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The WoW Economist has an interesting post about inflation in Northrend. In it they asked a question about whether the mechanisms in Wrath will be able to safeguard the buying power of that gold. They talked about the issue in terms of regulating the amount of currency in the game, which is essentially monetary policy. This is only half of the picture.First off, I think it is important to note that while economists that deal with monetary policy have the twin tools of interest rate and money supply manipulation, those aren’t the only economists that deal with macroeconomic policy.
Blizzard’s control of the money supply in WoW has to do with droprates and spawnrates. It would be inaccurate to say that there is an unlimited amount of gold in the game, because you can only skin or mine or kill so fast. Blizzard knows on average the value in gold of one person logging in for one hour. Let’s say that value is 50g. They can reduce that amount or increase it by changing spawnrates and droprates.
Our Blizzard Overlords control fiscal policy as well in the WoW economy, which is the other half of the economic toolkit. In the real world this would be collecting taxes and spending money. It is here that I believe that gold sinks can enter the analysis.
Large gold sinks act as a luxury tax. The ridiculous 20,000g mount is a great example of this. It is a status item that would be really tough to justify as an expense, but it will be popular for reasons that fascinate me.
The smaller gold sinks act as a regressive income tax. Everyone pays the same rate for repairs, training, mail service and flightpoints.
These gold sinks are used to reduce aggregate demand, which is the fiscal policy tool used to maintain price levels. People have less gold than they would otherwise, which keeps prices ideally from rising at all, but realistically it will keep them from rising as much.
In the real world some people benefit from inflation. If I owe you $10,000 this year, and next year the purchasing power of $10k is half of what it is this year, in effect my debt is reduced by half. But there is no debt in wow. So there are no real winners when our currency is inflated. But some people lose a lot less than others.
The big losers are the casual players who vendor a lot of white and green drops that they get while questing. These players will have far less purchasing power in wrath than they did in BC.
The smaller losers are people that read blogs like this one. If you have large reserves of gold you should be cringing a little bit, because your purchasing power is being reduced as well, but at least you have the power to fight it. You need to invest in mats that will only increase in relative value rather than keeping vast sums of gold.
The trick is that who knows what investments are good and what investments are bad. What we do know for sure though is that the value of gold will continue to decrease.
6 comments:
Greetings for your blog , a great adition to the little number of useful helps to this game-in-a-game and vital support for our toons , economy in wow.
I want to point that this inflation will really be helpfull to general player base , or at least those who USE AH in a logical way (gevlon would say not dumb people ;-) ) instead of vendors.
As "vital" things are prize fixed (riding skill, class skills ,repairing) they will be a lot easier to adquire , even to new players.
Thanks for the compliment. I would be interested to hear what Gevlon thinks about the post, but I have to disagree with you about inflation being good for people that use the auction house effectively. I think we might be talking about two different things.
If you are selling eternals it is good for the price of eternals to go up obviously. BUT, if the price of what you are going to spend the gold you just made off of that eternal goes up as well, then nothing has changed.
What might be a items worth investing in? I have a lot of purchasing power and could afford to take over any one market if I knew it was worth it. Do you have any specific things you think will rise? As far as the eternal-crystallized elements, I've noticed that the only ones holding their value are Life and Fire - Shadow to a lesser extent, and Earth/Water/Air dropping. I can farm the Wintergrasp fire mobs are gather about 20-25 crystallized fire in 20 minutes - I'm in extremely high end Naxx/VOA/EOE gear. They sell for about 9-11g each now, but that will also surely drop. I have mining/herbalism on my alt and enchanting/inscription on my main. Thoughts about these or other "hard, non-gold" assets for investing?
That is another good question that I think depends on your server and how risk adverse you are. I've budgeted 10k a week to spend on items to disenchant. That is about the right amount for me to not build up too large of an inventory. I may start to double that amount to try and keep my gold level as low as possible.
I never mine or farm or pick flowers. That is only because I am lazy, and I can find more lucrative opportunities.
I also have inscription on my main. There is money to be made there, and if I ever have any spare time after my disenchanting business is looked after, I'll get into that.
My gut though is that due to the simplicity of storage issues, shards and eternals will be a spot where I invest. Maybe high end ore as well. When I decided what I'm doing, I'll post about it for sure.
I can appreciate that. I don't expect the markets to really stabilize until about Christmas time, if not a bit after that.
WoW-economy has a pretty strange thing, not-existent in real world that questions it's power as macro-economical simulation. It does not affect the micro-economy though, so one can learn how to think as a businessman.
The problem is "item-inflation". It comes from two artificial things:
- "soulbound" which prohibits second-hand market. If I create an ilvl 200 epic crafting chest for 2000G material cost and in my first Naxx I get an ilvl 213 set epic, I can't sell my old chest for 1500G. Since this item is not requirement of the raiding (you can raid in blues, Blizz tuned down the instances), these are almost merely vanity/comfort items, not real investment. So the buyer base for these items (therefor their materials) is very limited.
- Item immortality. For a very low repair cost (less than 1% of new price) you can repair a completely broken item. So there is no replacement-buying. Same for consumables which have no expiration. I can still use the potion I bought on my first game day.
So items have a quickly declining demand for ALL items, at first there is high demand by people who either farm day and night to have the prestige of the item, or by rich people who buy it to decrease the number of T7 runs.
When these premium buyers bought their items, their price fall down almost to disenchant price.
So the bottom line: in WoW 95% of the population does not NEED anything that the economy provides. They are pretty OK with quest rewards, no enchants, no consumables. So the "economy" only affect those who decide to participate, therefor such macro-economical terms as "inflation" cannot be measured here.
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