Dr. McB explains the economy in Path of Exile

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NeroNoah wrote:

Wealth should be a Spike player thing. Also, it should be more correlated to killing rather than being a commerce master, although that's mostly an ideal, :P

+ 2^1024.

Another excellent post, Scrotie.

I like turtles.....

Pretty interesting. I hope i'm never in T1. Price/performance sucks and would be embarrassing. Even buying a 6L i hold my nose.

Really the T4 guys have it made from a value stand point. Yet they whine most. Strange to me.

Scarcity creates desire i guess with some ppl. For me its all about value and content. If a build can rack up uber for 5ex I'm all over it even though I have 200 in stash.

Hi Scrotie,

I agree with most of your analysis and also your modification, that a modified normal distribution resembling a mirrored Paretto-curve would more accurately describe the reality of an active economy (though your Bell Curve is most definitely accurate for an imagined self-found league without any trade).

But I have to say that this part needs major revision:

"

ScrotieMcB wrote:

One common myth is that those in the top tiers somehow have a parasitic relationship with lower tiers, even when not scamming, etc. Although they are (by tautology) richer than those in lower tiers, this is not a result of abusing those in tiers below them. It is a combination of simply playing the game for more time, and/or luck, and/or trading with those in the tiers above even themselves. This is an inevitable conclusion of the Thrift Shop Rule.

While I agree with the implication that the "top tier" players have no ill intent or could in any way be blamed for what they are doing, they do, in fact, have a parasitic relationship with lower tiers, but I think the correct adjectiv is "exploitative". Now I am not talking about the wealthy tier 2 trader or a high-end mapper who has a shitton of gear, but I am talking about the "top tier" players who transform currency into capital. And I am also not demanding or even suggesting in any way that the wealth of those people is illegitimate and should be removed or redistributed or whatever social-romantic idea may come to mind... As long as they abide the ruleset of the game they can do as they wish and amass as much stuff as possible, which in itself is a great achievement - in a game!

Now that this is out of the way I can hopefully explain my argument. I think we can agree that these ultra-rich players did not find most of their currency and items and that they also do not actively farm*, which means actually playing the games content for the primary purpose of amassing currency and items to trade them away. They might play endgame content and they might kill uber-atziri several times a day, but it is highly unlikely that these activities have a sole or even major farming purpose. Because they are in the posession of items that allow them to generate wealth, the mirror-worthy crafted items. This is in essentia capital. They took (a lot of) currency, invested it into a production method and are now selling the products to generate more currency than they invested. As I have not directly spoken to any one of these players, I have to assume they are doing this to benefit from their investment solely based on the fact that they are asking mirror fees.
This situation causes some problems for those players, although they might not perceive them as such - problems that every business man has. A) They have a lot of bound capital that is completely relying on demand to be able to generate currency. B) Therefor their product has to be better than that of their competitors or there must not be any competition. C) They have to reinvest because otherwise they will not be able to generate more wealth (and for this reason: more capital) once demand is satisfied (because in capitalism demand is only relevant if it is solvent demand - I can demand a Porsche as long as I want, if I don´t have the money for it I will not get one no matter how high my demand is). That means they need a constant and very large flow of currency to stay in business - they have to constantly sell products AND sell outdated production facilities; read: former mirror-worthy originals that were either made obsolete by better crafts or were made less desirable due to changes to the game mechanics (just imagine what would happen to all the CoC-daggers if CoC was removed with 2.0 or some later patch, just imagine this for a moment).

Now, why would I claim that they have an exploitative relationship towards less wealthy players**? I think it is fairly clear now that the amount of required currency to stay in business over an extended period of time cannot be generated by them farming endgame content, but only through trading, or rather, selling products (= mirrored copies - or even more accurately: mirror rights). But at the same time there is only a single way*** to create the specific currency that is required to reinvest and expand - Exalteds, Eternals (atm at least) and finally Mirrors (and I do not buy into the conspiracy-theory of GGG giving away stuff to RMT sites, that is ridiculous). And as in the real world, there is only one single source that can create wealth and this is labour. So by farming we are working. And to whom is the fruit of all this labour sold? To the rich ones, because as you describe accurately, currency flows from left to right. There it is used for production and the products then have to move to the left again for currency which was created by labour in the meantime. So in essence: if you are not at the rightmost spot, you give currency to then be enabled to give currency. The only reason why this part of the economy exists is the dualistic nature of currency: for the ones who create it, it only has purpose if they give it away, while for the once who can use it, it has purpose to create stuff that is then used to get more currency. They can only exist because the majority of players cannot do things with currency but give it away (see: Scroties Thrift Shop Rule!) and the high-end crafters exploit this fact. This is the definition of an exploitative relationship - at least if you understand it in an amoral way!

And there is nothing wrong with it because it is inherent to the way this game works and if you DO have a problem with it you can simply leave and shut down the game (or play selffound ofc). The problem is if this applies to a situation that you CANNOT simply leave and shut down, but I DO NOT want to talk about that...

Otherwise, good read Scrotie, thanks for sharing your thoughts.


regards

*HOW they came into possession of all that wealth does not really matter. They might have gotten some lucky drops or be talented traders or play the game 24-7-365... it simply doesn´t matter. They are rich, that is what matters.
**This is essentially what your euphemistic phrase "lower tier" means: ppl who have less; who are poorer than others
***at least to my and I think most other peoples knowledge

edit/
modified first paragraph to better reflect the intention

"

Azdrubel wrote:

Hi Scrotie,

I agree with most of your analysis and also your modification, that a Paretto distribution would more accurately describe the reality of an active economy (though your Bell Curve is most definitely accurate for an imagined self-found league without any trade).

But I have to say that this part needs major revision:

"

ScrotieMcB wrote:

One common myth is that those in the top tiers somehow have a parasitic relationship with lower tiers, even when not scamming, etc. Although they are (by tautology) richer than those in lower tiers, this is not a result of abusing those in tiers below them. It is a combination of simply playing the game for more time, and/or luck, and/or trading with those in the tiers above even themselves. This is an inevitable conclusion of the Thrift Shop Rule.

While I agree with the implication that the "top tier" players have no ill intent or could in any way be blamed for what they are doing, they do, in fact, have a parasitic relationship with lower tiers, but I think the correct adjectiv is "exploitative". Now I am not talking about the wealthy tier 2 trader or a high-end mapper who has a shitton of gear, but I am talking about the "top tier" players who transform currency into capital. And I am also not demanding or even suggesting in any way that the wealth of those people is illegitimate and should be removed or redistributed or whatever social-romantic idea may come to mind... As long as they abide the ruleset of the game they can do as they wish and amass as much stuff as possible, which in itself is a great achievement - in a game!

Now that this is out of the way I can hopefully explain my argument. I think we can agree that these ultra-rich players did not find most of their currency and items and that they also do not actively farm*, which means actually playing the games content for the primary purpose of amassing currency and items to trade them away. They might play endgame content and they might kill uber-atziri several times a day, but it is highly unlikely that these activities have a sole or even major farming purpose. Because they are in the posession of items that allow them to generate wealth, the mirror-worthy crafted items. This is in essentia capital. They took (a lot of) currency, invested it into a production method and are now selling the products to generate more currency than they invested. As I have not directly spoken to any one of these players, I have to assume they are doing this to benefit from their investment solely based on the fact that they are asking mirror fees.
This situation causes some problems for those players, although they might not perceive them as such - problems that every business man has. A) They have a lot of bound capital that is completely relying on demand to be able to generate currency. B) Therefor their product has to be better than that of their competitors or there must not be any competition. C) They have to reinvest because otherwise they will not be able to generate more wealth (and for this reason: more capital) once demand is satisfied (because in capitalism demand is only relevant if it is solvent demand - I can demand a Porsche as long as I want, if I don´t have the money for it I will not get one no matter how high my demand is). That means they need a constant and very big flow of currency to stay in business - they have to constantly sell products AND sell outdated production facilities; read: former mirror-worthy originals that were either made obsolete by better crafts or were made less desirable due to changes to the game mechanics (just imagine what would happen to all the CoC-daggers if CoC was removed with 2.0 or some later patch, just imagine this for a moment).

Now, why would I claim that they have an exploitative relationship towards less wealthy players**? I think it is fairly clear now that the amount of required currency to stay in business over an extended period of time cannot be generated by them farming endgame content, but only through trading, or rather, selling products (= mirrored copies - or even more accurately: mirror rights). But at the same time there is only a single way*** to create the specific currency that is required to reinvest and expand - Exalteds, Eternals (atm at least) and finally Mirrors (and I do not buy into the conspiracy-theory of GGG giving away stuff to RMT sites, that is ridiculous). And as in the real world, there is only one single source that can create wealth and this is labour. So by farming we are working. And to whom is the fruit of all this labour sold? To the rich ones, because as you describe accurately, currency flows from left to right. There it is used for production and the products then have to move to the left again for currency which was created by labour in the meantime. So in essence: if you are not at the rightmost spot, you give currency to then be enabled to give currency. The only reason why this part of the economy exists is the dualistic nature of currency: for the ones who create it, it only has purpose if they give it away, while for the once who can use it, it has purpose to create stuff that is then used to get more currency. They can only exist because the majority of players cannot do things with currency but give it away (see: Scroties Thrift Shop Rule!) and the high-end crafters exploit this fact. This is the definition of an exploitative relationship - at least if you understand it in an amoral way!

And there is nothing wrong with it because it is inherent to the way this game works and if you DO have a problem with it you can simply leave and shut down the game. The problem is if this applies to a situation that you CANNOT simply leave and shut down, but I DO NOT want to talk about that...

Otherwise, good read Scrotie, thanks for sharing your thoughts.


regards

*HOW they came into possession of all that wealth does not really matter. They might have gotten some lucky drops or be talented traders or play the game 24-7-365... it simply doesn´t matter. They are rich, that is what matters.
**This is essentially what your euphemistic phrase "lower tier" means: ppl who have less; who are poorer than others
***at least to my and I think most other peoples knowledge

I really enjoyed this summary of crafting. I really like POE, but crafting is one area i feel they have failed in, I really prefer the D2 model in dealing with high-end rare currency/crafting MATS.

I feel that as a mid-bellcurve player in POE, I should have a choice when an exalted orb drops(or any other high end, rare currency):between crafting with it, or trading it.
Unfortunately, in POE, the value of trading 1 exalted orb is significantly higher then the expected value/return on using 1 exalted orb.

In D2 if i found, let's say, a Lo rune(or any mid-high rune), I had a real choice, craft it, or trade it. I could gain a good value either from crafting or trading.

Wow! TL{BI}DR (Too Long But I Did Read).

 Sigh! Is the state of the art today in arpg's such that we must do a ton of math (new mana leech mechanics for example) or have taken a statistics course in college just to play this game? Why is all this over thinking required to play PoE anyway? Most want a reasonable bang for their buck, enough rewards for time played (masochists excluded), so the play difficulty balance or economic balance to make PoE enjoyable and thus attract new players and keep them hooked for long term is really all that is required here. The fact that we all have different playing skills and different amounts of time to play PoE means each of us will have a different "goldilocks" view of PoE (or any game) and thus GGG can never expect (nor should we) to get to a perfect place and have a PoE that makes the newbies, casuals, hardcore, and no-lifers all happy. There are at least 101 trade-offs that GGG has to weigh in deciding where they place PoE on the "difficulty" scale. All GGG really needs to do is come up with a statistical graph for time/rewards for the 99% of PoE players (or the majority whatever that % is) and then tweak PoE as best possible to hit the center of that bell curve. I have no clue how to gather that kind of info. I do acknowledge and understand that GGG can take PoE in whatever direction they want and go uber hard or soft and ignore their player base entirely (GGG's always steered PoE toward the uber hard end of the scale so I don't expect any change in that going forward) so soon (like in less than 5 hours from now!) we will all see if PoE v2.0 is better or worse for the 99% (anything with no or low desync has to be better).

 So no amount of statistical analysis of the PoE economy will ever change the plain cold hard fact that trade chat sucks for most players and that some kind of the much talked about (but to date mythical) Public Trade Stash system is needed to make trading a much less "pain in the arse" (even if your ass is cleaner than the innkeepers rooms. Who else remembers back to the elvin arses. ☺). Getting to a better PoE gear and wealth place is one of the main goals (besides the obvious level 100 build) and at some point real soon after the shake down (major debugging and re-balancing) GGG must focus on getting us an in-game/in-browser easy way to WTS/WTB gear and currency. We don't need a ton of economic statistical analysis here to understand that.

scrot is right tho, via trade lower tier players get far better gear by pushing their orbs up the food chain and getting already made items for them than they would by using them. You can buy a pair of boots for 4 chaos that you would probably have to spam 60+ chaos on a base item to replicate.

ultimately the really rich guys dont even interact with low to mid tier players, at least I dont imagine they do. Theyre probably not willing to sell you items for 1 chaos here, 2 chaos there, 4 chaos for this one etc, they probably just vendor those sort of items. I think they only bother to trade with people in the highest tier or very close to it where theyre getting 10+ exalts per trade or it wouldnt be worth their time, the only people theyre taking orbs off are other considerably wealthy players.

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Snorkle_uk wrote:

ultimately the really rich guys dont even interact with low to mid tier players, at least I dont imagine they do. Theyre probably not willing to sell you items for 1 chaos here, 2 chaos there, 4 chaos for this one etc, they probably just vendor those sort of items. I think they only bother to trade with people in the highest tier or very close to it where theyre getting 10+ exalts per trade or it wouldnt be worth their time, the only people theyre taking orbs off are other considerably wealthy players.

That is exactly my point. The really rich guys don´t interact with tier 3/4 players and likely most tier 2 players, but the people they DO interact with are also in a position where most of the currency they are trading is not generated through farming but rather trading as well. As this chain of interaction goes down the tiers, a greater part of the traded currency is created by farming and not simply handed over from one player to the next.

regards

Apparently, I missed you posting this because I was busy over with the Beta at the time. However, good, solid work; you certainly explained it in a LOT fewer words than I would've taken. Very readable, and hopefully will educate a LOT of the players here.

For anyone else reading this, (i.e, McB's targeted audience) the basics of this post apply to pretty much all economies. The only really unique part of it is that PoE's currency is consumable, but that does NOT actually affect these rules.

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Azdrubel wrote:

I agree with most of your analysis and also your modification, that a Paretto distribution would more accurately describe the reality of an active economy

I would actually disagree with this on a major ground: while, yes, because total wealth progresses, as a general rule, with increasing time spent, (suggesting an exponentially-shrinking Paretto distribution) so does the probability of partaking in trade. A simple observation is that one with no wealth (to either buy or sell) does not partake in the economy. As a (tautological) note, those not trading... Are not part of the economic distribution.

Rather, I would suggest that the distribution is still follow a Gaussian "bell curve," albeit a "positively skewed" one. In many political, social, and economic measurements where :

- There is a defined zero-value, (e.g, it is impossible to have NEGATIVE wealth here, only POSITIVE)

- But no PRACTICAL defined maximum (94,371,840 mirrors may as well be "infinity" for most purposes)

The result very often will follow such a "positive skew" with a longer "tail" heading towards higher numbers. However, the result still largely follows the same shape, just skewed.

"

Azdrubel wrote:

But I have to say that this part needs major revision:

I will say that you brought up the very point that I had in mind after reading the original posting. The irony is that while I would've written the OP as too long-winded, my commentary on the cycle of using capital to generate more capital would've been WOEFULLY incomplete and under-detailed. You managed to put something out that was both readable AND clearly illustrate how such a position can become self-sustaining.

Similarly, to help back one of your observations on how wealth is produced at the very top end:

- The fastest I've seen people boast about being able to produce wealth via mapping, Uber Atziri, etc, is on the order of magnitude of 1-2 exalted orbs per hour. This may even be a little stretched; but certainly is not an understatement from the maximum possible in "playing the game" (as opposed to the trading meta-game)

- The investment necessary to produce a mirror-worthy item is IMMENSE; my calculations have suggested it takes in the neighborhood of 1,200 exalts' (minimum) worth of currency in the alt-regal-eternal-exalt process to produce a new 6-tier-1 weapon, without ever divining it. (And the real figure may be up to an order of magnitude higher)

- Some of the most prolific mirrorers, like AXn, have managed to produce (Craft) new mirror-worthy items at a rate that vastly exceeds the rate wealth could be produced through farming: upwards of 1 item/week, when there are only 168 hours in a week.

-However, with mirror fees, wealth may be acquired at a rate largely unrestricted by any factor beyond a supply of buyers. The bottlenecking factor is, almost certainly, the overall economy's supply of mirrors. (as more mirrors would mean more being used, while NOT directly enabling the creation of more mirror-worthy items)



Overall, this is why I considered, in terms of an economy that helps newcomers and others succeed, mirrors (or more precisely, the method of wealth generation that they've enabled) have proven detrimental. Some of the changes for Awakening may provide some changes, though:

- As my math suggested, eliminating Eternal Orbs will raise the cost of producing new "mirror-worthy" gear by multiple orders of magnitude; it'd go from 1,200 ex to around 334,348,560 ex. Such a jump could likely render such an option implausible for wealth-generating, thereby closing the exploit to allow it to bypass the "thrift shop rule." (technically, the rule was never broken; it's why mirrored items never traded for more than a few hundred exalts)

- The introduction of new, higher-tier stuff will, at least in time, offer the chance that existing mirror-worthy items may eventually prove no longer the best. As a result, they will be mirrored less, eliminating their own use for making wealth.

- Of course, there will still be those making money from mirroring. However, with note 1, this most likely can no longer be a more "deliberate" method of forcing this; distribution for those making money here will likely be random, and their "reign" of being able to control such a market segment (and hence make money) will also not be self-sustaining. (as there will be no intentional way to use one's edge to help maintain it)