Dr. McB explains the economy in Path of Exile

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Azdrubel wrote:

**Bad-ass abbreviation for a bad-ass theorem! For further information check: McB, Scrotie 2015: Dr. McB explains the Economy in Path of Exile

To have a theorem, you need a proof. I think this is a helpful and interesting topic, but the OP is speculation.

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Byzantion wrote:

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Azdrubel wrote:

**Bad-ass abbreviation for a bad-ass theorem! For further information check: McB, Scrotie 2015: Dr. McB explains the Economy in Path of Exile

To have a theorem, you need a proof. I think this is a helpful and interesting topic, but the OP is speculation.

I pretty much did prove the Thrift Shop Rule in the OP.

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Byzantion wrote:

To have a theorem, you need a proof. I think this is a helpful and interesting topic, but the OP is speculation.

In economic discourse, (like any of the behavioral sciences) "proof" comes from observation. All of the observations used to back the statements are very valid.

It's all fine and dandy to reject someone else's observations, but to outright claim that they're lacking, when you could just as well gather your own empirical observations is thoroughly unscientific.

It's the equivalent of rejecting a tested hypotheosis from a physical science (like, say, physics) on grounds that you didn't believe any testing was done, and refuse to test it yourself to either prove or refute the hypotheosis.

Updated OP with two additional sections on easier trade, and incorporated modified bell curve graph into section 7.

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ACGIFT wrote:

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Byzantion wrote:

To have a theorem, you need a proof. I think this is a helpful and interesting topic, but the OP is speculation.

In economic discourse, (like any of the behavioral sciences) "proof" comes from observation. All of the observations used to back the statements are very valid.

It's all fine and dandy to reject someone else's observations, but to outright claim that they're lacking, when you could just as well gather your own empirical observations is thoroughly unscientific.

It's the equivalent of rejecting a tested hypotheosis from a physical science (like, say, physics) on grounds that you didn't believe any testing was done, and refuse to test it yourself to either prove or refute the hypotheosis.

First of all, if we are looking at this through the lens of "proof comes from observation," there is no dataset from which this thread can base its conclusions; hence calling it "speculation." The author certainly has his own observations, which is great, but that is totally insufficient to be called a proof to a theorem. Even a simulated dataset where you take say a set of N stochastic processes, representing the players, that gain wealth according to some sort of function and have some sort of trading rules according to those mentioned in the OP would be very interesting to discuss, but that would be a totally different story. Something along these lines is what I have seen from reading some of Merton's and Samuelson's papers where for instance a person has a defined consumption function and has the motion of his wealth governed by an SDE etc. and conclusions are obtained quite rigorously.

As for your second statement, if no testing, derivation, proof, etc. is presented, I would claim that the hypothesis remains just that - a hypothesis (I would prefer using conjecture as I am a mathematician). My refusing to test it, prove or refute it, is irrelevant to this story. Under your paradigm, I should just write a note to the Clay Institute: Hey Bros, I have a proof for finding smooth solutions to the Navier-Stokes equations with large initial data - please give me the $1,000,000 millennium prize! Are they being thoroughly unscientific, as you say, by requiring me provide a proof?!

As for the OP, I already commended that it is an interesting topic, but the analysis is entirely not rigorous. For instance, take this Gaussian distribution being thrown around. Obviously, at any given time the distribution will be changing as people in the game will not be gaining wealth uniformly. Especially given at any early time near t=0, i.e. when the game starts, the beginning of a new season or whatever, the distribution of wealth will be initially uniform (as everyone starts naked!) or close to it. As no specific time is stated in the hypothesis, this simpleminded counterexample obviously could disprove the claims of the OP. The author does gets away with saying "approximately" Gaussian, but what precisely are the bounds of this approximately? To be clear, it has to be approximate since the problem is discrete, but if the approximate criteria (or topology or whatever) are loose enough we can prove a lot of things (an say absolutely nothing meaningful)! If we add in some sort of hypothesis about a mature economy or whatever you want to exclude this case, what about a ton of new players all of the sudden joining, fattening up the poor side of the curve making the distribution asymmetric - that will no longer look like a Gaussian (maybe approximately Gaussian though).

What I am thinking the author might be getting at is that this wealth distribution, let's just call it W(t), approaches something like a Gaussian as an equilibrium state, or limiting case in t, that the distribution of wealth starts to approach as time progresses. Of course, what topology are we taking this supposed limit in, do all the samples play the game the same amount of time (or is this variable as well), are we taking into account new players joining and old ones quitting, etc., these are important details. This is just what comes to mind and is obviously just a guess!


-edit: typos!

@Byz:

Of course you have a point. If you get into the technicals of probability distributions there is a fair chance I've chosen the wrong one. However, the general shape of a bell curve is an observation which can be verified readily enough, albeit not utterly conclusively, with personal observation.

I don't know how serious one would want to get with research more vigorous than my own, but if so I hope this is a stepping stone, and some Einstein proves this Newton wrong on a few points. :)

Shival is Idiot. Here is what Shival knows about ecomy from smart people.

1. Currency flows up in exchange for gear, gear drops down in exchange for currency. (Dis allows poor people who worked hours on their money to get a piece that allows them to work some more, because they desperately need a gear upragde because of self-found drop rates)
2. But, the currency on the top makes more gear, so there is too much wealth to drop.
3. Dis makes people frustrated because they cant buy all the candy they see
4. Capitalism is good and screw people who dont swim in it like fishes

Did I understood good, or Im too stupid and should reread all the stuff?
If we dont accept point 4, what the fix could be?

Also I have a question:

"

Thus, in order to ensure items sell, sellers are forced to offer gear for less than the craft cost.

So why would anybody sell crafted gear? Isnt the only gear that gets sold dropped/mirrored? Wouldnt that be a bit influential on the economy, meaning that the poorer gets a bit less poor, but the rich gets even more rich? (As they are able to amass giant funds by selling items they didnt had to invest to, making almost pure profit). So rich, they are able to hold the whole system in their grasp, gamble, flip, play and monopolise the market?

A simple man like me thinks arbitrage (currency flipping!!) is making money from thin air and its kind of bad. Banks rule the world, man...

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Shival wrote:

Shival is Idiot. Here is what Shival knows about ecomy from smart people.

1. Currency flows up in exchange for gear, gear drops down in exchange for currency. (Dis allows poor people who worked hours on their money to get a piece that allows them to work some more, because they desperately need a gear upragde because of self-found drop rates)
2. But, the currency on the top makes more gear, so there is too much wealth to drop.
3. Dis makes people frustrated because they cant buy all the candy they see
4. Capitalism is good and screw people who dont swim in it like fishes

Did I understood good, or Im too stupid and should reread all the stuff?
If we dont accept point 4, what the fix could be?

Also I have a question:

"

Thus, in order to ensure items sell, sellers are forced to offer gear for less than the craft cost.

So why would anybody sell crafted gear? Isnt the only gear that gets sold dropped/mirrored? Wouldnt that be a bit influential on the economy, meaning that the poorer gets a bit less poor, but the rich gets even more rich? (As they are able to amass giant funds by selling items they didnt had to invest to, making almost pure profit). So rich, they are able to hold the whole system in their grasp, gamble, flip, play and monopolise the market?

A simple man like me thinks arbitrage (currency flipping!!) is making money from thin air and its kind of bad. Banks rule the world, man...

A common problem I see in people who are upset that rich people get richer is the fact that they can only get richer if you let them. Currency flipping works because people choose to rip themselves off and allow it to work, not because magically hacking NPCs to give then more currency in return

Another example is a bank lending you money to buy a bigger house then you can afford normally but you have extra interest in the long run, you don't need that bigger house/shiny loot/ect but your paying them extra to get it. You could save money over time where you don't need a loan, build the house yourself for it to be much cheaper but have a shit ton of effort ect.

That is equal to why crafters make money, there is nothing stopping you personally yourself from investing hours within crafting, learning how to craft, and looking for things to perfectly craft along with farming the currency to start crafting mirror level gear. But how many people just want to buy the end product for the extra price or mirror it + fee?

Do you have to buy the handbag from that fancy company that cost them 200$ to make but 2000$ for you to buy? You could hunt it yourself and learn how to the handbag or just pay them the market price of said handbag.

If people want to be casual/average in a video game then they will be at the middle-class level and one day slowly work their way towards higher class, they can't be upset that some portion of the population have higher ambitions and will fight tooth and nail + invest crazy amounts of hours and game knowledge to get ahead of you.

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Shival wrote:

Shival is Idiot. Here is what Shival knows about ecomy from smart people.

1. Currency flows up in exchange for gear, gear drops down in exchange for currency. (Dis allows poor people who worked hours on their money to get a piece that allows them to work some more, because they desperately need a gear upragde because of self-found drop rates)
2. But, the currency on the top makes more gear, so there is too much wealth to drop.
3. Dis makes people frustrated because they cant buy all the candy they see
4. Capitalism is good and screw people who dont swim in it like fishes

Did I understood good, or Im too stupid and should reread all the stuff?
If we dont accept point 4, what the fix could be?

Also I have a question:

"

Thus, in order to ensure items sell, sellers are forced to offer gear for less than the craft cost.

So why would anybody sell crafted gear? Isnt the only gear that gets sold dropped/mirrored? Wouldnt that be a bit influential on the economy, meaning that the poorer gets a bit less poor, but the rich gets even more rich? (As they are able to amass giant funds by selling items they didnt had to invest to, making almost pure profit). So rich, they are able to hold the whole system in their grasp, gamble, flip, play and monopolise the market?

A simple man like me thinks arbitrage (currency flipping!!) is making money from thin air and its kind of bad. Banks rule the world, man...

Unlike many of my posts, I have tried throughout this thread, and the OP in particular, to avoid editorializing. I'm not trying to say the current state of the economy is good or bad, but instead what it is and what would happen if certain changes were made. I want to promote understanding first and foremost, with as little spin as possible.

That said, your points 1 & 2 seem pretty accurate to me. Points 3 & 4, well, that's just your opinion, man. "Capitalism" does things, and I tried to describe them, as well as what would happen if certain alternatives were implemented (many of which fail to realize their intent)... It's up to you to decide which things are good or not.

On that note, here's what flipping does, and what increases or decreases its prevalence.

Flipping is exploiting laziness. You've probably noticed that soda costs considerably more at a pizzeria or a gas station than at a supermarket; flipping in an ARPG operates on the same principle. Flippers depend on your impatience for and/or loathing of trading to extract a more favorable deal for themselves, and a less favorable deal for you.

The essence of flipping is customer service. Flipping does not work on a practical level if the flipper's customers are not able to find the flipper and quickly execute a trade so they can go back to farming, an activity they greatly prefer. It's not entirely inaccurate to say they rip people off, but the way they get away with it is by facilitating good time flow for customers - just like those pizzerias and gas stations.

Anything which makes trading possible but a complete pain in the ass concentrates flipping to a small number of people but at extremely high volume (this is why trade chat is still in use despite existence of poe.trade and Procurement), while anything which makes trade stupid easy makes everyone and their mother try to flip but there is near-infinite competition and each flipper gets only the tiniest piece of the pie. In essence, easy trade systems destroy "dedicated" flipping and disseminate both the service and its profits over the greater playerbase. (One of the myths is that D3 auction house was good for flippers, but buyout AH is a flipping nightmare compared to the flipping paradise PoE is now.)

Flipping should be seen as another third-party service. Similar to poe.trade and Procurement, flippers fill (exploit?) gaps in trade systems provided by the developers to ensure a user-friendly system for the players. Like poe.trade, you can love them or hate them for that.

Flipping doesn't have a huge impact on the player tiering system/bell curve. It is erroneous to believe all Tier 1 players don't care about farming, or that a Tier 3 player won't go the extra mile to squeeze value from trades. Flippers are everywhere at all levels of the economy, and it has more to do with their view on trade than their progression.

Lastly, flipping takes time. In order to be flippers, flippers must spend more time trading than their customers (of equal trade skill) are willing to spend. This is lost farming time. At the end of the day, supply and demand determine how efficient flipping is; if more people want to flip than to farm, there is too much internal competition for flipping to have decent return per unit time, but if more people want to farm than flip then flipping will generally be more profitable than farming. At the end of the day, it is your love of farming and avoidance of trade which gives flippers power.

Good read - kudos for the truth. Sadly, only few people realize that, and prefer going on and on about trade being a terrible thing.

One point I'd add to all this is effect on RNG aspect of the game, namely, they ability to turn "anything" of value you find into items your character needs. Because of that, you can keep "everything is RNG" thing in the game, and also be able to progress into very specific builds without the need to increase drop rates by crazy amount, to the point that gear needs to rain in order for player to able to get those specific items.

The "easier" the trade (by that I do not mean automated auction houses, which were discussed a lot here) makes the currency flow and mitigation process more intense, making gear progression smoother, without the feeling of being rained with gear, for no reason.
It would make prices lower, because of the competition, but at the same time it would make an average player have better gear, meaning they would be less likely to hit a gear-check wall.

I think that revamped trade system should be next big step in PoE development. (well, maybe just after FINALLY fixing the terrible performance... 2.0 was announced to do so, but failed to deliver any change... : /)