There are a number of odd behaviors that players exhibit as a result of fixed /sell prices. Reed-farming, as an example. No one buys reeds, yet they are valuable enough to build an entire industry around. Equally, no one wants Obsidian, yet it is one of the most valuable blocks in the game. Clearly, the /sell prices have nothing to do with supply or demand. Now, I don't know it there is a way to adjust the /sell prices on-the-fly. If there isn't then just disregard this post. If there is, then I think it would be valuable to begin exploring a dynamic /sell pricing system. Even if the best that could be done was a slight randomization, it would remedy the economically nonsensical behaviors of players.

 

I only use reeds and obsidian as two examples. Those stand out in my mind, because the imbalance in the price structure has caused some very curious rent-seeking behaviors to emerge. Namely, reed and obsidian farms. Yesterday, I found myself grinding obsidian. Grinding is my least favorite activity and, generally, indicates some market imbalance. Equally, I've noticed a number of pay-per-hour reed farms popping up. I'm not objecting to building reed farms, players can build anything they want. Rather, I'm surprised that the price of reeds is so highly imbalanced that players farm reed to /sell them. Essentially, reeds have no utility, but a high price.

I could point out other price oddities, bread as an example. The /sell price of bread is $.8, the server store price is $15, and the going market price is between $3 and $12. Neither the /sell price of bread nor the server store price reflect the natural price. Because of this, there isn't very much bread being produced. That is, of course, anomalous as food is significantly more important in 1.8 than any previous release.

My concern is that /sell prices neither reflect supply nor demand. As such, they will continue to create odd behaviors in players. Namely, grinding. I don't know if this can be addressed now, I'm not sure how the /sell plug-in works. I do know that 1.9 is going to introduce a new set of alchemy items to go with potions. I suspect that, when potions come out, it'll be a perfect opportunity to let prices stand on their own.

 

I'm not proposing that reed prices should go down, I'm proposing reed prices, really all prices, be un-fixed. A price is, fundamentally, a reflection of the relationship between people's want for something and their ability to get that thing. Reeds are easy to get, and no one wants them. So is obsidian. Bread is exactly the opposite. Bread is difficult to get, and everyone can use it. Yet, the price of bread is low. If there is a real market-demand for reeds, the price will stay the same in a dynamic-price environment. If there is no demand for reeds, then it's not really fair to call it an "economy" while reeds have a non-zero price.

I understand that reed farming is more profitable than mining. Doesn't that seem silly? Mining takes work and skill, reed farming doesn't. Iron, diamonds, gold, even coal are all more rare than reeds. Yet, reed farming is super profitable. I'm not advocating that the fixed price on reeds just "be lowered" that wouldn't accomplish anything. I'm proposing letting the market of players set the price by their purchasing decisions, just like the real world.

Basically, what we have right now, is a government subsidy on every in-game item. No matter how many of any item are produced, they always have a minimum /sell price. Because of this, it encourages players to build an economy around subsides and not around other players. A dynamic price change could be something very simple. As an example, suppose that every 10k of an item that are sold to the server, the /sell price goes down one cent, and for every 10k of an item bought at the server store the price goes up one cent. It wouldn't be a major change in the normal day-to-day and players could adapt to price trends. I'm not proposing anything dramatic, just a more open and free economy.

 

My advice to any passers by: TLDR

Under the current price structure, that's true. But why should it always be true? Imagine that, tomorrow, the fixed-price of iron ingots went to $100 each. All reed farms would be abandoned, all wheat left to die, and everyone would go underground mining. Price-fixing is a backwards method of behavioral control. By controlling prices, you also control the demand for goods. The whole idea of reed farms is a byproduct of the current price-system. Change the system, change player behavior.

The answer is obvious, the value of residency is not apparent to all players. I can think of three builders that bought multi-home, rather than residency. Truly, before the market, there was no advantage to residency over multi-home, /back, or even tp.

Ok, first of all, you can never catch all the fish in the sea. Assuming that ores are distributed in a sufficiently random manner, such that no player knows where they all are, it becomes marginally more difficult to find each ore with each ore found. In fact, economic theory tells us that the last ore would be both infinitely valuable and impossible to find. On a more pragmatic level, if people are hesitant to reed farm, knowing there is profit in doing so, why would they spend hours burrowing through fruitless stone, looking for $500 iron ingots?

No one would buy reeds at 1% to price of an iron ingot, I agree. I bet people would buy reeds at .001% the price of an iron ingot. That's my point, no one (but the server) would buy reeds at their current price. Obsidian's price makes no sense, bread's price makes no sense, even stone bricks' price makes no sense. I highly doubt that the entire economy would become mining-motivated.

Still, let's say that a totally free market is too much right now. What would be wrong with daily price fluctuations, the way commodity markets work? Basically, a commodity market (irl) has a price that changes daily. As an example, the market keeps a two-week moving average of every thing in the game. The /sell prices, say everyday at midnight (or even once weekly), could be set to their respective 14-day moving averages. Then there would be real price changes to reflect changes in supply and demand.

I understand that, as I have never seen the custom iConomy plugin, I have no idea what the simplest tactic to implement is. That is exactly the reason that I'm proposing a strategy and not a tactic.

The only way for the price of everything to go to zero is for the currency to become infinitely more valuable than any good. We call that "deflation". New users can make money the exact same way they do now, they'll /worth every item, pick the best mix of easy-harvesting and high-value, and go get some. The only time that the economic structure can work against new players is when the server has barriers to entry in a specific resource acquisition scheme.

There's no reason to pre-suppose catastrophe. Why would mining be the only way to make money? Seriously, is there nothing that the average player wants besides iron, gold, and diamonds? You don't want wood, bread, or wool? There is no reason to think that mining would be the only profitable activity, that the price structure will collapse, or that the server will catch fire as a side effect. It isn't even necessary to go to a fully free market pricing system.. Like I said, there are many mixed-market schemes that would work just as well. You're worried about userbase, me too. Think about this, if prices move every 2-3 days, won't that encourage people to be on more often? With real price fluctuations, we can hold and trade commodities for profit. The player who joins for economy will go nuts for a commodities market. The player who joins to build, won't notice the difference. If there's a problem with the underlying monetary system (if all prices are too low or too high), then the overall money supply can be changed by pumping money into (or out of) the total economy.

If you're worried about across-the-board low prices, then the inflationary trend of the economy needs to be cut out. Reeds are infinitely renewable and sell for a non-zero cash value under the current price system. As long as new-money is flowing into the economy faster than old money is flowing out, there will be dramatic inflation. As a perfect example, the prices of buying goods in the server store are completely insane. While I understand the stated goal of the action of raising those prices, it still represents massive price inflation. Ask yourself, has it always taken only 3 days to go from builder to mayor? I thought I'd try it myself. I as able to raise $85k, purely from grinding out materials, between Monday and Wednesday. Here's the important question, the one that matters most to me. If everyone can afford a town, what's the incentive to make one look nice?

 

I agree.

I'd agree with that estimate. There is more trade traffic during peak hours, weekends, and no-white list periods. But overall, sure.

I agree,the prices of mined goods are not accurate reflections of the supply-of or demand-for those goods.

True.

This is where I gotta disagree. Overinflated prices do go down when unsubsidized. In fact, the more free an economy is, the lower prices are on the whole. However, there is no reason to think the prices would go to zero. I don't know about you, but I'll buy an unlimited number of iron ingots at $.00 each. Further, I'd bet there's demand for iron ingots at $5, there may even be demand at $10. I don't see everyone mining their hearts out. I see prices finding a balance between the time-value of labor and the utility-value of each good. That is the foundational theory of markets.

Sure, you have demand @ or about the /worth price. Not everyone will. Negotiation is, fundamentally good for community. The more people get accustomed to peaceful interaction, the fewer fights they will get in. That's actually the entire reason that all the world economies were entangled after WWII. The UN figured that the only way to prevent another global war was to make all nations trading partners with all other nations...and look....no WWIII.

First, the value of resident is not the price, it's the effort involved in getting it. You can buy resident the first hour of the first day you're on the server. The effort expended in getting it creates an emotional attachment between the player and the server. A player that spent three days of hard clicking to get resident will say "It's mine, I earned it". That's the emotional attachment they we want players to have. Truly, resident should be a hard-won accomplishment.

Second, the amount of money in the game only decreases two ways. Either, money goes back to the server through the server stores, or players buy ranks and in-game features. No matter what the price structure of /sell does, it doesn't reduce the money supply.

Well, first, I've been selling bread on the market like crazy. I suspect you're looking at the high ask-price break (@ $5+). By the current price structure, bread's not worth $5. Bread @$3 goes instantly, in any quantity. Considering the cost of wheat ($.5-$.9 on the market) there's still a good 10% to be made by a reasonable bread dealer.

Demand is a feature of the ability to purchase, not the number of people. To put it another way, 10,000 poor people don't have the demand for even a single yacht. However, yacht manufacture and sales is one of the most lucrative businesses in existence. The reason? The individuals who buy yachts have enough demand to account for millions of poor people. You don't need many, relatively equal market participants, you only need a sufficient amount of demand across an entire market. Thus, that there is money, and that players will spend it is sufficient to account for all the demand you'll ever need.

So let's talk about the monetary policy of ECC. First, it's a pure fiat economy. That is, the money is made to exist by the will of Andrew. What makes ECC$ valuable? The ranks of resident, mayor, president, survivor, etc. Players have a natural desire to attain a more respected position in the social structure of ECC. To that effect, the currency is representative of social value. That is, we would assume the player with the highest rank is the most invested in the well being of the server. It's actually a very clever way to give fiat currency value without taxes. Money comes into ECC from three sources: Donations, /sell, and the bonus sign-up money. I'm unconcerned with the first and last. Donations are purely Andrews business, and the bonus money is a lure for new players. Now, as to /sell, every item that is sold creates new money. True, there is a rate of monetary creation and a rate of monetary depletion (that's also true in the real world). However, as there are infinitely renewable resources in MC (unlike reality), (reeds, wheat, obsidian, melons, trees, saplings, wood, leaves, wool, bacon, fish, bones, string, seeds, etc) there is a problem that an infinite amount of money can come into existence all at once. Basic economics tells us that, when you produce an unlimited quantity of a fiat currency, you rob every unit of that currency of its value. That is, each ECC$ that is produced makes every ECC$ worth less. The consequence of this is real-price inflation. Consider that the price for mayor just went up. Commodities, in-game, are priced by players with no idea of the total money supply. Alternatively, ranks are assigned by Andrew, and he knows how fast players are able to turn in ECC$ for the various ranks. My guess is that the price of mayor went up, because too many players are requesting too many towns, too fast.

What we need to do, really, is equalize the rate at which money is produced and destroyed. By doing that, we can create a stable economy. However, monetary policy is totally separate from price-fixing. We can look at the real world as an example. In America, all monetary policy is controlled by the Federal Reserve, while the market has many unregulated sections. Further, in America price-fixing is rarely practiced.

Anyone with the hutzpa to sell an apple for $30k is a winner in my book.

 

I realize that this is starting to sound like my opinion. To rectify that, I'm gonna try a slightly different approach.




This is a diagram of the monetary cycle of ECC. I know it's a bit excessive, but what I'm trying to explain is very important. There are three, primary monetary inputs to ECC (each is labeled). "S" represents all the money produced by /sell in one, non-zero length period of time (duration is irrelevant). "B" represents all the money produced by Sign-up bonuses in a single period, and "D" represents all the money produced through donations. The sum of "S", "D", and "B" is "Mi" or total monetary input over a given period of time. "Ms" is the total amount of money in ECC at any given time. "P" is all the money spent on promotion fees, "T" on town fees (upgrades and stuff, I'd count vent channels in this category as well), and "V" is money spent at the server store. "P", "T", and "V" are measured over the same, single period that "Mi" is. "Mo", then, represents the total amount of money leaving the server in a single period.

Let's start by establishing some goals. First, ECC needs to be fun. That's largely a byproduct of the community, but we don't want the economy to add value to the server, not remove value. Second, we want people to feel that trading irl money for ECC$ is a good idea. Third, we want people to be able to buy promotions and town upgrades at some particular rate. That is, we don't want anyone to be able to buy 5 towns within their first day on the server, nor do we want their to be a need for any player to work for weeks just to get resident.

All that being true, the task ahead is to design a monetary policy that supports these three goals. As an addendum to goals, I would add that we want a relatively constant rate-of-exchange between irl money and ECC$. If ECC$ becomes inflationary, players are less likely to be willing to fork over irl money. Alternatively, if ECC$ becomes deflationary, players will not exchange irl money for ECC$, as a deflationary currency is always a poor means of exchange. Basically, if ECC$ is not a good store of value and a viable means of exchange, donations will simply dry up.

Right now, with the high server store prices, "V" is very small. I've noticed an increase in "P" and "T"; however, judging by /baltop, "Ms" has increased in size over the last two weeks. From this, there is an emerging problem. The relative availability of currency to goods produced is the primary determining factor of demand in any economy. That is, if there are only 100 apples, and the demand for apples is uniform across the market, and only $1000 in existence, then each apple will be priced at $10. Given the same conditions but with $10,000, each apple will be priced $100. Why does this matter for ECC? The larger "Ms" is, the less useful each unit of ECC$ becomes. That is, the more money exists, the higher the prices of goods and services must become. I think we can all see why excessive inflation is problematic.

I identify two causes of the inflation that ECC is currently experiencing. First, /sell is (at this point) more of a legislative than a monetary tool. The policy has been, for the most part, if a player exhibits an unacceptable resource-related behavior, devalue the underlying resource. While this an effective policy for controlling player behavior, it creates odd side-effects. Namely, for every cent of price-loss in a specific good, every other good seems to become marginally more valuable. As an example, suppose there are only two goods (apples and pears). If apples /sell for $1 and pears /sell for $1, then the amount of harvesting and selling will be about equal (assuming pears are no easier or harder to harvest than apples). If the /sell of pears' is then lowered to $.9, pear harvesting may diminish, but the displaced pear-harvesters will begin harvesting apples. Discouraging pear harvesting encourages apple harvesting. The effect of all the price-lowering is to drive players to whatever the new most lucrative method of making money is. What structured price-lowering doesn't do is reduce the overall size of “Ms”. Second, raising server store prices to astronomical levels has, effectively, set “V” to zero. When the server store opened and closed, it was a hub of activity. That is, the server store selling goods at /sell prices was a significant output for the economy. The new server store isn't.

Why won't price-fixing work? Altering the prices of individual goods simply re-allocates the labor force of the server, it does not address the underlying problem in monetary policy. Alternatively, organic price-fixing, basing the /sell (to some degree) on the real demand for goods. Will prevent each unit of currency from losing more than a predictable measure of value.

Ideally, “Mi=Mo”. In that case, “Ms” will remain fairly constant. For “Mi=Mo”, “S+B+D=P+T+V”. I don't think adjusting the sign-up bonus is a good idea, it's an important lure for new players. I also think changing donations around will upset the community. The only real option, for adjusting “Mi”, is to adjust prices to limit the amount of incoming money to the server. Alternatively, promotion fees can be further raised. However, money will become less valuable as promotions become more expensive. Alternatively, promotions will become easier as money becomes less valuable. Town fees can be changed, but the more expensive portals become, the less likely players will be to buy them. Again, I see “V” as the only viable output to change.

The short and skinny is this, something's going to give. If everything continues along the current path, the currency will, eventually, become largely worthless. I'd prefer that the economy could be brought into a balanced state. Milton Friedman proposed that an ideal economy would have about 3% inflation annually. Since ECC isn't on a real-world clock, I think 3% inflation a month would make a lot more sense. That is, “Ms” should grow by no more than 3% a month.

Aside from all this, I really like this server. I think that if we're willing to do a little bit of high-quality central economic planning, we can be the best economic/survival server in the world. The greatest advantage, at this point, is the small size of the economy. With no more than 70 players on at a time, the economy is relatively slow to adapt. While the number of committed players stays low, there is little chance of an economic catastrophe.