Video: MMO Economies – How to Manage Inflation in Virtual Economies – Extra Credits
Before we start, a big thank you to Nick Dewitt for tackling guest art for this episode. Today, we're gonna talk about economic balance in MMOs. It's one of the most complex things you can wrestle with as a designer. And it offers a fascinating view into where real-world economic theory and the inherent strangeness of running an MMO collide. Now, this topic could easily be an entire series unto itself. But today, we're gonna dive into one of the most important issues that MMO economies face: The tendency toward hyperinflation.
Pretty much any of you who have played an MMO for any length of time have seen this tendency in effect. The value of a Gold piece in the game drops and drops as time passes. In the first month after launch, you could buy great items for 20 gold pieces. Fast forward to three years later, and those same items are costing ten thousand gold pieces in the auction house. This is why players eventually improvise by adopting alternate currencies… …such as Stones of Jordan in Diablo 2, or Shards in Asheron's Call. But why does this hyperinflation happen in the first place, and how can we prevent it? Okay, so let's start by defining "inflation". When the buying power of a given amount of currency drops, we call that "inflation". So, for example, a nickel buys a lot less in the United states today than it did in 1850. As you probably know, whenever you print money in a real-world economy, you inflate the currency.
Print too much money and you hit hyperinflation – an economic state where the currency effectively becomes worthless. That's essentially what's happening in all of these MMOs. You see, in the real world, governments control how much money is printed in a given amount of time… …so that they can regulate how much currency enters the economy. And thus control the rate of inflation to some degree. But where does currency come from in an MMO? Well, monsters. Every time a monster spawns, you're effectively printing money. Every time you kill a mob in an MMO, you either get money directly or you get loot that can be exchanged for money. But to keep the game engaging for the players, these monsters have to respawn in a timely fashion… .
..with an amount of loot and currency similar to what they had last time they spawned. If they didn't, you just end up with big empty zones with nothing to fight. Or people feeling cheated when the first players to get to his own swipe all the good loot. It would be a great way to kill your MMO in a hurry. So over time, more and more currency is being added to the world as, in aggregate, the player base is killing and looting huge amounts of mobs. This effectively devalues the currency and leads to runaway inflation… …creating the worthless currency scenario that I described before. So how do we combat this problem as designers? The standard answer is to find currency sinks. Places where you can use game mechanics to take currency out of the world. The obvious go-to is your death mechanic. Every time you die in World of Warcraft, your equipment takes damage. Eventually you have to repair it, which costs money.
And that money goes to a vendor, and not another player. So you're giving money to an NPC without getting any resellable goods in return. Effectively taking the full value of that repair out of the world economy. It's a great design idea, but it's not gonna single-handedly solve your problem. The trouble with death sinks is that it's almost impossible to make them effective enough by themselves without feeling onerous. The amount you'd have to charge for repairs would really start frustrating your players. Especially those playing tank classes. The only devs I've seen come close to controlling inflation solely through death mechanics are the folks at CCP with Eve Online. In that game, the economic cost of dying is so staggering, it becomes a strong tool to rein in inflation.
They also encourage large-scale player wars as a key element of the game. These wars destroy so many goods, which then must be replaced, which helps to keep inflation in check. But since death penalties alone usually aren't enough to prevent the hyperinflation incurred by player farming, what else do games do? Well, first off, they use the buy and sell prices of vendors. Note how most NPC vendors in these games only give you a very small percentage of an item's value when you try to sell it to them. Where does that value difference go? Nowhere. It falls out of the economy, effectively reducing the amount of currency in circulation. Unfortunately, this technique isn't a cure-all for the problem either. Because our NPC merchants aren't all that discriminating about what they'll buy. In real life, a shopkeep would tell you, "No.
Stop trying to sell me rusty knives." "You've sold me thirty of them now. I don't want any more. Get out of here." But nope, our NPCs are happy to pick up those tattered rat pelts all day long! Rag, weeds, a handful of rocks… Doesn't matter if they're worthless at the auction house; that NPC will buy as many as you can bring them. This means that items which otherwise would have zero economic value now have some economic value due to our NPC vendors. Which, in the end, often results in the sell function actually adding more currency to the economy than it removes. This is doubly true when you introduce the concept of soulbound items. Sure, it creates scarcity for those specific items… But it also means the only place you can eventually offload them is with a vendor. Which just floods more and more money into the economy.
If it were a regular item, it could at least get circulated among the playerbase forever… …as players kept selling it to each other, which is a currency neutral activity. But okay, what other options do we have? Well, there's also consumables. Potions, ammo, food and drink. All of these serve as ways to remove currency from the economy. And games which make these systems crucial parts of play tend to do so… …so that the designers can have a big lever to pull to stop runaway inflation when they need to. Is inflation growing too fast? Well, create an expensive high-end consumable that all your players are gonna wanna burn through… …and you can level out that problem real quick. Auction house fees are another common system. Besides simply deterring players from putting up junk auctions all the time… …these fees serve to remove a small percentage of the cost of an item from the economy every time it circulates through the playerbase.
There's also services. Have you ever wondered why you have to pay for fast travel, or why that griffin ride costs you money? It's because it's another economic sink. This can be anything from transportation, to fees for sending letters, to money paid to open up new bank slots. All of these services take money from the player without returning a tangible good, thus effectively deleting that money from circulation. I could go on all day about this stuff, but let's talk about some of the more inventive solutions that could be used. First off, let's talk about this idea of tying currency to a consumable necessity. Let's say, for example, that you put a high-end potion into your game for ten thousand gold that every raid player is gonna want every time they go raiding. Now let's say that it's only purchasable from vendors.
And not only does this remove ten thousand gold from your economy every time a player swings one of these things… …but it also sets a baseline for the value of money. Your currency may inflate, but by essentially backing it with another good – by saying that at any point, you can trade in ten thousand gold for this potion… Your currency will never become worthless. Or you could tie it to real-world currency. If players can trade your in-game currency for something with real-world value… It'll inflate, but it'll always retain value. In Eve Online, Plex serve this function. Plex are game codes that can be used to pay the monthly subscription fee for the game, but they're also tradable on the in-game market. And this means that the in-game currency will always have value, because it's tied directly to something with a real-world dollar value.
There are also taxation systems in games, which help to keep things regulated. You wanna keep your guild for another month? Well, you better pay x amount of gold. You wanna keep that farmland you bought? I guess you better pay the NPC lord a few hundred guilders before the week is out. It's an effective option, although it's really hard to manage without making it feel burdensome to the player. Lastly, there's the idea of permanent purchasable upgrades for a character. We do already use this to a limited degree. Have you ever wondered why this trainer who wants to guide you through life or prepare you to save the world… …isn't gonna teach you that new kick until you fork over four platinum? It's to get that money out of the game. The problem is that this often stops at the level cap, when you run out of stuff to learn. Which is unfortunate, because that's the place where it would actually be most effective. There is an alternative, though: premium endgame trainers.
Have you already maxed out your level? Well, here's a special trainer who will increase any stat you want by one point, for 40,000 experience points and 10,000 gold. The great thing about this is that it can be an exponential system, which causes the high-end players to just drain money out of the economy. Which is good, because those players are usually the biggest generators of inflationary influxes of cash. This stuff is all just the tip of the iceberg, but we are way out of time. If you guys found this interesting, let us know. We may come back to it. There is no shortage of special weirdness that comes with trying to craft an economy for an MMO. See you next week!.