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.

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