Guild Wars 2

Aurisai.3416:

Now I’m going to really drive our Anet friend crazy with my next statement (please don’t take offence) The very fact that it is possible to buy gold with rl money, albeit through indirect trade of gems, introduces a large amount of gold into the in-game economy that wasn’t “earned” through farming. If this increase in the gold supply is not counteracted strongly enough with gold sinks, we have a textbook economic definition of inflation (an expansion of the money supply, which cannot but eventually lead to higher prices).

The gem → gold exchange increasing the money supply in the game might be a problem if it wasn’t for the fact that the gold → gem exchange reduces the money supply.

Are these two equal? I don’t know with any certainty, but given the gap between the 2 rates, as long as the quantity of gems converted to gold is no more than 30% more than the number of gems bought with gold, then the net effect should be to actually remove money from the economy.

Also consider:
Inactive accounts with gold
and
People hoarding money but not spending it

when talking about money supply.

As far as gold→in game items are concerned I think we are in a period of general deflation. t6 prices are remaining flat but everything under that is dropping, rares are dropping, ectos are dropping.

The only thing that went up was gold→gems and that wont be around forever, well maybe.

Lets not forget that Anet is a dominating influence in the market price. When they add sales for gem items, demand increase. If they ever create a sale for gems or gems->gold transfers, supply would increase. Marketing, and sales are undeniable factor in a demand-supply economy. Since Anet is the key player in this, maybe they could market a bit more for the supply side, as so far, all the focus has been to increase demand.

We don’t need regulations; only some attention by Anet to encourage more people to buy more gems for gold purposes. This would then balance their current actions of inflating of the demand with item sales and a rapid introduction of new items into the market.

John Smith.4610:

MRA.4758:

(Same “textbook” source as your quote.)

~MRA

I laughed at “textbook”, one for you, but I encourage you to search that textbook for whether or not that’s true; especially considering the state of the economy and a video game economy.

I for one don’t mind your input but I am not a fan of your condescending attitude and ridicule towards anyone who is not a student of economics, although you are right this is a video game you manage the economy for…so just how credible does that make you in the field of economics?

MRA.4758:

John Smith.4610:

Aurisai.3416:

If this increase in the gold supply is not counteracted strongly enough with gold sinks, we have a textbook economic definition of 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”

Time for new textbooks; change in money supply is not a change in price level, they are not interchangeable.

However:

“Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.”

(Same “textbook” source as your quote.)

~MRA

There’s an extremely important word you’re missing there…(or perhaps two.)

Vlad Morbius.1759:

John Smith.4610:

MRA.4758:

(Same “textbook” source as your quote.)

~MRA

I laughed at “textbook”, one for you, but I encourage you to search that textbook for whether or not that’s true; especially considering the state of the economy and a video game economy.

I for one don’t mind your input but I am not a fan of your condescending attitude and ridicule towards anyone who is not a student of economics, although you are right this is a video game you manage the economy for…so just how credible does that make you in the field of economics?

The people who receive the “condescending attitude” generally do something to deserve it. In fact, I haven’t seen an example where that’s not the case. If you falsely build yourself up as an expert, you have no one to blame but yourself when someone pulls the rug out from under you. Economics as a field suffers greatly from the constant stream of false information constantly parroted by armchair “experts” who have absolutely no idea what they’re talking about.

Syeria.4812:

Economics as a field suffers greatly from the constant stream of false information constantly parroted by armchair “experts” who have absolutely no idea what they’re talking about.

You mean… politicians?

Vlad Morbius.1759:

I for one don’t mind your input but I am not a fan of your condescending attitude and ridicule towards anyone who is not a student of economics,

He’s an economist. What do you expect? :V

I hope John’s bosses never put the kabosh on him.

Astraea.6075:

Aurisai.3416:

Now I’m going to really drive our Anet friend crazy with my next statement (please don’t take offence) The very fact that it is possible to buy gold with rl money, albeit through indirect trade of gems, introduces a large amount of gold into the in-game economy that wasn’t “earned” through farming. If this increase in the gold supply is not counteracted strongly enough with gold sinks, we have a textbook economic definition of inflation (an expansion of the money supply, which cannot but eventually lead to higher prices).

The gem -> gold exchange increasing the money supply in the game might be a problem if it wasn’t for the fact that the gold -> gem exchange reduces the money supply.

Are these two equal? I don’t know with any certainty, but given the gap between the 2 rates, as long as the quantity of gems converted to gold is no more than 30% more than the number of gems bought with gold, then the net effect should be to actually remove money from the economy.

If I understand how it works correctly, all of the gold in the exchange was put there by players, so the exchange always removes gold from the economy, as the amount that the selling player gets is less than the buying player put in. No gold is being generated, and so there is no need to worry about weird interactions.

John Smith.4610:

Vlad Morbius.1759:

John Smith.4610:

MRA.4758:

(Same “textbook” source as your quote.)

~MRA

I laughed at “textbook”, one for you, but I encourage you to search that textbook for whether or not that’s true; especially considering the state of the economy and a video game economy.

I for one don’t mind your input but I am not a fan of your condescending attitude and ridicule towards anyone who is not a student of economics, although you are right this is a video game you manage the economy for…so just how credible does that make you in the field of economics?

Maybe you missed the joke here? He is pointing out that I googled the copy paste inflation definition and I’m acknowledging he caught me. Then I’m telling him to look for evidence that changes in money supply don’t necessitate inflation. There is nothing condescending in this post at all.

Mentioning the video game economy is mentioning that it’s a specific type of economy, not mentioning it holds less value.

I got the joke

Pumping currency into a market doesn’t equate to inflation. If a currency retains it’s purchasing power, which it does in the case of video game economics, it doesn’t matter how much gold is in it. Even in the case of player traded items, there is a rather large missing factor to real world economics, the cost to produce (with the extremely minor exception of crating). Since many items are very much based around vendor value initially (plus obviously scarcity and demand for some of the more luxury type goods), it’s very odd to see it called inflation. There is a good argument always brought up in these circle, which is cost to play, meaning the necessity items that are either broken or consumed and in that particular instance, it cost not a single copper more than it did at release. The “cost of living” hasn’t changed in other words, which is often a key indicator when talking about inflation.

In terms of a currency exchange (such as gold to gems) inflation again is an odd word. The value placed on what it cost for gems is entirely based on whether or not there is even a demand for them. If no one wants what the gem store has to offer, gem prices stay low. The base price hasn’t changed, it doesn’t cost more resources to manufacture gems, they aren’t consumed (although they can be left dormant in a abandoned players account) and of course they are entirely confined to a single economy. Thus eliminating some of the key contributors to inflation.

Guys are you serious ? You all try to sailing without sail.

Arena.Net need to make money and for that Gem Prices must be go up up up with wind and why they are hired John Smith (BIG DOT)

John Smith On Economics
http://www.youtube.com/watch?v=_EGpWe5Q4nU

Well good, hopefully the prices will keep on climbing so that buying gems and transferring them to gold will make RMT be pointless as buying gems will be more profitable for players.

Eolirin.1830:

If I understand how it works correctly, all of the gold in the exchange was put there by players, so the exchange always removes gold from the economy, as the amount that the selling player gets is less than the buying player put in. No gold is being generated, and so there is no need to worry about weird interactions.

No. JS stated a while back the exchange was set up with both a (very, very large) pool of gems and a pool of gold. We as players add and subtract from those pools when we convert. And the relationship between the current amount of both pools factors into the exchange rate.

Irena.1062:

Well good, hopefully the prices will keep on climbing so that buying gems and transferring them to gold will make RMT be pointless as buying gems will be more profitable for players.

Just quoted for truth, while hoping that someday players will realize that a high exchange rate is generally good for the game. Yes, a high exchange rate will also mean that you will have to grind a little bit longer until you can afford that sugar-coated sparkling knickknack that you want to buy so eagerly from the gem store (at least if you are unwilling to buy gems with real money). But, after all, these are luxury items with no real relevance for the game.

Behellagh.1468:

No. JS stated a while back the exchange was set up with both a (very, very large) pool of gems and a pool of gold. We as players add and subtract from those pools when we convert. And the relationship between the current amount of both pools factors into the exchange rate.

Smith (2012) also concluded:

John Smith.4610:

Astraea.6075:

Another issue that is often debated is to what extent (if any) the initial exchange rates (and possibly initial supply of gold and gems) when the game launched have on the current rates. Are you able to provide any insight on this?

Virtually none at this point.

~MRA

The example John is hinting at is Japan. They’ve been printing money like crazy for 20 years, yet the only result is more deflation. It is the prime example that merely printing money doesn’t necessarily lead to inflation.

On the other hand, a gold standard means inflation and deflation, irrelevant to the actual state of the economy, which is eventually devastating once the value of the economy becomes more than the gold reserves. Runaway inflation can and will happen without printing a single banknote.

Third, changing fractional reserve requirements is like taking a sledgehammer to the exchange market without even involving the central bank.

azazil.9541:

Guys are you serious ? You all try to sailing without sail.

Arena.Net need to make money and for that Gem Prices must be go up up up with wind and why they are hired John Smith (BIG DOT)

John Smith On Economics
http://www.youtube.com/watch?v=_EGpWe5Q4nU

For ANet to make money, they need to sell gems for real money. This means the gem store has to contain items that people wish to purchase, which will also lead to the gold -> gem rate rising as new desirable items are added to the gem store’s offerings.

Yes, this higher rate does benefit ANet by increasing the amount of gems that are purchased with the intention of converting to gold, but the primary “lever” is offering desirable items in the store. In my opinion, ANet are managing to do this without undermining their “no significant advantage” philosophy.

John Smith.4610:

Aurisai.3416:

If this increase in the gold supply is not counteracted strongly enough with gold sinks, we have a textbook economic definition of 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”

Time for new textbooks; change in money supply is not a change in price level, they are not interchangeable.

It depends on your school of economic thought – you really should get to know me better before implying I don’t know what I’m talking about. Keynesian economics has your definition as outlined above, although in general economist do agree that expansion of money supply in excess of output rate does result in inflation, so the 2 are inextricably linked. Austrian economics explicitly defines expansion of money supply as inflation, with inflation being the root cause of rising prices.

Either way, it is all semantics. Now our politicians all favour Keynesian economics because they benefit hugely from doing so. They can essentially print money all they like and make claims about how inflation is only x%. Yet when we all go to the store to buy groceries, we know it is more like 10%+x%.

Now you can tell me all you like that there isn’t inflation (using your “textbook” definition) in gw2, but the proof is in the pudding. The goalposts for legendary item for example have shifted massively. 5 months ago the precursors sold for around ~300g or less. Last time I checked they were around 700g. I remember someone from Anet actually making a post about how they saw someone snatch up a completed legendary for a price (can’t remember exact amount but it was around 700-1000) and just turn around and sell it for double that price. I can’t see that anyone has earned that kind of gold just through dungeons etc. Another example is exotics, when I started playing a crafted lvl 80 exotic weapon was typically in the region of 1-1.5g. Now they sell for more than double that price.

Aurisai.3416:

John Smith.4610:

Aurisai.3416:

If this increase in the gold supply is not counteracted strongly enough with gold sinks, we have a textbook economic definition of 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”

Time for new textbooks; change in money supply is not a change in price level, they are not interchangeable.

It depends on your school of economic thought – you really should get to know me better before implying I don’t know what I’m talking about. Keynesian economics has your definition as outlined above, although in general economist do agree that expansion of money supply in excess of output rate does result in inflation, so the 2 are inextricably linked. Austrian economics explicitly defines expansion of money supply as inflation, with inflation being the root cause of rising prices.

Sorry to burst your bubble but Austrian school isn’t considered a viable economic theory. It’s on the shelves with communism as something that doesn’t work.
http://rationalwiki.org/wiki/Austrian_school_of_economics

marnick.4305:

Aurisai.3416:

John Smith.4610:

“In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time”

Time for new textbooks; change in money supply is not a change in price level, they are not interchangeable.

It depends on your school of economic thought – you really should get to know me better before implying I don’t know what I’m talking about. Keynesian economics has your definition as outlined above, although in general economist do agree that expansion of money supply in excess of output rate does result in inflation, so the 2 are inextricably linked. Austrian economics explicitly defines expansion of money supply as inflation, with inflation being the root cause of rising prices.

Sorry to burst your bubble but Austrian school isn’t considered a viable economic theory. It’s on the shelves with communism as something that doesn’t work.
http://rationalwiki.org/wiki/Austrian_school_of_economics

I think I’d rather stick to a less biased perspective, also from the same textbook. http://en.wikipedia.org/wiki/Austrian_economics

Relating Austrian economics to communism is just silly as it enshrines a free market based economy free of all intervention. It has received noticeable recognition including a Nobel prize and is used as a counter balance to mainstream economic theory by many successful fund managers around the world.

marnick.4305:

The example John is hinting at is Japan. They’ve been printing money like crazy for 20 years, yet the only result is more deflation. It is the prime example that merely printing money doesn’t necessarily lead to inflation.

This is completely inaccurate. To quote recent news:

“The big surprise last week, though, was the action by the Japanese central bank, whose governor, Haruhiko Kuroda, announced a commitment to meet its 2 per cent inflation target in two years by at long last joining the quantitative easing party. It represents a U-turn from its stance over the last couple of decades, and is now about to follow the strategy of monetary loosening being followed in Washington and London. Lack of growth will do that. Better late to the game than never.”

Source: http://www.independent.co.uk/voices/comment/japan-has-finally-joined-the-quantitative-easing-party--and-better-late-than-never-8563280.html

For reference: quantitative easing = money printing

Aurisai.3416:

marnick.4305:

Aurisai.3416:

John Smith.4610:

“In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time”

Time for new textbooks; change in money supply is not a change in price level, they are not interchangeable.

It depends on your school of economic thought – you really should get to know me better before implying I don’t know what I’m talking about. Keynesian economics has your definition as outlined above, although in general economist do agree that expansion of money supply in excess of output rate does result in inflation, so the 2 are inextricably linked. Austrian economics explicitly defines expansion of money supply as inflation, with inflation being the root cause of rising prices.

Sorry to burst your bubble but Austrian school isn’t considered a viable economic theory. It’s on the shelves with communism as something that doesn’t work.
http://rationalwiki.org/wiki/Austrian_school_of_economics

I think I’d rather stick to a less biased perspective, also from the same textbook. http://en.wikipedia.org/wiki/Austrian_economics

Relating Austrian economics to communism is just silly as it enshrines a free market based economy free of all intervention. It has received noticeable recognition including a Nobel prize and is used as a counter balance to mainstream economic theory by many successful fund managers around the world.

I put them on the same shelve because both are philosophies neglecting basic principles to advance a political motive. Neither works because they aren’t an economic school but rather a philosophical construct.

Aurisai.3416:

marnick.4305:

The example John is hinting at is Japan. They’ve been printing money like crazy for 20 years, yet the only result is more deflation. It is the prime example that merely printing money doesn’t necessarily lead to inflation.

This is completely inaccurate. To quote recent news:

“The big surprise last week, though, was the action by the Japanese central bank, whose governor, Haruhiko Kuroda, announced a commitment to meet its 2 per cent inflation target in two years by at long last joining the quantitative easing party. It represents a U-turn from its stance over the last couple of decades, and is now about to follow the strategy of monetary loosening being followed in Washington and London. Lack of growth will do that. Better late to the game than never.”

Source: http://www.independent.co.uk/voices/comment/japan-has-finally-joined-the-quantitative-easing-party--and-better-late-than-never-8563280.html

For reference: quantitative easing = money printing

They’re going to print even more money than they did in the last 2 decades? Well if that’s going to help …

Important detail: hitting the 2% inflation mark over two years means getting 2.1% inflation instead of the regular 0.01% deflation. For the USA hitting 2% inflation means getting 1.9% instead of the usual 5%. Put everything in perspective again.

Aurisai.3416:

marnick.4305:

Aurisai.3416:

John Smith.4610:

“In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time”

Time for new textbooks; change in money supply is not a change in price level, they are not interchangeable.

It depends on your school of economic thought – you really should get to know me better before implying I don’t know what I’m talking about. Keynesian economics has your definition as outlined above, although in general economist do agree that expansion of money supply in excess of output rate does result in inflation, so the 2 are inextricably linked. Austrian economics explicitly defines expansion of money supply as inflation, with inflation being the root cause of rising prices.

Sorry to burst your bubble but Austrian school isn’t considered a viable economic theory. It’s on the shelves with communism as something that doesn’t work.
http://rationalwiki.org/wiki/Austrian_school_of_economics

I think I’d rather stick to a less biased perspective, also from the same textbook. http://en.wikipedia.org/wiki/Austrian_economics

Relating Austrian economics to communism is just silly as it enshrines a free market based economy free of all intervention. It has received noticeable recognition including a Nobel prize and is used as a counter balance to mainstream economic theory by many successful fund managers around the world.

Out of the wikipedia textbook, I read the methodology and criticism sections thoroughly, for your convenience.

Methodology: The method at the basis for Austrian school is flimsy at best. Praxeology is not science but philosophy (hence shelving it next to duality and class struggle). Relying on the axiom of choice does not equate economics to me because there’s more at hand than merely that. This kicks the legs out of all that follows, regardless of whether it looks good (class struggle sounds good too in theory).

Second, some of the criticism parts are extremely harsh, some from established economists. I’m not going too deep right now, but I think it’s important to note the difference between philosophy and the work economists do. I appreciate both Austrian School and Communism for the social insights, but I don’t see them as valid economic frameworks.

marnick.4305:

Aurisai.3416:

I think I’d rather stick to a less biased perspective, also from the same textbook. http://en.wikipedia.org/wiki/Austrian_economics

Relating Austrian economics to communism is just silly as it enshrines a free market based economy free of all intervention. It has received noticeable recognition including a Nobel prize and is used as a counter balance to mainstream economic theory by many successful fund managers around the world.

Out of the wikipedia textbook, I read the methodology and criticism sections thoroughly, for your convenience.

Methodology: The method at the basis for Austrian school is flimsy at best.

You’re missing the entire point of the conversation here. I don’t think you actually read the wikipedia page properly since the word “flimsy” is not used once in the entire page. Flimsy research does not win Nobel prizes. Yes there is criticism, but there always will be between opposing schools of thought. Not to be funny, but economics as a whole is not a science and therefore is offered through faculties of commerce as it is a system of man made laws governed by human perception and willingness to trade rather than fixed laws governed by nature.

So in an attempt to bring this conversation back on track, the crux of my argument is that while the in-game ability to to earn gold in gw2 has remained flat, or slightly increased, the total gold supply in the game has drastically increased thanks mostly to gem→gold conversions. As a result, price is pressured upwards and scarce items become more difficult to attain by people not willing to make gem→gold conversions or spend their game time flipping items on the TP.

Aurisai.3416:

Now you can tell me all you like that there isn’t inflation (using your “textbook” definition) in gw2, but the proof is in the pudding. The goalposts for legendary item for example have shifted massively. 5 months ago the precursors sold for around ~300g or less. Last time I checked they were around 700g. I remember someone from Anet actually making a post about how they saw someone snatch up a completed legendary for a price (can’t remember exact amount but it was around 700-1000) and just turn around and sell it for double that price. I can’t see that anyone has earned that kind of gold just through dungeons etc. Another example is exotics, when I started playing a crafted lvl 80 exotic weapon was typically in the region of 1-1.5g. Now they sell for more than double that price.

You might want to check your facts on the crafted exotic bit. If you take something like a zerker’s greatsword, the prices have remained pretty stable since launch, while the cost of materials has increased.

Also, when speaking about inflation (as originally mentioned, that sparked this debate) you have to take a larger look at prices over a range of goods. The legendary/precusor market is clearly a supply/demand luxury market, which says very little of average earnings of players versus what things costs. More players want them yet the supply hasn’t changed, aside from a single event drop rate increase for precursors, in which we saw an almost immediate price drop across the board. Talking about inflation in that sense is moot, many of the t6 mats have increased since they are very tied to creating these luxury goods, while supply has actually decreased (for whatever reasons).

Aurisai.3416:

So in an attempt to bring this conversation back on track, the crux of my argument is that while the in-game ability to to earn gold in gw2 has remained flat, or slightly increased, the total gold supply in the game has drastically increased thanks mostly to gem->gold conversions. As a result, price is pressured upwards and scarce items become more difficult to attain by people not willing to make gem->gold conversions or spend their game time flipping items on the TP.

There are quite a few other factors involved with what you’re saying. Although i agree the earning potential has remained somewhat flat, and there isn’t any hard numbers we can use to confirm that, it’s not a flood of gold on the market particularly that has contributed to price increases in certain aspects of the market. Some factors we may want to include:

1.) A reduced supply – bot banning, less people farming or changes in drop rate
2.) Increased demand – More people going for the big ticket luxury items and the materials required to create those items.
3.) Changes in player behavior – More people running the most profitable dungeon paths which contributes to only certain items loosing value as they flood into the market, while other areas see a reduction in supply, increasing the value.
4.) Changes in population – increases or decreases in population affect the supply chain. This especially so with new players coming in that don’t even have a scope on the big ticket items. You can see a pretty drastic reduction in t5 and below costs as those new players might be pumping up supply in those areas.

Aurisai.3416:

So in an attempt to bring this conversation back on track, the crux of my argument is that while the in-game ability to to earn gold in gw2 has remained flat, or slightly increased, the total gold supply in the game has drastically increased thanks mostly to gem->gold conversions. As a result, price is pressured upwards and scarce items become more difficult to attain by people not willing to make gem->gold conversions or spend their game time flipping items on the TP.

What evidence do you have that there’s been a big increase due to gem->gold conversions? I’m not seeing a huge influx of gold from gem conversions, otherwise the gold->gem conversion cost would be lower, wouldn’t it? I’m also not seeing an overall increase in prices. If it was inflation, everything would cost more, and that’s just not the case. (Well everything that people actually want to buy… I don’t think a cup of potato fries will ever rise in price).

I think it’s a big assumption also that the ability to earn gold has remained flat. You aren’t accounting for the fact that my earnings go up when the price of items I can sell on the TP goes up. I make far more gold by selling what I find than what actually drops as gold.

munkiman.3068:

There are quite a few other factors involved with what you’re saying. Although i agree the earning potential has remained somewhat flat, and there isn’t any hard numbers we can use to confirm that, it’s not a flood of gold on the market particularly that has contributed to price increases in certain aspects of the market. Some factors we may want to include:

1.) A reduced supply – bot banning, less people farming or changes in drop rate
2.) Increased demand – More people going for the big ticket luxury items and the materials required to create those items.
3.) Changes in player behavior – More people running the most profitable dungeon paths which contributes to only certain items loosing value as they flood into the market, while other areas see a reduction in supply, increasing the value.
4.) Changes in population – increases or decreases in population affect the supply chain. This especially so with new players coming in that don’t even have a scope on the big ticket items. You can see a pretty drastic reduction in t5 and below costs as those new players might be pumping up supply in those areas.

I totally agree with you and I don’t mean to exclude that the factors you mentioned have a huge impact on the prices of items. However these factors are usually of a fluctuating nature, they come and they go cause prices to rise and fall in cycles.. perfect, no problem with that. The issue I’m concerned with is one of purchasing power. With the current rate of difficulty for earning gold, the person that makes use of gem->gold conversions and flipping items at the TP has far greater purchasing power than someone just running fractals/dungeons etc for example for effectively little to no effort (in game effort ofc, don’t want to suggest that people don’t work hard for their money).

The result of this on me for example, is that I have the distinct feeling that now that I’m getting closer to end game phase of play in gw2, flipping items on the TP trumps any other activity that I can possibly do in the game with regards to earning a legendary item. I do concede however that my assertions regarding gems->gold conversions resulting in a glut of gold in the market, resulting in higher prices are largely speculative, or guesses (albeit an educated guess). I also concede that in the case of legendary items and associated materials, increase in demand is playing a much bigger role than I initially gave it credit for. Either way, given that I to date have earned at most 200g over the 8 months I’ve been playing, I just can’t see that I could be bothered to raise the 700g required for a precursor even though I’ve already met or am relatively close to meeting a number of the other requirement.

Please bear in mind that legendary items are not the only thing I’m after. I would also love to be able to decently equip alts. Last I checked it would cost me in the region of 30-40g per armour set to craft. Then still need to craft accessories and weapons.

Pandemoniac.4739:

What evidence do you have that there’s been a big increase due to gem->gold conversions? I’m not seeing a huge influx of gold from gem conversions, otherwise the gold->gem conversion cost would be lower, wouldn’t it?

I think it’s a big assumption also that the ability to earn gold has remained flat. You aren’t accounting for the fact that my earnings go up when the price of items I can sell on the TP goes up. I make far more gold by selling what I find than what actually drops as gold.

I speak under correction, but as I understand it the gem->gold buy rate is based on the real value of the gold. As John has put it in a previous post: i.e. 1 real gold buys a stack of ore. So if it takes 2 in-game gold to buy that ore stack, and assuming 100gems buys 1 real gold, then the rate would be 100gems->2g. So a rising gold rate implies that you are not able to buy as much with gold as you were previously. If you look at a graph showing the gold->gem and gem-> gold prices over the past 8 months, you will notice that they are perfectly proportional to each other with a loss on the gold->gem being factored in. This implies that both conversions use exactly the same real value conversion formula. So basically, if prices go higher, gem/gold conversion rates go higher.

With regards to selling on TP, yep I do it too. I typically salvage whites/blues and sell greens to the higher of the vendor/TP, usually ends us being the vendor. I salvage yellows as the ectos are way more valuable than what I could vendor it for or sell on the TP.

I think there is an expectation problem here. It didn’t take me less effort to equip my main that I’ve been playing since launch than it takes for me to equip an alt. I just have less patience for it because I’ve done it all before.

Accumulating a big pile of gold to buy a complete set of exotic gear for an alt is a shortcut. You don’t have to do it that way. You can just play the game the way you enjoy playing and upgrade a bit at a time.

Sure folks that farm or play the TP might earn ore gold per hour than I do, but the point of a game is to have fun. If you can’t have fun because you can’t buy all exotic gear or get a legendary on a time scale that’s acceptable to you, then maybe it’s time to take a break. I like GW2 because I don’t have to do the stuff I find tedious. I make progress toward the stuff I want every time I play, even if I can’t match the earnings of folks that don’t mind doing nothing but COF runs.

I don’t see how you can increase the gold/hour rate for folks that aren’t as willing to “work” at it as other folks, and aren’t willing to buy their way out of the tedious stuff with real money.

I can either suck it up and cut my lawn myself, or I can pay someone so I don’t have to do it. My fairy godmother who should be here waving a wand so I can play games on Saturday and get my lawn cut and still have my $35 has yet to make an appearance.

Aurisai.3416:

I speak under correction, but as I understand it the gem->gold buy rate is based on the real value of the gold. As John has put it in a previous post: i.e. 1 real gold buys a stack of ore. So if it takes 2 in-game gold to buy that ore stack, and assuming 100gems buys 1 real gold, then the rate would be 100gems->2g. So a rising gold rate implies that you are not able to buy as much with gold as you were previously. If you look at a graph showing the gold->gem and gem-> gold prices over the past 8 months, you will notice that they are perfectly proportional to each other with a loss on the gold->gem being factored in. This implies that both conversions use exactly the same real value conversion formula. So basically, if prices go higher, gem/gold conversion rates go higher.

I think you’re confusing measuring inflation (or lack of it) with how the gold/gem conversion works. The actual price for gold to gems is based on how much demand there is for the gems available in the pool, not the Real price of gold. Don’t mix up Real value, the economic term, with real money, the uh gamer term.

Astraea.6075:

azazil.9541:

Guys are you serious ? You all try to sailing without sail.

Arena.Net need to make money and for that Gem Prices must be go up up up with wind and why they are hired John Smith (BIG DOT)

John Smith On Economics
http://www.youtube.com/watch?v=_EGpWe5Q4nU

For ANet to make money, they need to sell gems for real money. This means the gem store has to contain items that people wish to purchase, which will also lead to the gold -> gem rate rising as new desirable items are added to the gem store’s offerings.

Yes, this higher rate does benefit ANet by increasing the amount of gems that are purchased with the intention of converting to gold, but the primary “lever” is offering desirable items in the store. In my opinion, ANet are managing to do this without undermining their “no significant advantage” philosophy.

Obviously you don’t get sarcasm. Watch that youtube video and read some posts so you’ll understand me.

@ Aurisai

If you’re genuinely attempting to push Austrian ideals as viable economic theory, I have to seriously question if your knowledge of the topic extends beyond “I read the wiki article once.” von Mises and his colleagues have certainly contributed to the collective economic landscape. However, their contributions would be best considered in the same manner as Rawlsian thought. Their contributions aren’t the same as those of a Keynes or Friedman. The closest the Austrian School comes to that type of contribution is from Hayek, and some would argue he wasn’t an Austrian Economist at all.

Syeria.4812:

@ Aurisai

If you’re genuinely attempting to push Austrian ideals as viable economic theory, I have to seriously question if your knowledge of the topic extends beyond “I read the wiki article once.” von Mises and his colleagues have certainly contributed to the collective economic landscape. However, their contributions would be best considered in the same manner as Rawlsian thought. Their contributions aren’t the same as those of a Keynes or Friedman. The closest the Austrian School comes to that type of contribution is from Hayek, and some would argue he wasn’t an Austrian Economist at all.

Im personally going to ask that you belabor an aus verse video game economy. It’s really not even close to the same thing. Yes Aus has opinions and yes US economy is actually in an odd state, but you cannot compare a virtual economy against a RWE. If so maybe there is a speculation thread you can join.

John Smith.4610:

Mentioning the video game economy is mentioning that it’s a specific type of economy, not mentioning it holds less value.

The point is as I see it, what basis is there for considering the world of video game ‘economics’ has anything to do with ‘real world’ economies.

Because that’s what you continually portray yourself as being an expert in and use arguments from ‘real world’ economics, while in fact your professional life is managing an entirely artificial ‘economy’ with many constraints and attributes entirely absent from the ‘real world’ (and vice versa).

As for the issue of your “condescending tone”, as he alluded to, your replies to those who don’t profess or exhibit such expertise are often condescending rather than educational (since you often portray them by the wording and tone of your replies to them as being ignorant).

Kraggy.4169:

The point is as I see it, what basis is there for considering the world of video game ‘economics’ has anything to do with ‘real world’ economies.

Because that’s what you continually portray yourself as being an expert in and use arguments from ‘real world’ economics, while in fact your professional life is managing an entirely artificial ‘economy’ with many constraints and attributes entirely absent from the ‘real world’ (and vice versa).

Economic theories apply to both the real world and virtual economies. Obviously they have different constraints, but the principles still apply to both.

You just have to understand the theory well enough to know what constraints apply and what assumptions to make.

You have to realize that from JS’s point of view, he’s arguing baseball coaching strategy with a bunch of people who only have the box score from last night while he has data on every pitch and play in every game.

He can see everything. How much gold is being added to and removed from the active money supply. Every TP transaction with volume and price of the sale. How many Gems are left in the exchange, how much gold converting gems is actually injecting into the economy. He knows what’s being gambled away in the Mystic slot machine and if the number of Fused skins handed out is according to predictions.

And I can understand that his omniscience of this game’s current economic state causes him to facepalm at every accusation that the economy is broken or out of whack or needs “guidance” because someone doesn’t bother to notice that there’s two million of a T5 mat for sale and that might have something to do with their low price at the TP or how the gem exchange’s price will continue to rise until it becomes an attractive way to convert cash to gold via gems.

He has the real time data, we don’t but some simply won’t believe him when he does supply some fraction of the data that disproves a point a group of players insist is happening.

Aurisai.3416:

So in an attempt to bring this conversation back on track, the crux of my argument is that while the in-game ability to to earn gold in gw2 has remained flat, or slightly increased, the total gold supply in the game has drastically increased thanks mostly to gem->gold conversions. As a result, price is pressured upwards and scarce items become more difficult to attain by people not willing to make gem->gold conversions or spend their game time flipping items on the TP.

Gold isn’t put into the economy by gems> gold but rather sinked. Every gem/gold transaction destroys 30% of the gold involved!!! This a very important point you don’t seem to get. As long as you don’t acknowledge that, further discussion is moot.

You are so set on this Austrian idée-fixe of an increase money supply, that you’re clinging to the one thing that could potentially create loads of money, while disregarding all evidence to the contrary. To your defense though, videogames are probably the only economies where Austrian ideas hold merit.

marnick.4305:

Aurisai.3416:

So in an attempt to bring this conversation back on track, the crux of my argument is that while the in-game ability to to earn gold in gw2 has remained flat, or slightly increased, the total gold supply in the game has drastically increased thanks mostly to gem->gold conversions. As a result, price is pressured upwards and scarce items become more difficult to attain by people not willing to make gem->gold conversions or spend their game time flipping items on the TP.

Gold isn’t put into the economy by gems> gold but rather sinked. Every gem/gold transaction destroys 30% of the gold involved!!! This a very important point you don’t seem to get. As long as you don’t acknowledge that, further discussion is moot.

You are so set on this Austrian idée-fixe of an increase money supply, that you’re clinging to the one thing that could potentially create loads of money, while disregarding all evidence to the contrary. To your defense though, videogames are probably the only economies where Austrian ideas hold merit.

What 30% are you on about? When you buy gems with cash there’s no 30% fee. If you’re talking about gold→gems there’s still no fee. There is just the disparity between the 2 to keep people from creating endless wealth in gold.

munkiman.3068:

marnick.4305:

Gold isn’t put into the economy by gems> gold but rather sinked. Every gem/gold transaction destroys 30% of the gold involved!!! This a very important point you don’t seem to get. As long as you don’t acknowledge that, further discussion is moot.

What 30% are you on about? When you buy gems with cash there’s no 30% fee. If you’re talking about gold->gems there’s still no fee. There is just the disparity between the 2 to keep people from creating endless wealth in gold.

I agree that it’s not a straight gold sink, but there is maybe an argument to be made that because gems to gold transactions make gold to gems conversions more attractive, the net effect on the gold supply in the long term isn’t that large.

I think after the recent spike in gold to gem prices, more folks might start buying gems in anticipation of new things becoming available in the gem store instead of waiting to see what it will be. So, folks dropping the conversion rate by buying gold might actually be causing more transaction fees…

Ugh economics twists my brain. I should stick to my signal processing and Fourier xforms. People are so much harder to account for than noise.

So, he’s assuming the disparity between the 2 is somehow a gold sink? The only way i could see that is if people bought gems with gold then converted it back (for a loss unless they wait till it’s profitable). From what i understood about the gem store, people that put gold in for gems, comes out when people buy gems and turn it into gold. The disparity doesn’t destroy the gold like the fees in the TP, from what i understand of it anyway. I may be misunderstanding it though.

munkiman.3068:

So, he’s assuming the disparity between the 2 is somehow a gold sink? The only way i could see that is if people bought gems with gold then converted it back (for a loss unless they wait till it’s profitable). From what i understood about the gem store, people that put gold in for gems, comes out when people buy gems and turn it into gold. The disparity doesn’t destroy the gold like the fees in the TP, from what i understand of it anyway. I may be misunderstanding it though.

I wouldn’t consider it a gold sink, but the way it’s set up, I don’t think it causes a big increase in the gold supply either.

After messing around with the D3 AH, I have a new appreciation for the GW2 economy and how much thought went into the design. I can buy 1 million gold in D3 for about a 25 cents and it is not a good thing. All of the checks and balances were designed from a game design perspective and not an economic perspective and really don’t work that well. You would be surprised how much impact choosing not to split the currency into gold, silver and copper has.

D3 has a gold to money exchange system also, but there are no gems, so there is no pool that can be used to measure the relative demand. I can’t explain in economic terms why having that buffer between real dollars and gold makes such a difference, but it does.

I think to really have an informed opinion on regulation, we’d have to have some better understanding how it’s set up. I think most people that express concern over it are people that are worried that the eventual price for gems purchased with gold will be so far out of reach, they have no choice but to spend real cash to buy anything out of the gem store. So knowing there is a cap that isn’t unrealistic (say 10g per 100 for example) or knowing there is some sort of mechanism in place to keep it from going crazy.

Rouven.7409:

Well, just a thought here, instead of explaining maybe it’s time to change people’s perception.

Inflation is rarely discussed as an economic or policy topic; it is usually a political topic. There is a very strong, entrenched political establishment working very hard to make sure that people do not understand inflation.

When you deal with economics and not politics, it’s exhausting to continually encounter people whose notions of inflation are deeply embedded in their politics.

I can totally sympathize with JS simply beating his head against the wall when people drone on about generalized unhappiness with the economy and call it inflation. There is only so much effort you can put into educating people who have put in no effort themselves.

The declining gold to gem exchange rate is solely due to the prevalence of cheap kittens who never open their wallet and support ArenaNet by buying gems.

You have no one to blame but yourselves, and ArenaNet shouldn’t pay any attention to your tears.

It may be harsh, but it’s the truth.

Kraggy.4169:

The point is as I see it, what basis is there for considering the world of video game ‘economics’ has anything to do with ‘real world’ economies.

The equations governing a video game economy are identical to the equations governing a ‘real world’ economy.

They are different in the sense that certain terms are negligible in a video game economy that are very important in a ‘real world’ economy. Similarly, there are terms that are not important in a ‘real world’ economy that are very important in a video game economy.

The fundamental equations are identical, however, and basic micro and macro hold; the specialized research into those important terms won’t necessarily apply, but the core does.

I think the discussion on further regulating gem prices is a bit silly. I am in the camp that the current system is fine.

Anet has said the following:
1) gems transacted through the gold→gem exchange are not created
2) the only way gems are created is when real world money is spent to create them

so, how does one ‘regulate’ this system while guaranteeing that the supply of gems doesn’t run out? (in my estimation it is already regulated, though the algorithm arena.net set)

If you put a price cap on the gem price a couple of things may happen:
1) people may seek to buy gold from illegal sources because they don’t see 10$ as being worth the arbitrary X gold amount in exchange for the risk of getting their account banned for a TOS breach.
2) people just simply wont transfer gems to gold as they don’t see it worth it
3) the supply of gems in the exchange will disappear leading to shortages where you simply cannot buy gems.

The exchange is great, in my opinion, in determining what 1$ of real world currency is worth in terms of gold by adjusting over time to what a player in the game feels 1$ is worth.

You seem to be thinking that a gem is worth less gold, but the market here is simply disagreeing with you. Personally I find 1.80 to 100 gems unreasonable for me if I wanted to convert my gems to gold. The 3+ gold range seems more reasonable to me.

In an example: You might think a share google’s stock is worth 500$, but you are going to have a kitten hard time getting someone to sell it to you for that price.

Draygo.9473:

I think the discussion on further regulating gem prices is a bit silly. I am in the camp that the current system is fine.

Anet has said the following:
1) gems transacted through the gold->gem exchange are not created
2) the only way gems are created is when real world money is spent to create them

Is that true? I’ve not seen it said that, that is how it works. I was under the impression there was a limited supply of gems in the coffers to begin with.