As the summer semester crawls to its inevitable conclusion and I find myself returning with increased frequency to my old pastimes. Specifically, the MMO's I would pour hours into over previous summers instead of going out into the world on a Friday night and infecting the world with my bad taste and mild paranoia. I powered up a personal favorite, Guild Wars 2 and proceeded to slowly empty my mind of the past few weeks of education with a few buddies. What started out as some good natured banter devolved into a full blown argument about the economics behind games like EVE Online and Guild Wars over the course of the night. Now I'd like to mention before we dive into this one that I'm no economist, I'm just a university student with a surplus of free time and nowhere else to go but hopefully I can provide some useful information as to how markets work in your own MMO and what to do in the event things go south.
First off, we're going to have to define inflation. In casual use, the term “inflation” is used to say that price increases. From the perspective of the Austrian School of economics, though, that price increase is a secondary effect of the increase in the amount of money that is out there in your virtual world. Quite bluntly, more money=more problems. Hyperinflation is when the inflation spirals so rapidly out of control that your currency becomes worthless in a matter of hours. The most famous example of hyperinflation could be the Weimar Republic from 1922 to 1923, where the average price level increased by 20 billion, doubling every 28 hours.
To understand why hyperinflation occurs, we must first understand money. Simple enough, money is a medium of exchange. People use money instead of trading good for good (bartering) and money has value because people say it has value. They agree that 1 bottle of water is a buck fifty, and a gallon of gas is five dollars. An oversimplification, but you get the idea.
For most of history, money was backed by some precious commodity like gold or silver which prevented government expansion of the money supply, and this inflation. But in the 20th century this was left behind and we were left with fiat money, or money backed by nothing. With the advent of fiat money, governments can print as much as they want and this is the issue with MMO's. MMO currency is backed by nothing more than faith and prayers.
Most of the time, you get money in game like Guild Wars 2 by killing enemies or selling items and resources at vendors. But the resources and enemies are always respawning and with millions of players, this means that the money supply is increasing FAST. As the amount of coins in game increase, so too does the prices and sometimes the economic instability is enough to completely destroy a game.
Remember, game economies are private and players are there by choice and can switch games easier than they can a country. There is no explicit mandate to ensure inflation control as one sees in real world economies. That said, knowing that complex MMO's can be upended by economic problems, there is a clear business interest for companies in keeping virtual currencies and the greater economies as a whole stable.
So what do companies like Blizzard, Trion, and CCP Games do to prevent this? Well, they try to get the money out of circulation as quickly as it gets in. They're called Currency Sinks, and they permanently delete money whenever its spent. You put a small tax, yes a genuine sales tax or transportation fee just like real life, for things like fast travel or the market place and sap the amount of money in each players personal account. Making it cost money to start/maintain a Guild or Clan, fees for armor repairs, CCP even goes as far as to encourage player wars because war is expensive and has a way of draining coffers at an alarming rate. Some attempts have succeeded, others have failed. It's a balancing act, just like in the real world. But what basic steps can be taken by players themselves?
Don't go it alone. It's called a Mass Multiplayer Online game for a reason. Find a guild, a clan or a group of friends you can play with. It is much easier to pool your resources in a you scratch my back, I scratch yours deal than it is to do everything by yourself. Another good tip would be to keep bartering items. Generally a good idea regardless, a lot of games have personal storage spaces separate from the main inventory. Items like potions, raw materials, gear that might not be usable by your class but are valuable to others. Then throw out a little blurb in the chat box asking if anyone is looking to trade. This cuts out the need to spend gold in its entirety and keeps items in circulation instead of being deleted from the economy by NPC's, thus sustaining the economy. Sell items on the market to other players instead of the vendors, barter with other players, build a little circle of friends you can all sell and exchange with.
At the end of the day, the biggest source of Headaches are NPCs. They can not negotiate, they can not innovate and they are not dynamic. When confronted with instability, the NPC's won't do a thing about it but the wonderful thing about human beings is that we quite enjoy the sense of stability, and when that goes we are very quick to find ways to return to it as quickly as possible. But as I said earlier, I'm no economist. I'm just throwing my two cents into a fountain that's already overflowing.