Do gold farmers hurt the economy?

RMT is a very emotional subject, and people have a tendency to jump from one argument to another totally unrelated one. Thus whenever I mention gold farmers, somebody immediately starts shouting about hackers, which is *not* the same. While everybody knows somebody who know someone who has been hacked, few people bother to count that they also know 99 other people who *never* got hacked. Simple back-of-an-envelope calculations of the amount of gold stolen by hackers compared to the amount of gold sold every day in World of Warcraft shows that the large majority of sold gold is produced by farming and botting, not by hacking and stealing. So in this post I'm focusing on the effect of gold farming and botting on the economy of World of Warcraft (although many of my considerations will be true for other games as well).

So lets take the fabled Chinese sweatshop where a dozen young Chinese men make a living by playing World of Warcraft, because it pays better and is more pleasant work than working in the factory next door. First thing to note is that obviously they are playing on US and European servers, because that is where their customers are; thus reported problems Blizzard has with Chinese authorities do not affect the gold farming business. Second thing to note is that much of what these gold farmers are doing is done manually. If it was possible to completely automate the farming of gold in an efficient way and without Blizzard shutting you down fast, there wouldn't be a Chinese sweatshop. The desire to make easy money is not unique to poorer countries, only cheap labor is.

So what are gold farmers actually doing? The main difference between a gold farmer and a regular player is motivation. A regular player wants to make his character as powerful as possible, wants to have lots of items, both fluff and gear, and wants to have fun. Much of what a regular player does is destruction of economic value through the use of money sinks. Besides the money sinks (repair costs, buying special mounts, etc.), there is also the destruction of economic value by "item sinks", that is by equipping bind-on-equip items, which effectively removes those items from the economy. A gold farmer at the start of his career is often indistinguishable from a regular player, because he'll want to level up his character to the level cap and equip him with reasonable gear just like the regular player does. But once he reached the cap and okay gear, a gold farmer plays differently than a regular player. He isn't interested in activities like raiding or PvP, and he certainly won't spend money on a mammoth or a motorcycle. Instead the gold farmer will seek the most effective way to make gold, so he can pass that gold to his boss, who'll sell it for real money.

Now a game like World of Warcraft has lots of different ways to make gold. Gold drops from monsters you kill, or is handed out as reward for quests and daily quests. But for the gold farmer these direct gold-making ways aren't optimal: For reasons of efficiency several gold farmers share one account, playing that account 24/7. With only 25 daily quests, and a thousand or so high-level quests that give good gold rewards, this avenue of gold farming is quickly exhausted. And the amount of gold you can make per hour by doing quests and getting coin drops from monsters is actually not all that big. Various WoW blogs frequently express a certain disdain for players who try to make gold that way. Being better motivated than the average player to be efficient in making gold, we must assume that the gold farmers know all the tricks that WoW bloggers know, and more.

There is however one big difference between a gold farmer and regular player with an interest in WoW economics: Gold farmers have to make a regular living, thus they prefer steady incomes over risky deals. Activities like buying low and selling high on the auction house, or making thousands of glyphs to sell them, are profitable for the regular players, but not something you can profitably do 24 hours per day. So typical activities of gold farmers would be gathering herbs and ores, or killing monsters that drop valuable trade goods like eternals, then selling these goods on the auction house. This hypothesis is easily verified, just check your auction house for lets say Northrend herbs, and you'll often see the same seller offering several hundred of the same type of herb, the obvious result of hours of farming.

So what is the effect of this gold farming activity on the World of Warcraft economy? The most surprising result, to many people, is that this doesn't cause rampant inflation. Take any given item, like a crafted epic Merlin's Robe, or a Frostweave Bag, and you'll see that its price today is *lower* than its price a month ago. Inflation and prices in any economy, virtual or real, depend on the relative levels of money supply and the supply of goods. As the gold farmers aren't actually farming gold, but goods that they sell for gold, they do not increase the supply of money. They do however increase the supply of whatever item they are farming, which is why the various trade goods and items crafted from these trade goods are getting cheaper. A secondary effect of gold farmers is to cause a predictable price fluctuation of trade goods during the week. The gold farmer who is lets say gathering herbs will supply about the same quantity of herbs every day. Sharing his account with other gold farmers, he can't wait to sell his goods. But the regular players who buy those herbs will be more active during the weekends, simply because they play more during the weekends than during the week. With supply and demand regulating price, prices for trade goods are higher on weekends than during the week.

So are gold farmers hurting the economy? That depends on which side of the economy you are. If you are a seller, then a bunch of gold farmers playing 24/7 is something you'll find hard to compete with. But if you are a buyer, and the majority of players is, the gold farming activity actually lowers the prices of the things you buy, which is good for you. Gold farmers will adjust to prices in the economy, so if some item dropping from some kind of monsters becomes especially valuable for some reason, they will go and farm that, keeping the supply up and the prices low. Ultimately a Chinese gold farmer isn't fundamentally different from a Chinese manufacturer of cheap toasters. If you happen to be a US manufacturer of toasters, he is a threat, but for the general population he just means cheaper toasters available at Walmart.

A different way to look at it is to look at what the gold buyer is actually buying. He doesn't buy gold because he likes to have a large amount of gold unused on his account. He buys gold to buy that crafted epic, those flasks for raiding, or whatever else. Thus the economy is a full circle: The gold farmer gathers trade goods, sells those for gold, sells the gold for real money to the gold buyer, and the gold buyer spends that gold for trade goods or items made from them. For the economy as a whole it doesn't matter who is doing the gathering, whether the regular player spends hours to gather all those trade goods himself or whether he "hires" a gold farmer to do it for him ends up being the same.

Now imagine Blizzard would start selling gold they create out of nothing to eliminate third-party gold sellers. Or some bug would allow widespread duping of gold or have gold fall out of the sky. The effect of that on the economy would be much worse than gold farmers. These events would dramatically increase the money supply, leading to inflation. If enough gold fell out of the sky, the value of gold would crash to zero, and the economy would break down. People would be reduced to bartering, or using alternative currencies.

Now it is totally reasonable to be opposed to RMT and gold selling because the basic concept of it is somewhat perverse: You could gain everything in the game by playing the game, thus buying gold is equivalent of paying somebody else to play the game for you. If you would for example buy enough gold to buy all the best bind-on-equip epics in the game, you would make large parts of the game which consist of collecting bind-on-pickup gear or tokens for such gear obsolete. You would "finish" World of Warcraft faster, get bored, and quit. It's like bribing the guy at the projector in the cinema to press the fast forward button, it simply doesn't make much sense if you consider hours spend in a game as entertainment and fun, not work. But to blame gold farmers for destroying the economy isn't really justified: They've been doing this for over 5 years now, you'd think that if their activity really destroyed the economy, that economy would be gone by now. The fact that the World of Warcraft economy is humming along nicely in spite of gold farmers disproves the argument that gold farming destroys the economy. Buying gold certainly is cheating in a video game, and some gold sellers use more harmful techniques like phishing, scamming, and hacking to get gold to sell, but the basic act of gold farming isn't all that harmful to the virtual economy.
- posted by Tobold @ 8:37 AM Permanent Link