Tip.It Times Presents: Construction; Deflation or Not?

[Duke_Freedom]

I also love how your predictions are coming out "without a problem".

 

 

 

Although there were some people who found my predictions in the previous article contraversional, most of my predictions are quite conversative predictions actually as I base them on a lot of (historic) data. Though *insert lame standard investement disclaimer voice here* results from the past give no guarantee for the future ofcourse. :P

 

 

 

I hadn't realised crackers were back up above blues again.

 

 

 

It's good that you mention it, as very few people observe the "regular" switching of blue phats and crackers in price 'position'. Yet, for the top merchants their price development can sometimes be very interesting for speculation and quite a buck can be made from just trading between blue phats and crackers alone.

 

 

 

Maybe start with rs again with a new account and see how fast you can pick up with the rare market again?

 

 

 

I appreciate that people would like me to play again, but it is rather unlikely that I'll ever return to playing rs again. I don't really have anything to come back for and I was much less active on RuneScape then I used to be for quite a long period already.

 

 

 

However, as you can see that doesn't mean I'm leaving this community (not for now, or anytime soon at least) yet. I've always had interest in just observing RuneScape's economy too and as quite a few people here like to read my observations as well, I don't mind writing about it either. :)

 

 

 

you asumed that construction would be "at least" half as popular, and provided estimates based on it being half as popular. No doubt in a few months it will be a lot less than half as popular as is has been, so perhaps in a few months it won't have anywhere near as much "drainage power" as predicted.

 

 

 

Perhaps yes. I found it hard to make a reasonable assumption on how popular it would stay, but I mainly just wanted to point out what the potential effects of construction are. As said, to determine how important construction will really be, we'll need to take a look at the whole situation again in a few months time.

 

 

 

The closer the cost is to other skills, the more likely players are to invest in it before investing in a non money draining skill.

 

 

 

I'm not sure what makes people think construction is so expensive. Well perhaps I do know: people can clearly see that construction costs money, whereas they may not notice that with most other skills.

 

 

 

For example, do people realize that when you smith steel bars or mith bars into plates, they basically "spend" ~10gp / xp on smithing? Do people know that burying dragon bones for pray exp is even much more expensive then that? (although with the ectofunctus it should be somewhere around 10gp / xp as well I think)

 

 

 

Construction, when you level it with oak logs, should cost less then 10gp / xp, somewhat depending on the amount of expensive items you make as well.

 

 

 

Therefore, I fail to see why many people call construction "expensive". It is comparable to other skills in terms of exp cost (unless you choose the expensive way of mahogany ofcourse). I think that just because people can better observe what they pay for the exp, they think it's a lot more expensive then what they "pay" for other skills.

 

 

 

Something I forgot to mention earlier, full phat sets also passed 1bil worth recently.

 

 

 

Thanks everyone else for the positive reactions as well. :)

[kevinfangs]

cool article, but then, are you sure money is being removed from the economy when we buy construction materials?

 

 

 

Here's what's happening in my opinion:

 

 

 

Person A cuts oaks: no money spent

 

Person B mines ores and makes nails: again, no money disappears

 

 

 

Person C raises construction by buying materials off these two chaps. Thus, the money is still in the economy, just in different hands. The only way money is actually "lost" is if you buy materials from a store, wherein the money "returns" to Jagex.

 

 

 

Thus, from this conclusion, the only reason Rares are losing their value is because their demand is going down. Looking at the economy through individual people's eyes allows one to realize that once a person has invested cash in materials (not leaving the economy, just moving to somebody else). Cash for players isn't unlimited; spending cash here means no cash to spend there. Thus people don't want to use their money on Rares. Thus, prices fall. Technically, this isn't really inflation; only on the part of rares, not normal items.

 

 

 

A correct view of inflation:

 

 

 

People invest lots of money on their countries' imports, thus the cash flows away to another country. The currency weakens, and demand for that currency falls. The government calls up the federal bank and asks for an interest rate increase (because when interest goes up, loans are costly and people don't feel like spending until the rate goes down so then working citizens can contribute more money to the economy, wait for the economy to become steady, then soften interest rates a bit).

 

 

 

However, this only applies to the full overall economy in itself. And as such, only rares are being affected. There is not much reason to be thinking that Runescape's economy is fading back unless you are a major rares invester.

 

 

 

Duke, feel free to correct any of my statements if they seem incorrect. I studied Economics and Marketing a few years back, still remember some stuff but my foundations aren't the greatest :D

[S_M_JaGeD]

great article, love seeing people in runescape doing productive stuff instead of playing rs :D

[Petaro]

Very nice...

 

 

 

 

 

I've been thinking about the same thing too.

[zaun345]

Jagex finally did something against the ever ongoing inflation issue, and right now it seems that they did quite well! Had they made Construction drain less GP, the drain may have been too small. Had they made Construction drain more GP, the drain may have been too large, causing deflation. Is it coincidence, or did Jagex finally do some math regarding their gameÃÆââââ¬Å¡Ã¬Ã¢ââ¬Å¾Ã¢s economy?

 

 

 

This is one of the best paragraphs I ever read. Very good article.

[HeliosG]

cool article, but then, are you sure money is being removed from the economy when we buy construction materials?

 

 

 

Here's what's happening in my opinion:

 

 

 

Person A cuts oaks: no money spent

 

Person B mines ores and makes nails: again, no money disappears

 

 

 

Person C raises construction by buying materials off these two chaps. Thus, the money is still in the economy, just in different hands. The only way money is actually "lost" is if you buy materials from a store, wherein the money "returns" to Jagex.

 

 

 

 

 

 

Kevin - your last sentence is the key point and upon which Duke has based his assessment of Construction costs. There is currently no other way in RS to obtain oak planks, cloth, marble etc. without spending money in a shop and thus 'returning' the money to Jagex.

 

The exchanges between players is irrelevant to the model posited by Duke. HTH

[Paladin05]

Great Article! :D

 

You always suprise me with your big, huge, and gigantic number calculations! :shock:

 

LOL.

 

Anyways, nice article I enjoyed it! :wink:

[dandonio]

if jagex really cares about inflation ingame they would allow construction for f2p or at least apart of it cause, unlike members f2p'ers can buy nothing with their cash the most expensive thing aside from a holliday item is a god armour and ordinary rune. So unless if a free2player has got like 100 mill they don't do anything with their cash.

 

I think f2p creates the biggest money pile. There should need to be a way for them to get rid of their cash.

[The_Computergeek]

Great article, Duke!

 

 

 

I've always been very interested in the RS economy, I always thought it was interesting how updates like Construction affected the economy; people paying 1k for planks costing 100gp to make, steel bars and clay selling for 1k; all of that gives an illusion of inflation rather than deflation. But, as your article puts it, once you look at the big picture, it certainly is deflation.

 

 

 

It's a great way to balance out the economy, I think. Just looking at your graphs shows how much the total GP in Runescape is exponentially growing at a crazy rate.

 

 

 

Anyway, I'll quit ranting, just thought I'd tell you that you did a great job.

[sheesha]

Nice article. It seems like you know what you are talking about.

 

 

 

However, I never really understood this "problem" there is supposed to be with inflation.

 

 

 

All rl economies have inflation. Of course, the Central Banks job is to keep the inflation down to a reasonable level, because otherwise noone will want to have money. But, deflation is far worse than inflation. Because deflation will cause people to keep their money on the bank. And there is nothing worse for an economy than a lot of "dead money", you will have to agree.

 

 

 

Anyway, my point is i never noticed any disturbing inflation.

[arkangel1772]

I'm not sure what makes people think construction is so expensive. Well perhaps I do know: people can clearly see that construction costs money, whereas they may not notice that with most other skills.

 

 

 

For example, do people realize that when you smith steel bars or mith bars into plates, they basically "spend" ~10gp / xp on smithing? Do people know that burying dragon bones for pray exp is even much more expensive then that? (although with the ectofunctus it should be somewhere around 10gp / xp as well I think)

 

 

 

Explain to me how smithing costs gold? I mine ore for free, I smith bars for free, I make items from the bars for free, I sell the items for gold. The only thing lost is time. Whereas construction costs tons of gold to buy rooms, buy planks, hire servents, etc. (Of course regular planks can be obtained for free at respawns, but it is very inefficient.) Anyway, great job on the article. Very informative.

[oldstyle]

Duke I know that you are nearly a god in the rs economy, and ty for this obviously well thought out and prepared review of things.

 

 

 

I agree.

 

 

 

The nutcases that alch phats, "and prove it with ess in inventory" like "dementeddogz" (whom I still have love for) and the miscellaneous pkings ect that occur, I only see the prices going up. Sadly I'll never own one, as I can't break tos to buy one in rl, and sure am going to keep skillin and training. Long term, rares will rise, unless jagex sells em in the champions guild like they once did.

 

 

 

That is always a risk assumed by market makers.

[pker683]

well now since that construction has drain so much gp the prices should be lowered so more people can enjoy it hence maybe a greater drain or a equal one, even though unlikely it may be possible.

[thejollyroger]

Great article as always, Duke. I'm a bit tired and didn't follow all of it (aside from not being very well-read in mathematics), but it was a very good read and well researched.

 

 

 

if jagex really cares about inflation ingame they would allow construction for f2p or at least apart of it cause, unlike members f2p'ers can buy nothing with their cash the most expensive thing aside from a holliday item is a god armour and ordinary rune. So unless if a free2player has got like 100 mill they don't do anything with their cash.

 

I think f2p creates the biggest money pile. There should need to be a way for them to get rid of their cash.

 

 

 

The f2p factor has always had me thinking. First of all, for the short-term, there are money-making opportunities for f2p: chopping oaks, making soft clay, making steel nails; and to a lesser extent, smithing steel bars (iron bars wouldn't be very feasible).

 

 

 

As far as f2p spending their cash, well, there's two tiers. The first would be to figure out how much gp f2p puts into the p2p economy-- pure essence runes, god armor, trimmed armor, etc. Then I would try to figure out the ratio of f2p migrating to p2p, compared to the numbers of new players coming into f2p, daily. Are the p2p updates a significant incentive yet, especially Construction?

 

 

 

This all may be highly insignificant but it is what I am wondering.

[LKTX]

Roger, I wouldn't call it insignificant. You're just thinking farther ahead. Lotsa folks get called fools for that : )

 

 

 

I do, however, think that Duke Freedom is a genious when it comes to the Runescape economy, and I'd like to see him play the stockmarket, lol.

 

 

 

He takes a very logical approach to answering our age-old questions, and this Times article was nothing short of excellence in demonstrating that.

 

 

 

Thanks, Duke : )

 

 

 

~The LK

[liljimpyro]

I found that really interesting, my fist time at reading one of those articles.

 

 

 

I have to say, at combat lvl 76, i find it very hard to do construction as far as i have, up to lvl 61 so far, and ive spent nearly 4 mil now. I tink this is very unfair on the lower level people like myself who really want to construct

[Duke_Freedom]

if jagex really cares about inflation ingame they would allow construction for f2p or at least apart of it...

 

...I think f2p creates the biggest money pile. There should need to be a way for them to get rid of their cash.

 

 

 

Well my total gp calcs show that p2p'ers surely create most of the gp (as fletching is by far the biggest gp creator), though who creates the gp isn't necessarily the same as who owns the gp. Still, who owns the gp isn't that important either as we're talking about the netto change in the total amount of gp ingame. Ofcourse, if F2P had construction too, construction would probably drain twice as much gp as it does now though.

 

 

 

All rl economies have inflation. Of course, the Central Banks job is to keep the inflation down to a reasonable level, because otherwise noone will want to have money. But, deflation is far worse than inflation.

 

Anyway, my point is i never noticed any disturbing inflation.

 

 

 

Yes, deflation is far worse then inflation, but the 400-500% money growth rate per year was not very healthy either. Also, the existance of rares are, IMO, an important reason for why we don't really notice much of the inflation on most items in the game.

 

 

 

Explain to me how smithing costs gold? I mine ore for free, I smith bars for free, I make items from the bars for free, I sell the items for gold. The only thing lost is time.

 

 

 

Well I can just give the boring "time = money" equation and have answered your question already, but I'll answer it a bit more in-depth.

 

 

 

The point is you mine ore and smelt bars. However, instead of smithing the bars into, for example, steel plates, you could also just sell the bars on the market. You have a choice, and each choice comes at the opportunity cost of the other choices.

 

 

 

If you choose to sell the steel bars, you would earn 600*5 = 3000gp for 5 steel bars. On the other side, if you smith steel plates, and high alch those (subtracting 300gp for the nature you'd need) you'd only gain 900gp for 5 steel bars. So the opportunity cost of getting the experience from smithing the 5 steel bars is equal to 3000 - 900 = 2100gp. Dividing this by the exp you get for smithing a steel plate: 2100 / 187.5 = 11.2gp / exp. So because of opportunity cost, you "pay" 11.2gp / smithing exp if you smith steel bars into steel plates.

[Rebd]

You guys notice the term "Opportunity Cost" in Duke's discussions? Learn that term well, 'cause it sure as hell's going to come up again (and I hate having to explain, it always takes people hours to even begin to understand it, ugh :x ).

 

 

 

Great article Duke- a lot of good insight that I'd never even hope to come up with :wink: .

[trapical]

Very nicely written. Professional and factual, yet easy to read for those not educated in business. I personally am surprised at how closely prices are following the imaginary exponential line. Very strange, its what economists predict for RL things but we rarely see it actually happen. Nice graph of prices to I always wanted to see one. Oh and blue party hats are 200 mil? Wow, I still think of mine as 400k :/

[number1short]

Great article. :o

[tofuburger]

Ive seen the price of coal drop since the update, while the price of iron has been sky rocketig.

 

 

 

And I saw santa hats for like 11 mil.

 

 

 

As for smithing costing money a lot of smiths will buy coal once they get to a certain point.

[cmelak]

well it was the choice of ppl. Only everybody wanted expin construction....

 

 

 

im pretty glad that it came out this way, since i got to lvl 50 construction pretty fast (up to top75 :oops: 8-) ) and next two days I made millions per hour makin planks.

 

 

 

Thanks to low prices i bought all remainin barrows sets I havent had...

 

 

 

So as u can see.. its not jagexÃÆââ¬Å¡Ãâôs fault, it was choice of people to spend that much money on construction

[monkeyboo2]

am i just naeve or does anyone no what actually happened to dukes account?...cos im baffled about the whole thing

[Cloud9157]

Personally I think rare items might go down due to the shortage of money. Sellers will want to sell these and they will lower prices to make it easier for ppl trying to buy the items. That's just what I think though.

[Skrittles]

I just wanted you to know, you are the only author, Duke Freedom, that I find worth the time to read an article from. I just wanted to let you know that your readers appreciate the effort and thought you put into your articles. Thank you for taking time out of your days to write them. :wink: