Tobold's Blog
Friday, April 11, 2008
WoW monetary policy

Relmstein thinks that daily quests are Blizzards federal reserve rate of WoW, effectively controlling monetary policy and driving RMT by oversupply of money. I am not sure it is that simple, or Blizzard really intended it that way. I had more of an impression that patch 2.4 is a kind of a bribe, trying to keep people from leaving by showering them with gold, badge loot, and other assorted goodies. But even if it was intended, would it work?

The economy of World of Warcraft doesn't work like a real world economy, because it has two totally different types of populations: the player-controlled avatars and the computer-controlled NPCs. Real world inflation touches all parts of an economy, some faster, some slower. But virtual world inflation usually is limited to the player economy. Thus if dailies increase everybodies income, and there is far more gold in the economy, NPC-sold goods like epic flying mounts effectively get cheaper, because they stay at the same absolute cost amidst rising incomes. Training, repairs, and NPC-sold consumables like spell components or food all remain at the same price in absolute terms, thus get relatively cheaper compared to the amount of money everyone has.

The same isn't true for everything which is gathered and sold by players. For players the only real currency in WoW is time. A stack of herbs or ore or a primal still needs exactly the same time to be gathered. But if in the same time you can now earn twice the money, the value of time in gold terms doubles, and thus the prices for everything in the AH doubles too.

Whether this drives the gold farmers out of business depends on what players used to spend their money on. The gold farmers too make more money per hour now, just like everyone else, be it through doing dailies themselves, or by selling farmed items for more money. So while the price of 1,000 gold goes down, the gold farmers make up for that by selling more. But whether they sell more depends on whether players buy more, and that depends on what for they need gold. If the majority of the RMT gold was spent on epic mounts, the current gold inflation will hurt the gold farmers. But if lots of RMT gold was spent on things like gear from the AH, crafting materials, enchantments, and player-made consumables like potions, the gold farming business is effectively unchanged. Everything just doubles in price, and you get twice as much gold for your dollars, so in the end you still pay the same amount of dollars for the same high-end enchantment. Thus the "federal reserve rate" fails to do anything for the player-run part of the economy. Because what RMT is at it's core is one player paying somebody else to "work" for him for a certain time in the game. The gold is only the means by which the work is transferred from one character to another. How much one hour of work costs has a lot more to do with average salaries in China and the US than with the rate Blizzard floods the WoW economy with gold.
Yes I pointed out that the inflation caused by increasing the dailies would eventually cause player controlled items like jewels, enchants, and crafted items to increase the demand for buying gold again. Right now its just causing a "Black Friday" effect on the Auction House as everyone spends large amounts of gp.

I think eventually more NPC controlled costs will enter the game. You can already buy a Sunwell title for 1,000 gp and lets not forget about the introduction of the WoW Barbershop in the expansion. As someone pointed out on my blog its a perfect money sink.

I just hope for laughs sake they make it cheap to get a tattoo but really expensive to take it off your character.
If it is Blizzard's goal, and I don't believe it is, to maintain price stability (a la the real Fed) then they would need to monitor prices on each server and adjust vendor purchase prices for items (lower them) and repair costs (raise them) in order to keep constrain the inflation we are seeing now.

Just like Tobold said though, the pumping of money into the economy at this stage of the game is akin to the Fed trying to ward off falling consumer confindence by lowering interest rates. Blizzard wants players to stick around through more of the same, and this is their enticement. I don't believe in any way they were tying to thwart RMT. While a gold buyer may get more gold per dollar spent, the purchasing power is largely the same.

Great posts by Tobold and Relmstein, lots to ponder.
I'd love to hear what the rationale is for the huge number of dailies and gold being pumped into the economy. I'm sure a good amount of research went into it and Blizzard has their reasons. I just want to hear them.

The reason I want to hear them is the amount of gold being added to the economy is downright terrifying. As it has been so astutely put, gold sellers are selling players their own gold back, which they got from auctioning primals. In this model, the net amount of currency doesn't go up all that much - the gold simply moves around.

Now with dailies, the amount of gold in the market is going up at a very good clip. Some of the effects in the short and medium term are obvious, as mentioned, but nobody really knows what will happen in the long term, especially with more tinkering from Blizzard.

Scary stuff.
It might be worth mentioning that the inflation does take a bite out of any gold reserves that gold farmers/sellers had built up. They're suddenly earning less for the gold they already spent X hours collecting. I don't think they keep all that much raw gold around if they're smart though. An amount that is enough for few days' average sales probably, and then some valuable stuff like primals that can be sold at suitable pace.

Any gold reserves that normal players had also took a hit of course. Since the ones it really affects probably had nothing to buy with their money anymore, I'd expect them to take it in stride and then not mind when everything is a lot more expensive in WotLK. (Adjusting the actual value of money earned in an hour back to the early TBC levels if Blizzard can manage it.)
What worries me is what the prices are going to be in the next expansion. Before BC one of the biggest money sinks was your epic mount training, 900g. In BC that rose to 5000g for the epic flying mount. Now WotLK might not have new mounts (I'm sure they will but just different variations) but they will need a new money sink. I was worried about things before, but now with daily where you can make 2000g in a week (Yeah, exact figure, just doing daily and sell the crap that drops while doing them, nothing else) I'm very frightened of how expensive things will be in Northrend.

Part of the problem was that Blizz obviously wanted BC to be epic and turn it into a complete freak show. They completely when off track, you get far better gear, gold, and skills in the last 10 lvl's than the thirty needed to get in to Outland. They went way off balance, it WotLK follows it predecessor then the gold market will be completely out of control.
give you an idea of what the dailies are doing on my server.

Dreamfoil is 23 g for a stack of 10 right now.

it was 8g for 20 pre daily.

And the sad thing is. thats one to two hours for me to gather. its about 30 to 45 minutes of dailies.
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