Economic Principles in the Context of “Path of Exile”

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cullam wrote:

Thank you! I hope with the new 6-month expansion timeline more time will able to put into regulating trade and other such things. To me, it seems as though eternals were put into the game in order to give more determinism to the crafting process, but other factors were not considered.

The horrible thing about eternals is they gave determinism to a crafting process only available to the rich.

1 because eternals are rare - therefore only available to the rich
2 the only way you can craft an item that can take advantage of eternals in a meaningful way is to be rich

so GGG helps the players who need the least help.

thanks.

p.s. and mirrors are _still_ a bad idea. get rid of them. there's is no reason AT ALL that they should exist.

I agree with most of this.

@Shagsbeard: you are funny.

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MatrixFactor wrote:

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cullam wrote:

the wealthy would get still get richer faster than the poor. Rather, it would just be at a slower, more reasonable rate.

Well the question is what should the rate of this divergence be.

I mean, this is the difficult part, since we have no absolute information as to the rate of increases of wealth, or even the concentrations of wealth. There will always be inequality in the market, because that's how markets are. I've argued that the extent to which these two poles are apart from each other is too much, mostly because of broken mechanics and illegitimate traders. I couldn't say what the perfectly ideal amount of difference would be, but I think holding back the top end and giving more tools to the bottom end, no long as it's done cautiously, can only have positive effects on the overall economy.

i agree with everything you wrote, gj and free bump

I posted this as a response on reddit, as I hardly come on here. I will probably only respond to reddit comments. The reddit thread is http://www.reddit.com/r/pathofexile/comments/2c2ups/discussion_economic_principles_in_the_context_of/

Missing from your discussion are any benefits to the economy of eternal orbs, as well as the productivity at the heart of the economy: drop generation. Better gear allows better drop generation through higher clear speed and higher rarity and quantity (through more difficult maps which can be tackled). Good gear comes form drop generation. When people have better gear, they can generate better drops. Better drops means better gear for everyone through the system of trading that exists. Thus, the better gear which exists because of things like eternals and mirrors generates better drops. Since the supply of better drops increases, the price to the normal player of better gear drops. This is how normal folks benefit.

Further, consider an economy without eternals. Since players want better items, people at the top will want to use exalts. The use of exalts will be gated by either the number of exalts which drop or the amount of gear they deem exalt worthy. If we are gated by the number of exalts (i.e. exalts are rare), top players will keep in their stash gear they deem excellent but do not wish to give away as they would like to exalt them later. This decreases the amount of good gear in use, makes the price of decent gear more expensive to the normal player, and decreases game wide drop rate. Bad for everyone as far as gear and farm speed (which most consider fun). If we are gated by the amount of exalt worthy gear (i.e. too many exalts), more things would get exalted; the line for what is "exalt worthy" decreases. This seems to be your goal, and there is nothing wrong with that. It simply entails different equilibrium relative prices.

However! Do exalts really hinder the use of exalts on non-eternal exalt items? They, in fact, do not. Since eternals are more rare than exalts, you only need exalts for when you have eternals; this leaves some leftover exalts that people do not use for eternal exalts. These exalts get used for improving maps or hoping to get a lucky roll; yolo exalting exists and is rational.

In that sense, I do not quite see the perils of eternals. Eternals allow exalts to be rare, but disincentivizes high drop rate players from keeping lots of good gear to themselves despite the rarity of exalts. And it is fun to have rare items in games of this type.

Let us revisit your definitions of a healthy economy. You say eternals make the economy unstable and inequitable. I do not see the instability, and I don't think you make an argument for it. Eternals make players want to eternal exalt, as you point out, but this just changes relative prices, but the prices are relatively stable in the long run. As for inequality, you never address the extra wealth generated by higher drop generation which flow from eternal exalting. The players at the top have no reason to hoard; they want the consumable currency and will trade the items they farm, which are worthless to them, for the currency they want. All trading players have better items as a result. Inequity in and of itself is not bad save for the envy it generates. Are players better off than they would have been otherwise? That is the better criterion for measurement here.

Thanks for your thoughts, it was a fun exercise.

I applaud you for attempting to improve the trading system Cullam, I think you make some good points and your suggestions seem reasonable. Sadly, I don't feel I have the necessary expertise and knowledge to meaningfully contribute, so I'll just say thank you for a good read.

Thank you that was a nice read - and well written. Even though I disagree with almost all points you made ;).

1. Your definition of a healthy economy does not appear to be reasonable

I agree with stability (or limited inflation). However, requiring that all players roughly have the same amount of wealth or at least do not deviate beyond a certain relation is not a good idea. Essentially this would mean that - ideally - someone who just logged in for the first time should have the same amount of wealth as someone who has played 100/hours per week for two years.

It would be much more reasonable to consider the health of the economy by whether it is good in gating item progression. And in fact PoE is doing an excellent job at that.
Let me explain. The economy in PoE is such that it allows to gear for endgame in about 100 to 200 hours of reasonably smart play (no flipping, just selling the stuff that you find and can not use yourself). It allows for optimal gear in about 1000 to 2000 hours of reasonably smart play (assuming that you can farm about 1ex/hour).

To me that is a very healthy economy.

2. It is not risk vs. reward but effort vs. reward and being smart vs. reward

You indicate that the main source of wealth in PoE stems from taking risks. This is not the case. Essentially only vaaling something is a risk-reward game. The main source of wealth is finding and selling stuff. There is no risk in that. It is purely effort-reward and playing smart - reward.

Again PoE is excellent at both effort. vs. reward and being smart vs. reward. There is a multitude of ways to get your items and depending on the way you play they differ in how good they are. There is a lot of room to optimize your gameplay and to be smart (or not so smart). That is very good for a game.

There is also nothing wrong with eternal orbs - their price (in other orbs and gear) simply reflect their usefullness. Without them the gear threshold would be lower but nothing fundamental would change regarding the economy per se.

3. Immaterial Goods

Crafting mirror-worthy gear and putting it up for mirroring does not run counter to what we see in real world economies. Mirroring services are similar to selling immaterial goods such as software or music. It is a very good game concept and I do not see any drawbacks. Like for eternal orbs - their price simply reflects their usefulness. They do not damage the economy in any way.

4. The real problem

The real problem is that a siginifcant amount of players does believe that they should have access to the best possible gear even though they do not put in the effort or play smart enough to get them. This is quite understandable since it is very hard for a human to admit on of the following statements:

I do not put enough effort into this game to deserve item XYZ.

or even worse

I am not good enough at this game to deserve item XYZ.

Cheers!

Two more things that came to my mind after pressing "submit".

1) The PoE economy is very healthy due to its inbuild inflation protection. The best possible rare items will never be more expensive (in ex/et) than their cost in crafting materials. That is a very unique property of the PoE economy.

2) By ensure that progression in expansions goes sideways (e.g. vaaling stuff) and not upwards (e.g. putting in better bases for items) GGG has protected the investment of their players. That is also a very good decision and very different from what Blizzard does with their games. I applaud GGG for taking this approach. That way items feel like they have real, persistent value.

Just my 2c

Cheers

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Faendris wrote:

Thank you that was a nice read - and well written. Even though I disagree with almost all points you made ;).

Thanks for responding! I'd like to first respond to some rash and pointless generalizations you applied to my argument. First and foremost, I never say anything about how all players should have access to the "best possible gear." Your bringing up of this is entirely out of the blue and does not add anything to the discussion. In fact, since I advocate the abolishing of eternal orbs, I consequently advocate significantly decreasing the amount of "best possible gear," in effect making LESS people acquire it.

I also specifically do NOT advocate that every player in the game have "roughly the same amount of wealth." I purposefully argued that a healthy medium between the two extremes should be a desired outcome. And anyways, the concept of a new player logging onto the game with 100 exalted orbs in his stash is entirely ludicrous and irrelevant. Even if I *did* argue for the absolute spreading of the wealth, it would be in terms of cost, or time, spent on the game.

These two things tell me that you came into this discussion with preconceived notions of what my argument would be, and responded accordingly. I genuinely suggest you read my post again before responding.

1. Unfortunately, I must take your numbers with a grain of salt, since we have no evidence to support any sort of number claims. Additionally, your statements contain a lot of widely ranging, subjective variables: what is "smart play?" If smart play is the topmost tier, what is "reasonably smart play"? It also uses some large assumptions which may not necessarily be true given different circumstances, like farming at 1ex/hour.

What I tried to do in my defining of a healthy economy was use terms that would be applicable to the real world, since we have little to no factual evidence in terms of the PoE economy, not to mention the fact that virtual economies are very new by comparison. I don't necessarily disagree with your defining of a healthy PoE economy, but what would an applicable IRL metaphor be?

2. When I explained the risk vs. reward equation, I also included explanations of the cost and failure variables. Both effort and being smart (or spending time/effort to learn about the game) are costs in this equation. Whenever you attempt to gain wealth, you are risking something (except in the case of eternals lol). You say that getting items to drop is devoid of risk, but this is simply not true: every time you play the game, you are taking the risk of death. This is one of the reasons why there is a smaller money supply in HC leagues.

My main issue with eternals orbs is not that they are costly. If they weren't, then everyone would craft perfect items and all items would be completely devalued. Please, read over my argument again.

3. The examples you used are not applicable to mirrors whatsoever. Let's take your example of software. If software is sold in hard copies, it must be produced in..a factory! If it is created and solely distributed on the internet, there are still costs associated with this, such as coming up with regular updates to your software, paying regular fees for the server that your software is downloaded from, etc. etc. Music is the same way, except in addition I would consider it even less relevant, since it has no practical value whereas items, in the context of PoE, do.

1) To me, this doesn't hold any water. Let's say I spend 1000 exalts crafting an item. If I'm going to sell it, won't I try my very best to make a profit, i.e. sell it for more than I spent crafting it?

2) I definitely agree that I like a sideways approach more than an upwards approach, simply because it does not affect what is already established, for better or for worse. However, legacy items have the unfortunate effect of ruining the standard economy over time, in addition to some of the other reasons I already mentioned in my original post.

Again, I truly encourage you to reread my argument with a more open mind, especially the preface. While I happily welcome all discussion, your response essentially amounted to a condescending "stop whining," without giving any of my points the light of day.

I apologize if I came across as condescending. That was not my intention.

I would like to focus my reply on how to determine wether the PoE economy is healthy or not, since everything else depends on that.

You suggest that we should look at whether the economy is stable and equitable. I have no problems with the first one and would guess that we can agree that the PoE economy (in standard) is pretty stable. There are small spikes here and there if something disruptive happens but exchange rates and prices are by and large quite stable.

I do have a problem with equitable, possibly because it is not well specified. If equitable means that the distribution of wealth should simply be shaped in some specific form, then that would be a problem for me - I tried to highlight that with the extreme example of someone just logging in for the first time. If equitable means that you should be rewarded according to your effort and skill, then I would agree completely.

If I may assume for a moment that we agree on the latter definition of equitable, then I would like to check whether the economy of PoE is in good shape. I do that be checking if effort and rewards match - I use standard as a reference:

I assume that it is reasonable to farm about 1 ex per hour. I myself am currently at about 3-4 ex per hour but then I already have perfect gear for what I am doing. 1 ex could be a member of a well organized dominus farming group, for example.

I also assume that if you spend about 10 to 20 ex per slot you will generally be end-game ready.

As a consequence you will need to play 100 to 200 hours to be end-game ready. This appears reasonable to me.

Further, if you want to get perfect gear, at most you need to spend between 1000 and 2000 ex. Thus you would need to play 1000 to 2000 hours to get to that level. Again, that appears to be reasonable to me.

So, if you measure the health of the economy by how well it rewards effort and reasonably smart play (e.g. using all features, in particular being able to sell stuff and farm efficiently) then the PoE economy is very healthy. I thus see no need to change it.