Curse

MyriaN · May 22, 2005, 08:16 PM // 20:16

I'm not an economist or anything so please forgive my extremely uninformed and totally unreliable ramblings. I'm one of those people that likes to talk about things they know nothing about, so here it goes.

Gold, silver, platinum or whatever in the game is not strictly speaking a commodity like in real life. In real life, precious metals have industrial applications and can be used to make things prettier thereby giving them intrinsic value. In the game, it's simply a unit of measure like dollars, yen, gil or adena.

Also, gold and other precious metals have a limited supply in real life. In-game gold can be created in unlimited quantities presumably based on consumer demand. Therefore, as has already been mentioned, the value of in-game gold will only go down as more gold is introduced into the economy.

However, I did leave out one valuable use of real life gold that can also apply to in-game gold. In real life, gold is valuable because it is also a very convenient method for storing and transporting real wealth. Although the world's currencies are no longer tied to the price of gold, most of the world's banks still store their "wealth" as gold bars. I believe this is because gold has a high value to weight (or volume) ratio, is non-perishable and difficult to counterfeit.

So what is the value/weight ratio of in-game gold? I really have no idea, but there must be one. A previous poster mentioned that there is a cap on the amount of gold that can be held by one account. If this is the case, then I suppose it is possible for rarer stackable items to become more useful as a way of storing wealth. However, since the rarity of items can be easily changed by the devs on a whim, investing in any one type of item is a bit risky.

My totally uneducated guess would be that stackable luxury items will continue to be rare and valuable even as more people start playing and get rich. This is because luxury items are not strictly necessary to "play" or "enjoy" the game, so there is no real pressure for the devs to bend to the wishes of the consumer. Luxury items can be used as a way for a few lucky people to distinguish themselves from everyone else. I haven't been playing long enough to figure out what these items would be. Rare dyes are probably an example of a stackable luxury item.

Another real life benefit of gold that may be applicable to in-game gold is that it's value is recognized by almost everyone. For example, if you show me money from a country I never heard of, I'll have no idea of what it's worth in my own currency. If you show me gold, I can quickly determine it's exact worth in my own currency and know that the value will not change drastically over time.

In the game, I know exactly what I can buy if you give me X amount of gold. But I don't know what your special rare crafting component is worth on the open market. Most people will be more likely to demand gold for payment rather than items they don't know about.

Since GW does not seem to have a convenient way of "checking the market" like an auction house, gold will probably continue to hold value simply because it's inconvenient to trade with anything else. But if a better market and trading system were to be introduced, the value of gold will probably drop dramatically.

Anyways, sorry for rambling on. I just like talking and thinking about mundane things like this and hearing what other people have to say.

-Myrian

Willow · May 23, 2005, 12:34 AM // 00:34

Myrian- despite you not being an economist, most of what you said is fairly well thought out.

I however, am an economist. So allow me to expand:

There are several things that a currency needs to have in order to perform well. I'm going to focus on three: liquidity, ease of transport/exchange, and scarcity.

Liquidity refers to the ease at which a currency can be spent or transferred. US dollars are highly liquid- you can use them to buy just about anything, anywhere in the world. A plasma television set is very non-liquid. It might be very valuable, but try paying for groceries with it*.

Currency needs to be easy to transport and exchange. US dollars do very well for this- they are small and fit easily in one's pocket, and to transfer them, you just hand them to someone else. They can even be stored and transferred electronically.
Plasma televisions, not so much. It's not practical to carry one or more around every where you go, in the event you have to make a transaction.

For a currency to be worth anything, it needs to be fairly scarce. There's lots of US dollars, but since they're printed in a fixed ammount regulated by the government, there's a set money supply at any given time- and there's always people who want more money. Leaves aren't- hence the phrase "money doesn't grow on trees." If it did, it wouldn't be worth anything.
Of course, if a currency is too scarce, no one is able to make transactions. If the only recognized currency is plasma televisions, not too many people are going to be buying groceries.

----

So how do various proposed currencies for Guild Wars measure up?

GOLD:

Gold is extremely liquid. Computer vendors deal solely in gold. (The scope of these vendors will be discussed below.) If you want to get rid of gold, it's very easy to exchange it for something, although maybe not something you specifally want (just go to Lions Arch district 1.) I don't think people will ever have a problem buying things with gold.

Gold is easy to carry and transfer. Gold is probably the easiest concievable item to carry, since it doesn't take up an inventory slot, and the currency limit is very high.

Gold is reasonably scarce. It is true that with every hour more gold is put into the system, and this is likely more than is taken out to pay for things from vendors. However, in the real world money supplies generally increase over time- inflation. So prices may rise.
However, vendors are a great equalizer as they take money out of the system (rather than giving it to another player.) The higher quality of vendors in the game, the more scarce (and liquid!), and therefore more relevant gold will be.

DYES (Black):

Black dies are extremely liquid, potentially moreso than gold. At just about everytown, one can sell black dyes to merchants for gold, or to players waiting to pay out many gold pieces. Concievably one might trade a black dye straight up for rare items (runes, flaming swords, etc.)

Black dye, like all inventory items is easy to transfer. It does cut into carrying capacity slightly (one inventory slot, as it's stackable). This is not likely to impact too negatively on Black Dye.

Black dye is scarce- in fact I've never seen one drop. However, there clearly are black dyes being bought and sold, so they are in circulation.
Consider though, that from drops and the dye traders, more black dye is being put in circulation, presumably at a fairly constant rate. (How one defines 'constant' in this context is up to debate.) It is possible that just as the market for gold may get flooded, so too will Black Dye.

RARE ITEMS (Runes/Sigils)

Rare items tend to be liquid, although there are fewer potential buyers for certain runes. Sigils and popular runes will likely attract buyers of all classes, whereas less used abilities will only attract buyers of the appropriate class.
Obscure rare items, however valuable, are incredibly non-liquid due to the restraints of the buyer. (As a case in point, if you are a monk with 7 smiting prayers, I've got a great staff to sell you. No, you're not? Didn't think so.)

Rare items are not stackable, so good luck carrying them all around with you. I'd advise only keeping the most valuable for trades (i.e. sigils, maybe major runes and turbo weapons)

Rare items are generally scarce. The actual scarcity of Sigils is open to debate. They are rare, but alternate means of acquisition exist that will eventually bring the price down. (I believe that there is a 'bubble' in the Sigil market, that will fall out. Watch out for speculation on Sigils.)
Runes and Sigils also have the effect of taking themselves out of the market (as they have innate consumable value), which makes them bad for long term currency- eventually people use them.

UBER RARE CRAFTING ITEM

Not much for liquidity... yet. There has to be demand first. This might be something to watch, especially if these crafting items are useful for multiple classes.

Crafting materials are very transportable and transferable. The same as dyes.

Uberrare crafting items, are, by definition very rare, so scarcity is a given. Since I've only seen one person in game ever mention ectoplasm, I suspect the scarcity is too high to make it a currency at this time. And if it's good for crafting, it should take itself out of the market quickly as it's used to make uberrare items.

THE VERDICT:

Gold is here to stay. Why? The sheer liquidity. The big detail is this: gold can be exchanged for dyes and sigils via vendors. If there wasn't a Dye Vendor and a Sigil Vendor, gold would probably end up being replaced by Black Dye as a standard high-end currency.

As is, gold can buy dyes and Sigils. Suppose Black Dye costs X gold from the vendor, and you need 3 for a Dragon sword? Just pay 3X gold. Most people will be willing to skip the middleman and just take the dozens of platinum or whatever required.

If the prices of Black Dyes start spiraling too high, expect more to get sold at the Dye Vendors. Similarly with Celestial Sigils. That will in turn bring the prices down.

The fact that gold can be easily transferred into what people are speculating on being the replacement currency is it's best selling point.

I do expect Black Dye and Sigils to remain a popular second trade good and the source of much speculation and investment. Also expect to see general inflation in all prices for player-driven items.