Relating Economic Topics to Runescape

[sees_all1]

A few years ago I took my first economics class- I have to say some of the things I learned were interesting, while much of the stuff was boring.

The first thing my economics teacher told me is that to be an economist, all you need to do is say you're an economist. I don't know the accuracy of that, but he said there was no exam, no boards, no thesis required. All you need to be an economist is an interest in it.

 

There is a lot of discussion recently over the Economy of Runescape, whether its micro, macro, in between. Believe it or not, discussion on prices of certain items, inflation, or even experience vs. cost all deal with Economics.

 

If you've read this far, are still interested, and have no economic experience (classes, reading, whatever), I suggest you read (or skim) the wikipedia articles on economics, supply and demand, and inflation. There are many other topics in Economics, and certainly many we can apply to Runescape.

 

Anyhow, the primary purpose of this thread is to discuss and debate different things relating to economics and runescape - I don't know how long or how far this thread will go, and if it seems to die I'll try and post a new, economics related thing that everyone can discuss.

I'm also starting this thread, in part, because I had a disagreement with Ts_Stormrage and the article they posted in the October 18th Tip.it Times. I want this discussion to be both highly visible, and easy to participate in, but I also want it to eventually cover more areas than Ts originally talked about (but couldn't fit into a single article).

 

So - the first Topic I would like to discuss is Inflation in Runescape.

 

 

Please notice that in my examples I'll make gross simplifications. This is so I can deal with only one or two variables at a time, and I suggest that when discussing these things you do the same (otherwise our heads will hurt from all the things we need to keep track of.)

[hide=Topic 1: Simplified view of Inflation - Not the cause of all runesape's problems?]

Inflation: In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy.(Wikipedia)

 

So, in Runescape terms. Inflation means that after some period of time (days, weeks, months, years) one GP will buy less goods in Runescape than before.

 

How does inflation occur?

Suppose there are 100 active players in runescape. Each player has 25 gp. There are 100 items total in the entirety of the runescape economy. Players are only able to trade items, or kill a type of monster, which drops gp only.

Say each of the 100 players kill a monster, and the total amount of gp in the economy grows from 2500 to 5000. The number of items stay constant.

This economy has experienced inflation of 100% - 1 GP now buys exactly 1/2 of what 1 GP would buy before.

Inflation would also occur if items were lost - Instead of 100 items total, there were 50. Then one gp would buy less, because there is less to buy.

 

Once again, this is a gross over simplification of what goes on in the Runescape Economy. It doesn't take into consideration that new items are created, there are many different types of items, new players enter and old players leave. It doesn't take into consideration that XP is valued, that shops sell items, etc.

 

What happens with pure inflation?

Suppose a player plays for a year, has 10m in their bank, and then quits. They obtain their money only from runecrafting.

A year goes by, and inflation was at 100%. The player is only able to buy 5m worth of stuff. However, because this is pure inflation, they are able to earn GP at a rate 2x as fast as they were, or at the same rate when you account for inflation.

What if the player also had 10m of items in their bank? Because GP is now worth less, the items are worth the same if inflation is accounted for, meaning they would be worth 20m (10m deflated GP).

In pure inflation, the only thing that is worth less is the GP. Items are still worth (relatively) the same, making profits by creating items still gives the same amount of deflated GP.

There are other was to get GP - PvM. Monsters usually drop GP. If that is the primary thing the monster drops, hunting them becomes less profitable over time, with inflation.

 

 

Whew, that's quite a bit. I will update this space in the future, but I'd like to see what everyone has to say on the topic.

Anything major I missed on the topic of inflation? Anything you respectfully disagree with? Anything I need to clarify? What do you have to say on the topic?

 

What I don't understand is why people dislike inflation so much. I don't think everything we're seeing now is pure inflation, and inflation is just a symptom and not the cause of the problems. It seems to me that telling Jagex to fix inflation is like demanding a new product to be created... Chipotlaway. It fixes the fact that you have to buy tons of new underwear, but it doesn't fix the fact that you're bleeding from... well you know.

Let the discussion begin.[/hide]

 

 

[hide=Topic 2: Supply and Demand, with some historical context.]

 

Alright. Last night I posted my views of inflation. I've spent some time clarifying, but not much time really *debating*. I would like to propose that inflation has very little to do with runescape's current economic problems (well, until we can get into a discussion about "what is money?").

 

So - What is the reason for crazy high, and rapidly increasing prices? I would like to propose that is supply and demand, and the invisible hand at work.

Supply and demand is a topic that is best explained graphically, and can be fairly confusing, so I'll try and get graphs up ASAP.

 

Remember back to January 2nd, 2008. That's right, almost two years ago. Unbalanced trade was removed from the game. 1/2/08 was the death of RWT, but more importantly, gold farmers selling 1m gp for $3 each.

If you've ever visited a gold farming website, you'll have noticed that not only did they sell gold, but they also sold lobsters, swordfish, sharks, yew logs, pure essence, and a variety of other materials.

 

Gold farmers typically DID NOT play the game as intended. What I mean is that Gold farmers would only "play" to gain materials in order to sell to other players. All gold farmers did was supply raw materials to the game.

With the removal of RWT (or significantly limiting it), gold farmers could no longer make an easy profit. It became impossible to RWT raw materials, but not so impossible to RWT weapons or GP.

 

I remember that after unbalanced trade was removed, for some reason this prices of cooked lobsters plummeted. I don't have any historical records to point to, and if anyone could provide it I'd appreciate it. I remember this so well because I lost so much money on it. I purchased several k's of lobsters on the GE at minimum instantly, and the price dropped down to 150 each. (EDIT:I've been searching some forums, and from Tip.it's price check of 2006 - http://forum.tip.it/topic/61735-price-list-overview/ (lobster is 220-250)

From another forum post that was last editted Mar 12 2007 - http://forums.d2jsp.org/topic.php?t=6700253&f=225

Lobster is 180-210. I'm still looking, but its looking fairly consistent...)

 

If this is what I think it means, it meant that the gold farmers were dumping all of their items. There was a massive store of items that weren't intended to be used by the owners. I think it might be plausible that over the course of a year or two, these items have been sold off.

 

So, the facts. With the removal of RWT from the game, Jagex severely limited the supply of popular items that were gathered by gold farmers. When the total supply curve shifts left (less supply at every point on the curve), the equilibrium price goes up.

 

The speculation - The amount of stored items have been dwindling, and is gone now. It has taken about a year to use up all of the stored items. Now that all the stored items are used, the prices are shifting to the new equilibrium values. This helps explains why pure ess is 220 each versus the 30 each two years ago, but why fire runes cost next to nothing. Pure inflation would mean everything rises in price. Supply and Demand means that only some items are affected - the ones that were gathered by gold farmers.

 

 

This does not explain why some items, like some armours, have changed in price, but it does (in my opinion) a good job with raw materials.

 

 

Topics I haven't covered that's related to supply and demand, which I might do later -

Price floors and Ceilings

Infinite Supply and money sinks

 

What do you think? Is my explanation plausible? Unlikely? Have a better idea what went on?

[/hide]

 

 

[hide=Topic 3: What is GP, actually? (and wtf is with junk trading)]

 

I touched on this with my discussion of inflation, that even though price levels rise, it doesn't affect players.

How could this be, if GP - the primary medium of exchange - becomes devalued?

 

So, I have two definitions for GP, similar to money, GP is the primary medium of exchange, and GP is a store of value.

As in, GP is bankable, was never worth nothing, will probably never be worth nothing, and is near-universally exchangeable for items.

 

And that sums it up really, all you need to know.

 

 

 

Just kidding. You're probably wondering right now, if GP is the primary medium of exchange, how could there be junk trading?

That is a good point, and it is almost exclusively a failure of the hand that drives the market - Jagex.

When I say this, I mean that the system that Jagex has devised is quite ingenious, while not allowing for massive amounts of Real World Trading, it allows for limited free trade. But that's the problem - trade is limited.

 

If trade was completely free, we had no updates, and we're at some long run point in time, there would be an equilibrium. Runescape Gold would have a monetary value, much like a euro has a value of the dollar.

The prices of items would remain relatively stable, because GP would be stable.

 

That isn't the case, and it never will be. Because Jagex cannot afford to allow RWT, they had to make the markets sticky.

 

 

To better understand what one GP is, I'd like everyone to imagine a runescape without GP. How would you get items that you wanted? You would have to make them yourself, kill monsters until they dropped them, or accumulate another item which you could trade someone for to get a mutual benefit - They want what you have, and you want what they have.

 

Merchanting in this system would be incredibly easy. All someone would need to do is accumulate an item, and be conservative in what they gave, but liberal in what they accepted.

 

This actually happened - and still does happen to some extent. An example my economics professor gave was Nazi POW camps. Each POW would get a care kit every month. Inside would be items like cigarettes, tinned meat, toothpaste, and a candy bar.

What happened? Cigarettes became the medium of exchange, and you would get people posting their prices - Will buy all toothpaste for 4 cigarettes each, will sell all toothpaste for 5 cigarettes each.

 

In that example, there were only several items. Imagine Runescape not having a GP. If nothing became the universal medium of exchange, trade would rarely occur. You would have to pair your item, one of the many thousands, to someone else's, of many thousands.

The GP makes everything more liquid, easier to buy and sell.

 

 

So, back to junk trading. When multiple items are stuck, junk can be used to supplement the purchase to make it more fair.

These items, whether it be junk, or under priced, have a VERY key role in the Runescape Economy - they help make trade possible in a restrictive world.

When a new item is created, and demand is exceptionally high for it, Jagex will never be able to correctly guess the price. Junk allows these items to be traded outside the GE... but more importantly, they're traded.

[/hide]

 

Topic 4 - Price floors and Price ceilings: the cause of all things junk

 

For my forth topic, I would like to discuss pricing limitations, specifically floors and ceilings.

 

First, I want to make a distinction. There are natural and unnatural pricing limits. An unnatural pricing limit is one where the market dictates the price of an object to be higher or lower than a limit that Jagex has imposed in the game.

A natural pricing limit is a price where the item can be converted directly to or from currency, via alching, shops, or into something else which is convertible via skills.

 

Straight to the examples:

Cooked Swordfish have a med and a max price of 500 each. If the market were allowed to dictate the price, you can be sure it would be much higher, probably around 750-1k each.

Other items in recent memory to have an unnatural price cap include death runes, lobsters, and strength potions.

 

An unnatural price ceiling set by Jagex does two things. The first is it keeps the item at a very specific price, which may or may not be affordable to all (which is usually the point, make the item affordable). The second is it stops the market from being fully efficient, it causes a shortage. More people would supply the item if it were a higher price. If you took an economics course, the teacher would probably show you some nice graph with an x, and a line underneath the x. Then they'd start talking about the dead-weight loss, etc.

 

 

 

A natural price ceiling is one that occurs in the market. I've found that in runescape these seldom occur, and an example of this would be the disparity between uncooked and cooked food. Cooked food will never be worth less than uncooked, because people value experience.

 

A better example would be death runes. When stores stocked items infinitely, the prices of those items could never get much above the price the store set. If death runes did not have a price ceiling placed by Jagex, people would sink millions of GP into stores to buy death runes to make a 1-2gp profit on each.

 

Another example of a different kind would be the rares market. A natural barrier in place is the 2.1B GP limit. Although the most valuable items are not remotely close to that, there could conceivably come a point in time in which a Christmas Cracker is worth 2.1B GP, but cannot be worth more because it is impossible to obtain more GP than that in a single trade; it is impossible to change the price valued on the GE.

 

 

 

An unnatural price floor is one set by Jagex that does two things. The first is it keeps the item at a very specific price, that makes it worth while to obtain this item to people that have time. The second is that it causes a surplus, there is too much of this item being created and the quantity demanded at the current price is very limited.

An example in recent memory are willow logs: they had a price floor of 18gp, and after it was removed the price dropped to almost nothing. Similar to price ceilings, one could discuss and examine the dead weight loss, and the surplus.

 

A natural price floor is one that occurs in the market. The biggest and best example of this is the high-alchemy spell. An item will never fall much more than its high alchemy price sans the price of a nature rune. People value magic experience, and high-alchemy is one of the neutral approaches to gaining experience in magic.

 

Another natural price floor is zero - an item will never reach zero because then it would be free, demand for such an item would be virtually limitless.

 

 

 

So, after defining natural and unnatural price ceilings and floors, this takes the discussion to junk and untradables. These are only created when the market is unable to adjust in a timely fashion to the natural equilibrium. One of the biggest fears that Jagex has is that all armour under steel will fall to the status of junk, because a nature rune costs more than high alching nets you. This arguably would ruin the experience for a lower level; there is no incentive to work hard to earn your keep.

 

The last point I would like to make is that markets with unnatural price ceilings are negatively affected, because as the value of currency is lowered, the difference between the natural price and the ceiling becomes much greater. This is an argument I've rarely heard used against me when I say inflation doesn't hurt the players, but it is true none the less. The easiest way to fix it is to allow prices to be set by the players, and not some arbitrary limit on the GE.

Alright - anything that I missed?

Also, I'm welcoming discussion on any past things I've written.

[Grimy_Bunyip]

you're economic theory is based on the idea if that the amount of GP in the economy doubled, and the # of all the items in the economy didnt, it the price of everything would double, reach a new equilibrium of sorts, and things would go back to normal.

 

unfortunately that does not apply very well because runescape employs "alchemy" where as the real world does not.

That means that certain items will never rise to reflect inflation, namely alcheables such as yew longbows, adamant platebodies, and so forth.

 

So lets say the amount of gp in the world doubled. The price of a standardized item, say whips, would roughly double in price.

Now lets take a look at smithing

Even if the amount of gp in the world doubled, the price of alcheables such as the adamant platebody would not double. it would remain stable.

IF adamant bars doubled in price however, the cost of making adamant platebodies would QUADRUPLE in price

this is where inflation takes its toll.

 

In real life, the price of said product, adamant platebodies, would simply rise in price to reflect the inflation.

but runescape is different, items actually turn into currency. You can't turn an ipod into dollar bills.

 

Also in runescape exists shops that magically produce items from nowhere

Lets say inflation GREATLY increase the price of pure essense

Pure ess cannot be bought from anywhere, is not a alcheable, and is highly demanded. Thus it rises rather linearly with inflation.

On the other hand, the runes that are made from pure essence do not rise linearly. Because they can be bought from shops. If pure ess truly rose to 400 gp ea, do you think nature runes would really rise to 500-600 gp ea to compensate? people would just start buying nature runes from magic shops instead of crafting. Sure nature runes would rise, but suddenly inflation would have turned a profitable skill like runecrafting into a buyable skill. A slow buyable skill.

[Adam007]

I've always have been big into runescape's community, although I have a limited economics background to tie theory into what happens in the game. I did enjoy the benefits of owning a few party hats and their exponential growth that occurred for a few years. With the GE though it appears the economy isn't that 'normal' anymore.

I'll recommend some reading for you by my friend Duke Freedom on the topic, although with recent changes I don't really know how relevant they are anymore:

http://www.tip.it/runescape/?times=archives (he wrote a few here)

http://www.runehead.com/editorials/Editorial+Archive-x (and here. and while you're at it, go ahead and give mine a read :P )

[sees_all1]

you're economic theory is based on the idea if that the amount of GP in the economy doubled, and the # of all the items in the economy didnt, it the price of everything would double, reach a new equilibrium of sorts, and things would go back to normal.

 

In a nutshell, my oversimplified model does say this. In runescape, there are literally hundreds and thousands of items. I do not wish to go into discussion on how inflation would affect each and every single one of these items, doing so would be pointless.

 

But you do have a valid point - inflation affects different items in different ways. That also goes into how you calculate inflation. There are many ways to do this, including putting together "baskets" of items that every runescaper needs, and then calculating the price change in these baskets.

 

One thing that complicates things is uncertainty - we have absolutely no idea how many scimitars there are at any one point in time, how many nature runes, how many ... you get the picture. We also have no idea the rates these are created or destroyed, further complicating everything.

 

But that is getting into different topics than the one I'd like to discuss at this point - pure inflation.

 

I've always have been big into runescape's community, although I have a limited economics background to tie theory into what happens in the game. I did enjoy the benefits of owning a few party hats and their exponential growth that occurred for a few years. With the GE though it appears the economy isn't that 'normal' anymore.

I'll recommend some reading for you by my friend Duke Freedom on the topic, although with recent changes I don't really know how relevant they are anymore:

http://www.tip.it/runescape/?times=archives (he wrote a few here)

http://www.runehead.com/editorials/Editorial+Archive-x (and here. and while you're at it, go ahead and give mine a read :P )

I'll go ahead and read it... I love reading different points of views. Thanks for the heads up on the older materials.

[Grimy_Bunyip]

you're economic theory is based on the idea if that the amount of GP in the economy doubled, and the # of all the items in the economy didnt, it the price of everything would double, reach a new equilibrium of sorts, and things would go back to normal.

 

In a nutshell, my oversimplified model does say this. In runescape, there are literally hundreds and thousands of items. I do not wish to go into discussion on how inflation would affect each and every single one of these items, doing so would be pointless.

 

But you do have a valid point - inflation affects different items in different ways. That also goes into how you calculate inflation. There are many ways to do this, including putting together "baskets" of items that every runescaper needs, and then calculating the price change in these baskets.

 

One thing that complicates things is uncertainty - we have absolutely no idea how many scimitars there are at any one point in time, how many nature runes, how many ... you get the picture. We also have no idea the rates these are created or destroyed, further complicating everything.

 

But that is getting into different topics than the one I'd like to discuss at this point - pure inflation.

im not quite sure what you would like to discuss, what exactly do you mean by pure inflation?

 

my point is that inflation will cause prices on different items to rise at different rates. If that's not economic destabilization then i don't know what is.

 

It would be fine if every item were multiplied by 1.5x or some other coefficient. Everything would cost 1.5x more, everybody would make 1.5x more money. Only people that would lose out are people that aren't active and those who have large stacks of cash. Which isnt THAT terrible so long as the inflation isnt occuring extremely fast.

 

But what we're seeing is that some items are being hit hard by inflation, and some are not.

Godswords are a good indicator of the total gp in the economy because they are dropped slowly, and were not dropped in PVP so they do not have drastic external forces attributing to their rise (like the removal of dragon full helms from PVP drops)

 

SGS has gone from 40 -> 75 mil

Lets take an alcheable like air bstaffs. Their price has remained stable since SGS' were 40 mil.

How about the cost per xp of training crafting?

It has tripled since before the PVP update

 

if tripling isnt drastic, i don't know what is. Because incomes sure have not tripled to compensate

Green dragon slaying went from what, 400k -> 700k gp/hour? that is barely double. Definitely not compensating for the damage inflation has done to skills like crafting

[sees_all1]

But what we're seeing is that some items are being hit hard by inflation, and some are not.

Godswords are a good indicator of the total gp in the economy because they are dropped slowly, and were not dropped in PVP so they do not have drastic external forces attributing to their rise (like the removal of dragon full helms from PVP drops)

Perhaps what we're witnessing isn't pure inflation? What I want to know is what is causing different items rising different amounts. But I'll get to what I think is causing it later, because I want to know and discuss what everyone else thinks.

 

Your point about the SGS is a good one - you've identified an item that is isolated from several different variables, but I think it might be susceptible to other factors.

I find this topic fascinating, and it helps me apply what I've learned. I don't know about you, but I like that.

I would much rather talk to others and learn from them than to write everything and have people say, "I like what you've written". That's probably why I like forums much better than English papers or speeches.

[Grimy_Bunyip]

Perhaps what we're witnessing isn't pure inflation? What I want to know is what is causing different items rising different amounts. But I'll get to what I think is causing it later, because I want to know and discuss what everyone else thinks.

 

Your point about the SGS is a good one - you've identified an item that is isolated from several different variables, but I think it might be susceptible to other factors.

I find this topic fascinating, and it helps me apply what I've learned. I don't know about you, but I like that.

I would much rather talk to others and learn from them than to write everything and have people say, "I like what you've written". That's probably why I like forums much better than English papers or speeches.

ah, i gotcha now. You're speculating whether or not all the price rises is due only to inflation or not

you're thinking perhaps OTHER factors are raising the price.

 

sorry i didn't catch that earlier.

 

Anyway's im gonna give an example of what i think you're talking about in terms of "impure" inflation. Tell me if I'm on the ball or not.

 

a) merch clans! in theory they shouldn't affect the prices of items too much. but let me provide an example

lets say that Godswords are a popularly merched item! (because they are)

when in the hands of a merchant, the godsword is not being used.

So lets say merchants buy out half the market when they are buying out

and lets say that merchants have these godswords within their possession half of the time. The other half, the economy is recovering and the merchants are not touching it.

 

This is a vague estimate but merchanting of this sort would effectively decrease the net available godswords in the economy by 25%

causing this "impure inflation" of godswords (that isnt due to actual increase in total gp count)

 

 

Anyways I like to think of things in relative rates.

lets say merchants buy out yew logs, but NOT magic logs

non-merchants would start buying up magic logs instead because yew logs would become more expensive.

if yew logs were merched up 150%, magic logs would NOT rise 150%. Because they are not directly related to the source of the disturbance (merchants).

Thus the relative rate of increase of magic logs would not be as great as that of yew logs.

 

what does this mean in terms of your concept of "pure inflation"?

I think some of your anxiety about "uncertainty" is coming from the fact that you don't know that inflation is not somehow sparking reactions somewhere else in the economy, causing drastic increases in other resources.

 

in terms of relative rates, this will almost NEVER happen barring sporadic events like merchant buyouts and pockets of pent up demand.

In which case inflation would not be the direct cause, these incidents are inevitable and would have happened with or without inflation.

 

There is also the possibility that GS' are this high in price because some really rich merchant bought out 500 of each GS and alched them all.

Once again unlikely.

 

The thing is that relative rates sort of squashes the idea that inflation could somehow be compensating for itself.

[gspbeetle]

But what we're seeing is that some items are being hit hard by inflation, and some are not.

Godswords are a good indicator of the total gp in the economy because they are dropped slowly, and were not dropped in PVP so they do not have drastic external forces attributing to their rise (like the removal of dragon full helms from PVP drops)

Perhaps what we're witnessing isn't pure inflation? What I want to know is what is causing different items rising different amounts. But I'll get to what I think is causing it later, because I want to know and discuss what everyone else thinks.

 

Your point about the SGS is a good one - you've identified an item that is isolated from several different variables, but I think it might be susceptible to other factors.

I find this topic fascinating, and it helps me apply what I've learned. I don't know about you, but I like that.

I would much rather talk to others and learn from them than to write everything and have people say, "I like what you've written". That's probably why I like forums much better than English papers or speeches.

 

The difficult part is indeed what goods to measure inflation.

 

It is somewhat difficult to make something like the consumer price index in our world.

The closest thing we can get is the common trade index:

http://runescape.wikia.com/wiki/Grand_Exchange_Market_Watch/Common_Trade_Index

 

Thats because we dont get everything from ge, we also get many useful ingredients from npc stores.

Npc stores sell at the same price no matter how the GE price (or black market price if ge fails like this: http://forum.tip.it/topic/248053-more-ge-fun/) changes.

Do have a look at this article if you have time:

http://tvtropes.org/pmwiki/pmwiki.php/Main/KarlMarxHatesYourGuts

[fat_klutz]

You know inflation is the product of a strong economy?

[Gigatiran]

tl;dr

The runescape economy is [bleep]ing stupid and makes no kind of sense at all. The ge is [bleep]ing broken and can easily be manipulated and to be honest who wouldn't do it with no consequences and mass profit to be made. In real life these people would be in jail, but whatever. The economy is dumb as [cabbage] and it's fueled by even stupider people who fall easily for hype and tricks. Take edible rares for example...why does everyone want them? People want them because other people want them. They don't do a god damn thing and they are overpriced and useless. Some [wagon] was like hey how can I [bleep] things up, I'll buy all the [bleep]ing eggs and make people think they want them. Then I'll use that and get the [cabbage] I want making that stuff impossible for other people to get. Sorry if I don't make sense, I drank a little much. All I can say is im sick of this [cabbage] and that's why i dont play scape anymore

[sees_all1]

This is a vague estimate but merchanting of this sort would effectively decrease the net available godswords in the economy by 25%

causing this "impure inflation" of godswords (that isnt due to actual increase in total gp count)

I'd prefer to call that the effects of supply and demand. Merchant clans are short term ventures that economically speaking can't work. I've done several graphs with explanations on this in a guide I was writing, here is the link.

The pertinent part is section 2 - Economics of Merchanting clans explained.

 

Anyways I like to think of things in relative rates.

lets say merchants buy out yew logs, but NOT magic logs

non-merchants would start buying up magic logs instead because yew logs would become more expensive.

if yew logs were merched up 150%, magic logs would NOT rise 150%. Because they are not directly related to the source of the disturbance (merchants).

Thus the relative rate of increase of magic logs would not be as great as that of yew logs.

Yes, that does make sense. I think this is an example of substitution, magic logs are a substitute for yew logs.

When it became impossible to buy rune scimitars (because BH was released), I bought adamant scimitars. They worked nearly as well, and didn't hurt so much to lose.

 

what does this mean in terms of your concept of "pure inflation"?

I think some of your anxiety about "uncertainty" is coming from the fact that you don't know that inflation is not somehow sparking reactions somewhere else in the economy, causing drastic increases in other resources.

I think you and I will agree that inflation cannot explain everything that is going on in the economy at once. There's too much other stuff. However, I believe that given enough time we can understand some basic things that are going on, enough to know how to least be affected by it.

[gda_scooby]

I don't think the GE is' {bleepin} broken' or the way people use it illegal, it is maybe amplifying the supply and demand aspect of runescape.

 

Couple of thoughts - if something like a whip was 1.4 mill and stable and is now 3million or so, who is to say that the 1.4 mill 'stable' price was a CORRECT one? Maybe the current price is correct? D bones at 1800 were as a result of bots/macroers/farmers was it not?

 

If it is purely inflation, why do produced/gathered goods go up in price? If coal was 180 and is know hovering around 200, and yew logs 330 ish gone up to 478? Is this rise purely from the extra cash available and everyone buying up all the supplies offering above mid price?

 

Is everything compounded by the fact that people that used to make money from coal mining etc are now going off doing other things which produce cash but no resources? If time = resource then this is consumed by either gatherer or sold to someone else then no net cash is generated - only transferred. In PVP, as i see it, time = money therefore money is the only generated item (more or less).

 

What about GWD and TD? are ALL the items produced there transferred to other people or does coinshare/lootshare generate cash but no items (or items which sit unselling on GE?)

 

G

[langer]

The economy used to be based around skills. Meaning the GPs would come from skills (mining --> smithing --> alchemy or WC --> fletching --> alchemy or dragon hides --> crafting --> alchemy or monster drops and to a lesser extent, thieving).

 

Getting wealth through skills was worth it because it gave a balanced amount of GPs and XP.

 

Lately, with PVP drops, a new way to introduce GP into the game has been added and it is better than skilling resulting in less people skilling for cash (hence supply lowers) and players having more cash to spend on buyable skills and equipment (demand rising).

 

Sure you can call it inflation, but it is also the result of demand and supply.

Once Jagex fix PVP tricking to a point where skilling becomes a better option to making cash and getting XP, expect supply to raise and demand to lower, resulting in all items not bound by limits (GE limits, alchemy limits) to drop.

 

Edit : GDA actually wrote something in the same lines as me.

Edited October 21, 2009 by langer

[gda_scooby]

The economy used to be based around skills. Meaning the GPs would come from skills (mining --> smithing --> alchemy or WC --> fletching --> alchemy or dragon hides --> crafting --> alchemy or monster drops and to a lesser extent, thieving).

 

Getting wealth through skills was worth it because it gave a balanced amount of GPs and XP.

 

Lately, with PVP drops, a new way to introduce GP into the game has been added and it is better than skilling resulting in less people skilling for cash (hence supply lowers) and players having more cash to spend on buyable skills and equipment (demand rising).

 

Sure you can call it inflation, but it is also the result of demand and supply.

Once Jagex fix PVP tricking to a point where skilling becomes a better option to making cash and getting XP, expect supply to raise and demand to lower, resulting in all items not bound by limits (GE limits, alchemy limits) to drop.

 

Edit : GDA actually wrote something in the same lines as me.

 

What Langer said :)

 

ANother interesting point before we blame everything on PVP - out of say 70k people playing, theres maybe 3k pvping? Is this enough people to effect everyone else? Are the amounts of money being injected by PVP players sufficient to skew everybody else? What costs/profit is PVP jsut now?

[mlclm]

ITT: People who like to pretend they have a degree in economics.

 

Also, economist is a nine letter word for "cheap." (I heard that from my micro teacher lol)

[sees_all1]

Sure you can call it inflation, but it is also the result of demand and supply.

Once Jagex fix PVP tricking to a point where skilling becomes a better option to making cash and getting XP, expect supply to raise and demand to lower, resulting in all items not bound by limits (GE limits, alchemy limits) to drop.

 

I think this will be my next topic for discussion... I want to look a little past the PVP updates.

I think supply and demand is a little more pertinent to current affairs than inflation is.

It was just everyone else calling it inflation, blaming it on inflation, saying we need to fix inflation that was getting me a little irked.

 

The other thing I'd consider writing about is similar to inflation - what is money? (I was actually just lectured over this in a macroeconomics class, so its fresh in my head).

 

I'll probably get started on that tonight...

[Grimy_Bunyip]

I think this will be my next topic for discussion... I want to look a little past the PVP updates.

I think supply and demand is a little more pertinent to current affairs than inflation is.

It was just everyone else calling it inflation, blaming it on inflation, saying we need to fix inflation that was getting me a little irked.

 

The other thing I'd consider writing about is similar to inflation - what is money? (I was actually just lectured over this in a macroeconomics class, so its fresh in my head).

 

I'll probably get started on that tonight...

I'm not sure i quite see this as a discussion though.

Everything boils down to "oh well maybe it's not just because of inflation"

which is kind of an obvious point that really isn't worth addressing

 

it took several posts for you to actually say something worth discussing "I think supply and demand is a little more pertinent to current affairs than inflation is."

which is great, now I'd like to know why you think that. That way we actually have something to discuss

 

Basically you told us a fact (that inflation isn't the sole cause of price rises). The thing is facts have 0 discussion value. Telling someone a fact isn't having a discussion with them, it's lecturing them. Which is nice and all when students come to class to listen to learn, but people here are either here to troll you, support you, or prove you wrong.

 

can I finally hear what your opinion is now?

[AceSpitball]

we've had about 400 of these threads talking about the rs economy, and frankly, it's the same crap being repeated over and over

[sees_all1]

we've had about 400 of these threads talking about the rs economy, and frankly, it's the same crap being repeated over and over

 

I hope not... I'm trying to bring a new perspective.

 

 

 

I posted my thoughts on supply and demand. Tell me what you guys think, I'm open to discuss, debate, and learn :P

[Youmu]

First of all, I'm really bad at the understanding of economics, so excuse my crappy explanation.

 

Lobsters plummeted, because people use the raw ones for cooking and sell the cooked ones. In addition, there are better food in F2P, such as Swordfish and Anchovy Pizza (which rose to 500 and 1800 respectively). Fire runes also plummeted, because there's the fire staff for superheating/high alch spells, although now they are used in Fire spells, due to prices of air runes.

 

Btw, before, Fire runes were basically unsellable, and at 9 GP each. Now they are 7 GP each, but they sell very fast because of personalized shops.

[sees_all1]

First of all, I'm really bad at the understanding of economics, so excuse my crappy explanation.

 

Lobsters plummeted, because people use the raw ones for cooking and sell the cooked ones. In addition, there are better food in F2P, such as Swordfish and Anchovy Pizza (which rose to 500 and 1800 respectively). Fire runes also plummeted, because there's the fire staff for superheating/high alch spells, although now they are used in Fire spells, due to prices of air runes.

 

Btw, before, Fire runes were basically unsellable, and at 9 GP each. Now they are 7 GP each, but they sell very fast because of personalized shops.

 

Is this in reference to Macroing / RWT?

I understand the point about Fire Runes, its related to price floors. I'm not sure the time frames you're referencing when you're talking about lobsters, swordfish, and Anchovy Pizza. My point was that after RWT was basically stopped, lobsters went to an unheard of price of 150-170 each. Pure Ess was at a historical low at that point, and ever since has been creeping higher and higher.

 

Is it plausible that the prices we're seeing now are the new equilibrium, or approaching the new equilibrium?

 

A little more to add - Back when there was RWT, A significant portion of the RS population was a bot or a gold farmer. I remember there used to be around 160k people playing at once daily, and now its closer to 80-100k (I couldn't tell you exact numbers, the average or st dev, but others will remember this too). Could that be supply being cut by 20-30%?

[Youmu]

First of all, I'm really bad at the understanding of economics, so excuse my crappy explanation.

 

Lobsters plummeted, because people use the raw ones for cooking and sell the cooked ones. In addition, there are better food in F2P, such as Swordfish and Anchovy Pizza (which rose to 500 and 1800 respectively). Fire runes also plummeted, because there's the fire staff for superheating/high alch spells, although now they are used in Fire spells, due to prices of air runes.

 

Btw, before, Fire runes were basically unsellable, and at 9 GP each. Now they are 7 GP each, but they sell very fast because of personalized shops.

 

Is this in reference to Macroing / RWT?

I understand the point about Fire Runes, its related to price floors. I'm not sure the time frames you're referencing when you're talking about lobsters, swordfish, and Anchovy Pizza. My point was that after RWT was basically stopped, lobsters went to an unheard of price of 150-170 each. Pure Ess was at a historical low at that point, and ever since has been creeping higher and higher.

 

Is it plausible that the prices we're seeing now are the new equilibrium, or approaching the new equilibrium?

 

A little more to add - Back when there was RWT, A significant portion of the RS population was a bot or a gold farmer. I remember there used to be around 160k people playing at once daily, and now its closer to 80-100k (I couldn't tell you exact numbers, the average or st dev, but others will remember this too). Could that be supply being cut by 20-30%?

My example is right after the personalized shop update. Because of this, supply significantly fell, therefore demand on items literally skyrocketed.

 

I dunno why lobsters were 150-170 GP each. However, it is now 365 GP each. It's just like what you said, they have been creeping higher and higher due to more people buying them. Even more people bought those items thanks to personalized shops.

[langer]

Of course prices of raw materials are high because there is less supply and the majority of players got used to get their materials cheap so they found other activities to get money. Now that getting these materials is a viable money makers, we see more people willing to get them for more cash but less xp (except for higher levels).

 

The new equilibrium is what we experience now. Nerf PVP drops and a bunch of players will fin themselves with something else to do to get cash (skilling, gathering or slaying-monster hunting), making the supply rise and prices drop to a new equilibrium.

[sees_all1]

Of course prices of raw materials are high because there is less supply and the majority of players got used to get their materials cheap so they found other activities to get money. Now that getting these materials is a viable money makers, we see more people willing to get them for more cash but less xp (except for higher levels)

 

The question is, is it plausible that it took about a year before the prices got up to this level?

The equilibrium price for fire runes (right now) is somewhere between 6 and 7 GP. I'm not sure if it'll be higher in the future, but Jagex had a price floor on these for a very long time. Granted the floor was only 9 gp, but it only took 5 days before they reached an equilibrium.

 

If in 1 year, fire runes are around 20-30 each, then I'll say that it was probable that item prices then went so low and stayed low for so long because of all the gold farmers.

If in 1 year, fire runes are still 6-7 gp each, then I'll say its improbable, because the markets should have adjusted much more quickly.

[hohto]

I remember that after unbalanced trade was removed, for some reason this prices of cooked lobsters plummeted. I don't have any historical records to point to, and if anyone could provide it I'd appreciate it. I remember this so well because I lost so much money on it. I purchased several k's of lobsters on the GE at minimum instantly, and the price dropped down to 150 each. (EDIT:I've been searching some forums, and from Tip.it's price check of 2006 - http://forum.tip.it/topic/61735-price-list-overview/ (lobster is 220-250)

From another forum post that was last editted Mar 12 2007 - http://forums.d2jsp.org/topic.php?t=6700253&f=225

Lobster is 180-210. I'm still looking, but its looking fairly consistent...)

 

Lets take a look at lobbie prices...

 

Their drop was timed pretty closely to the end of RWT like you said. This caused a major oversupply and the dropping prices basically forced people to sell their lobbies or wait for "tomorrow" when buying them. The snowball was rolling. It's also noticeable that the GE (which came around the same time) offered a chance for people to sell their lobsters in smaller amounts too. This offered a new chance for lower leveled people and for those who didn't feel like fishing 1k, 5k or 10k lobbies at once or who didn't want to sell them in small amounts. This meant an increased supply, despite it may look small at first: as enough small things combine, the result is something relatively big.

 

Also importantly, summoning was released and "fixed". This meant that bunyips and unicorns dropped the need for training food, which is argueably what lobbies are mainly used for. It's probably worth mentioning that the people who get a hold of these beasts at the first months were mainly those, who would have bought their food in masses too. Same time GE made buying anchovy pizzas easier, meaning there was less demand for lobbies in f2p: the demand of anchovy pizzas dropped the demand of swordfish and this made swordish a reasonable method for many players. This affected to the demand of lobsters as for cooks, swordfish became a proper alternative.

 

For the last lobbie rise, just look at the dates and compare it to anchovy pizzas. When Jagex stopped the "infinity stock stores", the anchovy pizzas skyrocketed. As you couldn't get them as easily as earlier and there was a huge demand for them due pkin, it was obvious that their prices rose. We can see from the GE charts that the rise of lobbies started during the same time: people needed alternatives for pizzas and thus increased the demand of other food. Could also mention that apple pies for example took a small jump there (and stabilized quickly to 40-50% higher than were they were) as they were used as one alternative. It doesn't require an iq of 180 to figure out that the chance in supply of one item can affect to the demand of another.

 

It's more than likely that soon the demand of anchovy pizzas will drop due them being too expensive to be efficent in masses, a lot will be dumped (I for example have quite a few thousands banked and I know many other pkers have too) and thus the snowball is ready. I'd be ready to bet that without an update the price won't go anywhere close to the "original" one, but I see no reason why would they be impossible to buy at 2.2k per in a long run. They aren't that supreme after all and there are alternatives that are still as easy to get as they were before.