Why MMO Economies Are Broken & 4 Ways To Repair Them
To really get involved in MMO economics, you first need to know basic economic concepts. While it is an endlessly complicated science that nobody really has a definitive handle on, there are a few basics everybody can understand. Supply and demand is by far the easiest. Demand creates supply by forcing someone to come along and fill a need for goods. Once a market is established, costs change depending on the supply/demand dynamic. The higher a supply, the lower the price to a consumer. The higher a demand, the higher the price. There are plenty of exceptions to this rule, but it’s a good rule of thumb that virtually everybody knows about.
What people rarely know about, however, are opportunity costs and externalities. An opportunity cost is the notion that you can’t do everything, and there is a cost associated with your choices. For example, you can only craft one of two potential items with your resources. The inability to make one of those items is the opportunity cost. Externalities are costs or benefits that apply to someone who was not directly involved in a transaction. For example, a positive externality from buying a nice sword is that your raid members have an easier time clearing dungeons thanks to your improved strength.
These concepts matter to MMO economies because they are fundamental pieces of information that any producer, trader, or buyer should have access to. Most MMOs, unsurprisingly, do not give players this kind of information. If they do, it is often inaccurate or unhelpful. The only way I can get information on basic opportunity costs – like the amount of time I have to spend mining a node – is by checking an external site for channeling times. I can’t determine externalities for my behaviors because I simply don’t have the information to do so.
(As a bit of a tangent to all you gatherers and crafters: Making items from stuff you gather yourself is not free. Think of it in terms of what else you could be doing. All that time spent mining and crafting could be used to run dungeons and make the money to buy your end product. While the market always needs miners to seed materials, don’t make the mistake of thinking that it is “free profit.”)
Then there’s the issue of trading interfaces and systems. Specifically, auction houses are terrible and should not be the standard. They are simply the worst. While auctions are an important part of any economic system, using them as the standard way to purchase common goods is inane and time-consuming for both the end user and the dedicated market player. I do not enjoy wading through page after page of auctions to find the best unit price. I doubt anybody without a streak of masochism enjoys it.
The lack of information in these interfaces is outright criminal as well. Vendor prices are usually listed, but average auction prices, what materials break into what, and other such information is hidden from the user with no option to turn it on. It is only through modding that a player gets access to such vital info. That’s why Auctioneer is one of the de facto mods for World of Warcraft. You have to have all that lovely data to make good decisions!
Lastly, there’s the problem of market relevance. Healthy in-game economies require the end-game to rely on player-made items. By making the best items only available via boss drops, developers remove the importance of crafted gear. This changes markets from being genuine exchanges of important goods into a way for players to essentially steal money by preying on the gullibility of others. True virtual economies require participation by the player at every level.