Relating Economic Topics to Runescape

[sees_all1]

Sorry for the delayed response - I've been a little busy.

 

@hohto - The economics you use to justify your points are mostly correct, the only thing I'm a little uncertain is the entire time-line you're using.

Summoning was released what, three months after the death of RWT? And at that point in time, no one would have the levels to summon those familiars. It would take a little bit longer than that for the effects you've described to kick in.

 

 

 

 

Also, I've posted my third topic, "What is GP anyway?" Hope to have some good discussions on it.

[mysafehome01]

I, myself have only a limited knowledge of the financial sector but as i was watching a documentary I realised something. The way in which merchant clans operate is very similar to the methods used by the big money making wall street 'speculators', which caused the Wall street crash of 1929.

 

The methods as you probably know are simple. Items are bought by 'leaders' at a high price days/weeks before the general public are told of the items to purchase, they then sell all their items/stocks at a 'hidden' earlier date causing them to ultimately maximise their profits.

Edited October 30, 2009 by laura0077

[sees_all1]

I, myself have only a limited knowledge of the financial sector but as i was watching a documentary I realised something. The way in which merchant clans operate is very similar to the methods used by the big money making wall street 'speculators', which caused the Wall street crash of 1929.

 

The methods as you probably know are simple. Items are bought by 'leaders' at a high price days/weeks before the general public are told of the items to purchase, they then sell all their items/stocks at a 'hidden' earlier date causing them to ultimately maximise their profits.

 

Well, true, but there are some key differences between the financial system during 1929, and today.

First of all, in 1920s, the majority of stocks were purchased at margin. People would pay 5-10% of a large amount of stock, and take out a loan to finance the rest of the purchase.

This worked great because people would make tremendous profits, so long as stock prices continued to rise.

(people were able to take out loans)

 

Second of all, banks would do similar practices, they would back deposits with the stock market.

(banks were able to participate in trade)

 

Lastly, when people couldn't pay back their loans when stock prices fell, banks started failing.

(banks could not give back deposits)

 

 

 

What you've said about merchanting clans is true enough, and I've illustrated that in section 2 of the first post in this thread.

[hohto]

Summoning was released what, three months after the death of RWT? And at that point in time, no one would have the levels to summon those familiars. It would take a little bit longer than that for the effects you've described to kick in.

 

Summoning was released on jan 15th, the trade limit was fully removed on jan 2nd. Of course you're right on the 3 month period - basically before the update at the end of march familiars such as bunyips were more or less waste of time as they lasted for so short period of time. I also didn't mean the drop was first caused by this, I agree with your "dumping theory" as the reason for crash. My idea was to say that the demand of fish was first hit by the dropping prices and summoning didn't definitely at least increase the demand few months later. In other words summoning didn't cause a crash but it made it last longer and even still today affects to the demand.

[Deathmath]

Graargh. It's not pure inflation. So? Pure inflation isn't that negative, as everything should move at the same rate. And these aren't equilibrium prices. Junk wouldn't exist if everything was at equilibrium. Alching puts a price floor on things, the GE sometimes put a price cieling. This comes at the cost of efficiency: therefore the inflation is worse than pure inflation.

 

The ge makes things liquid... yes... But at a cost. It manipulates prices, and makes things so liquid it's ridiculous. People normally have to spend opportunity cost on buying and selling. It's why I buy stuff at target which is 3 miles away, instead of spending an hour to buy the same product for $2 at walmart 20 miles away.

 

Liquidity isn't uniform either: which is a problem.

 

And some of this inflation could be demand pull inflation, in that there is not enough supply at the current price.

 

It is said by wikipedia to be

 

"too much money chasing too few goods". More accurately, it should be described as involving "too much money spent chasing too few goods"

 

Because more money enters the economy, people won't buy them at the old equilibrium price. So it changes. But some items are more elastic... It goes on and on.

 

I'll have out an article at some point in the future: i've had a couple posts in a month on here and am really really really busy. Feel free to correct me. These are my thoughts, but I think they are soundly based in economic principle in a convoluted system. (the runescape economy.)

[sees_all1]

EDIT: I've now added in a forth topic, discussing price floors and ceilings. I'm looking forward to some insight as to what everyone else thinks. I also welcome discussion on past topics.

 

 

Graargh. It's not pure inflation. So? Pure inflation isn't that negative, as everything should move at the same rate. And these aren't equilibrium prices. Junk wouldn't exist if everything was at equilibrium. Alching puts a price floor on things, the GE sometimes put a price cieling. This comes at the cost of efficiency: therefore the inflation is worse than pure inflation.

"Pure inflation isn't that negative" is a point I've bee trying to make for the past three weeks, I'm glad you understand that.

The point about junk not existing also gets to the efficiency of the GE, if it was 100% efficient, there could be no junk.

 

And some of this inflation could be demand pull inflation, in that there is not enough supply at the current price.

 

It is said by wikipedia to be

 

"too much money chasing too few goods". More accurately, it should be described as involving "too much money spent chasing too few goods"

 

Because more money enters the economy, people won't buy them at the old equilibrium price. So it changes. But some items are more elastic... It goes on and on.

The point about demand-pull inflation relates in a very strong way with the death of macroing and RWT. I think the full effects of this, along with a crazy increase in demand for pvp materials is starting to hit home.

 

I'll have out an article at some point in the future: i've had a couple posts in a month on here and am really really really busy. Feel free to correct me. These are my thoughts, but I think they are soundly based in economic principle in a convoluted system. (the runescape economy.)

I'm looking forward to reading it, it'll be refreshing to read something from someone who has shown credibility in knowing what they speak about. Thanks for the post.

[Deathmath]

Err... One sec. I'm typing up a bout three pages of McConnell Brue so we can try to relate it to the RS economy...

 

I disagree with you on some points... this is why

 

Inflation hurts some people, leaves others unaffected, and actually helps still others. That is, inflation redistributes real income from some people to others.

 

Fixed income receivers (MTK?), Savers, and creditors are hurt

 

Who not affected or positively affected: those with cost of living adjustments?, debtors

 

If people anticipate inflation it can be stopped if incomes become adjusted by the government/interest rates

 

Exact Quote (The following is from mcconnell brue.. please don't sue:

Economists do not fully agree on the effects of mild inflation (less than 3 percent) on real output. one perspective is that even low levels of inflation reduce real output, because inflation diverts time and effort towards activities designed to hedge against inflation such as:

Incurring the cost of changing prices

 

spending considerable time obtaining information on what the actual prices are

 

More money is changed from cash to checking accounts and stocks. More frequent trips to these places are necessary

 

some people say it's good because of growth..., some say it's bad yadda yadda yadda

 

Hyperinflation and Breakdown

All economists agree that the nation's policymakers must carefully monitor mild inflation so that it does not snowball into higher rates of inflation or even into hyperinflation. The latter is an extremely rapid inflation whose impact on real output and employment usually is devastating. When inflation begins to escalate, consumers, workers, and businesses assume that it will rise even further. So, rather than let their idle savings and current incomes depreciate consumers "spend now" to beat the anticipated price rises. Businesses do the same by buying capital goods. Workers demand and receive higher nominal wages to recoup lost purchasing power and to maintain future purchasing power in the face of expected higher inflation. Actions based on these inflationary expectations then intensify the pressure on prices, and inflation feeds on itself.

 

Aside from its disruptive redistribution effects, hyperinflation may cause economic collapse. Sever inflation encourages speculative activity. Businesses, anticipating further price increases, may find it profitable to hoard both materials and finished products. But restricting the availability of materials and products intensifies the inflationary pressure. Also rather than invest in capital equipment, businesses and individual savers may decide to purchase nonproductive wealth--jewels, gold and other precious metals, rel estate, and so forth--as a hedge against inflation.

 

In the extreme, as prices shoot up sharply and unevenly, normal economic relationships are disrupted. Business owners do not know what to charge for their products. Consumers do not know what to pay. Resource suppliers want to be paid with actual output, rather than with rapidly depreciating money. STUFF ABOUT LOANS

 

The economy may be thrown into a state of barter, and production and exchange drop dramatically. the net result is economic, social, and possibly political chaos. The hyperinflation has precipitated monetary collapse, depression, and sociopolitical disorder.

 

 

Yeah.. That's useful about inflation... We can discuss it at some point, methinks.

WWII examples

[sees_all1]

Of these three things:

"-Incurring the cost of changing prices

-spending considerable time obtaining information on what the actual prices are

-More money is changed from cash to checking accounts and stocks. More frequent trips to these places are necessary"

 

The only one I find relevant to the discussion is the third, but in an abstract sense.

 

The first is about the "menu cost", but people in runescape don't print menus or incur costs related to posting prices.

 

The second, price checking, is irrelevant because it takes literally 10 seconds to check the price of an item on the GE, and worst case is an hour, posting to a forum asking advice.

 

The third is talking about liquidity, a parallel I can see to runescape would be trips to the G.E., time spent teleporting, and time waiting for offers to complete.

 

If I didn't have a pre-lab to do, I would get into a discussion about hyper-inflation. I'll give a more complete response tomorrow.

Thanks for the reply, I look forward to the ensuing discussion.

[Deathmath]

Of these three things:

"-Incurring the cost of changing prices

-spending considerable time obtaining information on what the actual prices are

-More money is changed from cash to checking accounts and stocks. More frequent trips to these places are necessary"

 

The only one I find relevant to the discussion is the third, but in an abstract sense.

 

The first is about the "menu cost", but people in runescape don't print menus or incur costs related to posting prices.

 

The second, price checking, is irrelevant because it takes literally 10 seconds to check the price of an item on the GE, and worst case is an hour, posting to a forum asking advice.

 

The third is talking about liquidity, a parallel I can see to runescape would be trips to the G.E., time spent teleporting, and time waiting for offers to complete.

 

If I didn't have a pre-lab to do, I would get into a discussion about hyper-inflation. I'll give a more complete response tomorrow.

Thanks for the reply, I look forward to the ensuing discussion.

Of course, I understand the elimination of the prior two, missed them when striking through stuff.

[sees_all1]

I looked over the MTK minigame, and the conclusion I draw from it is that people doing this are helped by inflation.

 

In my explanation, only consider the value of GP relative to itself.

It costs 75k a day to play MTK. This cost is fixed.

When you purchase items from MTK, they charge you fixed prices.

 

Coal costs 91.6 gp from MTK regardless of the GE price. I think you and I can agree that with pure inflation, the price of virtually everything goes up. Say there is 25% inflation.

If all you kept in your bank was items, you wouldn't lose any wealth. But for the sake of argument, say all you had was GP. MTK still costs the same to do regardless. You still gain the same amount of items, which now from inflation cost 25% more.

MTK is now virtually cheaper to participate in and gives much better returns.

 

Please tell me if I have that right.

 

 

 

Anyhow, everyone in runescape has a virtual "cost of living expenses" adjustment. When people work, they receive items, and not GP. The items rise in price with inflation, which is an adjustment.

 

I'm going to continue to maintain that inflation in Runescape isn't bad for the average player. It hurts those with very large cash piles that don't or can't use it (idle players), but in day-to-day activities the effects of even 10% inflation a month aren't noticeable (prices of everything rise by .3% every day, the price of the 1k item goes up by 3gp.)

[Deathmath]

good point... didn't think that through. Honestly, it could cause problems if it goes on like this unchecked.

[sees_all1]

good point... didn't think that through. Honestly, it could cause problems if it goes on like this unchecked.

 

In another thread, I was arguing with TS Stormrage. One of the things he kept saying was that this inflation we're experiencing now was caused mostly by PvP worlds. I disagreed with him, especially after calculating it out:

 

I did the math using methods similar to what Duke Freedom did back in '05.

 

For all the assumptions I made, I came out with a number.

Assumptions:

1.Respective XP over a threshold level in each category is only for certain alchable items (if you read his article, it'll make a bit more sense)

2.GP was drained at the same rate as Duke predicted

3.Every player before PVP updates contributed 200k to the economy.

 

The amount of GP I found was on the order of tens of trillions.

 

So, I made the assumption that last month there was 10 trillion GP in runescape.

In order to have 3% inflation over the past month:

4.Each PVP world was 3/8th full

5.Every person on a PVP world received drops of coins only

6.When a person died, they would net zero items (including pvp materials / food, potion, weapons, etc.)

7.Every hour everyone on a PVP world would get a drop

 

To cause 3% inflation, the drop had to be valued at 93k gp.

The assumptions for #1,2,3 were pretty broad. For instance, in the skill of fletching, it is easy to make the assumption that everyone fletched yew longbows. For the skill of smithing, it is not easy to make the assumption that everyone smithed steel platebodies. Also, there are more skills now and more ways to make GP now than there were when Duke did the original calculation.

#1 probably over estimated GP, #2 probably under estimated GP, and #3 probably under estimated GP.

 

A sample calculation for Fletching:

Riemann sum for the high scores, bounded at the right to always underestimate XP.

Points were taken at significant drops: 42, 100, 500, 1000, 5000, 10000, 25000, and each 25k afterwards, until ~lvl 70.

Estimated EXP from Fletching passed lvl 70 was 2.01e12 (that's trillion), Estimated GP from Fletching was 10.3 trillion GP.

 

 

Assumptions #4,7 in my opinion was fairly accurate: rarely are all worlds past 3/8 full, and people gain EP at a rate of 25% every 30 minutes; most drops take up on the order of 50%.

Assumptions #5,6 had to be made: It's impossible for me to know at what rate items enter / leave the game for PVP.

 

The conclusion for 3% inflation, in my opinion was fairly reasonable.

 

 

 

 

 

Anyhow, the point after all of that is certain CPI's have been predicting 12-16% inflation per month over the past 3 months. That rate is not sustainable.

Say there is 10 trillion GP in the runescape economy. In order to have 10% inflation, the first month GP has to increase by 1 trillion (with production remaining the same). In order to keep it 10% the second month, GP has to increase by 1.1 trillion. Next, 1.21 trillion, and on and on.

Let's assume my PVP calculations were correct, and with 10 trillion GP in the economy, players getting 93k / drop will produce 3% inflation.

So for 10%, they'll need 310k per drop for the first month (1 trillion), 341k the second month (1.1 trillion), 375k the third month, 413k the forth... This doesn't happen, it cannot happen.

 

Consider that every player receives 310k per drop, always (along with assumptions 5,6). This might cause 10% inflation the first month, but then GP is inflated, so in last month's money they receive 281k. Also the GP became more and more inflated, the amount of people in PVP would become less and less, as they found they couldn't buy as much with the same amount they PK'd.

 

That, combined with the paragraph above, is why high inflation is unsustainable for a long period of time in runescape (until the next boneheaded update).

 

Also, my argument for why inflation is not bad to the average player:

The neutrality of money.

In addition the Neutrality of money, GP is directly convertible into items. At any point in time, a player can swap out all of their gp for items. Not all players can use the GE to do this, but all players can trade shops.

 

This makes inflation neither good nor bad, but indifferent.

[Deathmath]

I agree with the first half. However, I am not one to agree with the Keynsian view on neutrality in real life or in runescape. I think it is a somewhat negative aspect that should be addressed, but shouldn't cause "The fall of the Jagex Empire"

[Troacctid]

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.

Ugh, I despise price ceilings. I can't buy plain pizzas for making p'apple pizzas. I can't buy bronze or iron knives for training ranged. It's really annoying. Hope they fix those ones soon.

 

Supply and demand have the ability to successfully regulate the prices of every commonly-traded item on Runescape that I can think of. Might as well scrap the arbitrary price ceilings altogether--the personalized shop update has made most of them unnecessary.

[Deathmath]

In soviet RuneScape the prices control you.

[Trollface]

Mint cakes are 6m each now. Utter insanity.

[stonewall337]

Honestly, you can not, with any great degree of accuracy, compare RS to any current capitalist system for many reasons.

 

1. It is not a free market. The price of items can be, and is sometimes changed by an external factor (Jagex) despite all rules of supply and demand.

 

2. Unlike the real world, finished products are less valuable. Essentially, we have 2 "currencies", GP, and XP in certain skills.

 

3. Those who attempt to scam others through Ponse Schemes are allowed to continue.

 

4. The GE price isn't all that accurate as far as supply and demand.

 

5. Stable junk is essentially equivalent to cash, as long as the item being traded for has a street price differing from the GE price. The only real difference is that this junk can't be used to buy things on the GE.

 

There are more issues to be considered, but that is a lot of why you simply can not apply many real life economic laws to Runescape; it has a completely different economic structure.

 

Also, mint cakes are really fast and easy to get, as long as you have done the Glouphire quest line. You take a gnome food to the explorer gnome, and he gives you a mint cake.

[Troacctid]

Honestly, you can not, with any great degree of accuracy, compare RS to any current capitalist system for many reasons.

 

1. It is not a free market. The price of items can be, and is sometimes changed by an external factor (Jagex) despite all rules of supply and demand.

 

2. Unlike the real world, finished products are less valuable. Essentially, we have 2 "currencies", GP, and XP in certain skills.

 

3. Those who attempt to scam others through Ponse Schemes are allowed to continue.

 

4. The GE price isn't all that accurate as far as supply and demand.

 

5. Stable junk is essentially equivalent to cash, as long as the item being traded for has a street price differing from the GE price. The only real difference is that this junk can't be used to buy things on the GE.

 

There are more issues to be considered, but that is a lot of why you simply can not apply many real life economic laws to Runescape; it has a completely different economic structure.

 

Also, mint cakes are really fast and easy to get, as long as you have done the Glouphire quest line. You take a gnome food to the explorer gnome, and he gives you a mint cake.

You're wrong.

1. Price floors and ceilings exist in the real world too.
   
2. Finished products are less valuable because of the exact same supply and demand laws that we have in real life.
   
3. I don't think you even know what a Ponzi Scheme is if you think they exist in Runescape.
   
4. The GE price has the tendency to lag behind supply and demand sometimes and has price floors and ceilings on some items, but otherwise reflects supply and demand very accurately.
   
5. The junk phenomenon is simply a black market, jus like the black markets we have in real life.
   

 

Also, doesn't he only give you the mint cake once?

[sees_all1]

Actually, its much easier to relate economic topics to runescape than it is in the real world.

For one, there is only one universal currency, and its much easier to trust (rather than the tens to hundreds of currencies in the real world).

Another, there are no taxes, no interest rates, and no unemployment. Everyone who wants a job can get one.

Lastly, there are much fewer confounding variables, fewer items, no external costs like pollution.

[stonewall337]

Honestly, you can not, with any great degree of accuracy, compare RS to any current capitalist system for many reasons.

 

1. It is not a free market. The price of items can be, and is sometimes changed by an external factor (Jagex) despite all rules of supply and demand.

 

2. Unlike the real world, finished products are less valuable. Essentially, we have 2 "currencies", GP, and XP in certain skills.

 

3. Those who attempt to scam others through Ponse Schemes are allowed to continue.

 

4. The GE price isn't all that accurate as far as supply and demand.

 

5. Stable junk is essentially equivalent to cash, as long as the item being traded for has a street price differing from the GE price. The only real difference is that this junk can't be used to buy things on the GE.

 

There are more issues to be considered, but that is a lot of why you simply can not apply many real life economic laws to Runescape; it has a completely different economic structure.

 

Also, mint cakes are really fast and easy to get, as long as you have done the Glouphire quest line. You take a gnome food to the explorer gnome, and he gives you a mint cake.

You're wrong.

1. Price floors and ceilings exist in the real world too.
   
2. Finished products are less valuable because of the exact same supply and demand laws that we have in real life.
   
3. I don't think you even know what a Ponzi Scheme is if you think they exist in Runescape.
   
4. The GE price has the tendency to lag behind supply and demand sometimes and has price floors and ceilings on some items, but otherwise reflects supply and demand very accurately.
   
5. The junk phenomenon is simply a black market, jus like the black markets we have in real life.
   

 

Also, doesn't he only give you the mint cake once?

 

You are so wrong. The whole merchant clan idea is a ponzi scheme. Junk isn't comparable to black market, as it is completely legal. Black market items have a value due to utility. Junk doesn't, except as junk, not due to any use. I never said price floors and ceilings don't exist IRL. Finished products are worth less in game then raw because they don't have any xp potentiall. I stated why they were worth less, and you actually prove my point. What you are arguing about there I have no clue, as you only reinforce my argument. And also, the GE does a terrible job keeping up with supply and demand, it doesn't just lag behind. Look at items which are often unbuyable in the GE for months at a time. If true supply demand were met, they would rise until they reached a price were, at that time, the supply equals the demand at the price.

 

All of your points are wrong, except for your very last one.

 

Also, see all, then you are relating economic principles to RS, which is what I said is possible. However, I said you can NOT compare a true capitalist societies economy to RS, as RS is not a capitalistic. True, it is a lot less repressive then, say, a communist society.

[Troacctid]

You are so wrong. The whole merchant clan idea is a ponzi scheme. Junk isn't comparable to black market, as it is completely legal. Black market items have a value due to utility. Junk doesn't, except as junk, not due to any use. I never said price floors and ceilings don't exist IRL. Finished products are worth less in game then raw because they don't have any xp potentiall. I stated why they were worth less, and you actually prove my point. What you are arguing about there I have no clue, as you only reinforce my argument. And also, the GE does a terrible job keeping up with supply and demand, it doesn't just lag behind. Look at items which are often unbuyable in the GE for months at a time. If true supply demand were met, they would rise until they reached a price were, at that time, the supply equals the demand at the price.

 

All of your points are wrong, except for your very last one.

 

Also, see all, then you are relating economic principles to RS, which is what I said is possible. However, I said you can NOT compare a true capitalist societies economy to RS, as RS is not a capitalistic. True, it is a lot less repressive then, say, a communist society.

The very fact that we're having this discussion at all means that you certainly can compare Runescape to a capitalist society's economy.

[sees_all1]

However, I said you can NOT compare a true capitalist societies economy to RS, as RS is not a capitalistic. True, it is a lot less repressive then, say, a communist society.

You'd have a hard time finding a true "capitalistic societies economy" these days. But that is neither here nor there.

 

In my opinion, discussion on Runescape's economy is valuable to the every day 'scaper, not only so they can know why prices on items are doing what they're doing, but also so they can make informed decisions about their ventures (for instance, whether to participate in price manipulation or not).

 

I can appreciate your views, and I'm happy to see the discussion from it. However, I would hope that in the future when you disagree with someone on the surface, you can still understand the point of view they have.

It's very difficult to disagree someone and not seem like you're flaming them, especially on an internet forum.

Remember, the internetz is very serious businez. :thumbup: