afford the best gear at the AH they want to buy. The devs respond by increasing the gold drop from mobs and chests. This fixes the issue until the game's mid life arrives, along with the rampant inflation they introduced. Supply catching up with demand should have brought prices back down, but the inflation prevented that from happening.

Probably the biggest economical issue with MMOs is that they break their in game economy deliberately. They sacrifice economical stability for fun. Let the player hack through the game and easily accumulate vast sums of money and fantastic gear in a few months of casual gaming time because that is what fun means on this MMO. It is not necessarily a bad thing as long as they do not try and pretend to care. Perhaps Blizzard has come to realize that it does not care about D3's economy and decided to stop pretending.