"Inflation" in DN

[Olleh]

Let me first set the parameters -
1. DN is a closed economy (meaning we can't/don't trade across borders i.e the value of gold in NA does not impact anything at all in SEA, KR etc) A caveat exist in gold-USD and I'll address that later in post.
2. There are no financial institutions in DN. i.e there are no banks that pay interest rate on savings nor the federal reserve that sets inflationary policies
3. Wage is flexible - How wealth is accumulated in DN is through the marketplace or doing services - both of them do not have lag effects. i.e if gold value decreases and garnets prices go up, you can immediately sell garnets to get full value matching the inflation. The "wage" you get through selling is not fixed.

Now lets address why inflation (or hyperinflation) is bad in the real world -

First inflation is actually healthy for the economy, and that is why you commonly hear the 2% rule from the fed. Inflation incentivizes spending and brings forward consumption and promotes growth. The actual worse thing, and what many economist fear (especially given the inflation and interest rate of recent years and the liquidity trap , but I digress) , is actually deflation (price level dropping). The opposite happens and growth is depressed.

Now with excess amounts of inflation, or hyperinflation, it does have negative implications in the real world. Most recently observed in Venezuela, where the currency crashed towards the end of 2017. Price of essential goods rose even within the day, people faced severe shortages in food and medical supply and foreign investors fled. People could not even access their savings due to insufficient capital cause by running on the bank. Not surprisingly, social unrest follows. Unemployment rose and people could not afford much of anything.

THIS REAL CASE HOLDS NO IMPLICATIONS FOR DN.

First, the essential goods shortage in part due to abysmal exchange rates will not happen in DN as it is a closed economy (i.e if there is a shortage, it just means the price is too low and there is a gap between supply and demand within the one economy). Second, the quality of life drop due to inability to afford things because of laid-offs or fixed wages in face of rising prices should not happen in DN as wages are flexible and employment is a non-factor. Third, DN has no financial institutions so any bank failures or foreign FDI flight is nonsense talk in DN.

All of this does not mean there are no negative inflation implications in DN. The people who are worse off are the savers, i.e people who hold large quantity of gold reserves. These people are the kind of people we laugh at in the real world. The senile neighbor perhaps, who stash his savings all in cash under his bed. This is the price of liquidity, if you want to hold on to large excess cash, you inevitably face less returns or even extreme negative returns in the case of hyperinflation.

The good thing that comes with inflation that I don't see anyone talk about? -- the cost of enhancement. What used to cost you an arm and leg is now trivial.

Now I'll address the issue of gold-USD. For DN, the real world does not serve as an outside economy i.e if you try to apply international trade policies it becomes nonsensical. There's also the issue with ease of transaction and liquidity, not to mention its legality. For as long as people play this game, there is intrinsic value in gold. Unlike the case for Venezuelan bolívar, where you could imagine a flight to USD. As soon as hyperinflation becomes a reality, the bolívar loses all intrinsic value, this is the case for all fiat currencies in which the value is generated from belief in government. Even in the real world, the observed flight to a stable currency is trivial compare to the entire economy. Any belief that gold will be completely worthless and converted to cash is nonsense as long as people play this game.

People often blame the bots for inflating gold and ruining the economy. The same people who complain about Q garnets being so expensive are the same people who would put them at an even higher price if they have the Q garnets to spare. Any inflationary effects in a closed economy is a non-factor if the wage is as flexible as it is in DN. I always see people complain about prices but the prices in DN is effectively the wage....so

I'll let you guys finish that sentence

This post is inspired in part by my misfortune of talking with a econ graduate student who seems to have abysmal fundamental econ literacy and in hopes he make it through school okay.

[cleftobismalz]

I'll give you a simplistic answer to why the economy is what it is now.



Bots were the #1 issue pre-BHT bug.


Players are the #1 issue Post BHT Bug.


Prices inflated literally by 250%. (Prime example. Epic weapon coupons used to be 40k now 100k standard. U Gems used to be 40k now 100k standard ~)


Because everyone felt inclined to clear the market board, (Rather they thought a rollback was going to happen or were actually trying to exploit the rare-stone bug) those who wanted to join on in the wealth bolstered their prices. Then maint happen. And since maint doesn't cancel the listings on the market board before hand they stayed.

And one reason or another players still kept buying things despite the inflated prices.

Two things play at hand here simply put.

Greed and Desire.

About 4/5ths of the illegal gold was purged from the game from Admin activity. And yet prices did not drop down.

As the economy is now since the wealth has circulated to the players who accumulated a lot of items most of the server wants, it's not that hard to buy anything anymore when you are one of those players because you will keep trading with one another with the things you want and can obtain by farming/crafting/hunting means.


New players do not have this luxury. There is nothing in the game that will help them generate that amount of gold. The only option they have at this time is to sell their own garnets and spaeras to have a chance at obtaining some of the wealth. Despite them needing those gems themselves.


I imagine selling the mats just to afford gear such as Rune dragon U is a great step for new players. But after that it gets a lot harder than it needs to be.


Fortunately as long as we don't get another incident were a bunch of illegal gold is pumped into the server. The economy will stabilize when the massive purchasing dies out and mats start over crowding inventory's.

When will this happens? Who knows.

[Lemon]

bht was a tiny spike compared to how much bots inflated afterwards

[ELpatron50]

I think that the CHERRY Credits/Eyedentity issue caused many players to worry about that , i wish thiz will not occur in the new http://www.dnsea.net/ game

[Olleh]

My entire argument was that inflationary effects are a non-factor in a closed economy with flexible wages. Your cost of buying is exactly offset by your gain of selling. This is a neat phenomenon when your cost and wage is directed the same way.

The reason why inflation leads to less purchasing power in the real world is due to fixed wages in the short run. As addressed above, this is not the case in DN. Take your example of Epic weapon coupons/U gems where we saw a increase of 2.5x magnitude. You're arguing this price increase is detrimental bc oh god it's 2.5 times the price before, we can't afford it. What you failed to mention is peoples' wage have also gone up. Most all mats have increased in price magnitude that exceeds 2.5x easily. As selling mats is generally the way players get gold, especially new players, it is defined as wage.

I don't know about you, but I definitely feel it's easier to get gold now than compare to 93 cap.

[Bishoujou]

There is one thing that needs to be talked about, and that's the limit of 420k you can trade at once, so the likelihood of getting scammed when buying high value items is a real thing. The game though does seem to be going in the direction of not really needed to trade with other players though with things like the green dragon accessories you have to farm yourself from clearing gdn, and the unique fd crest you can enhance but will take an extremely long time getting the mats that I also think can't be traded.

[Zengeroff]

In games like this there will always be "haves" and "have nots".

Honestly, people who are "grandfathered" in ought to have more than someone brand new or a recently joined player.

This very dynamic has always existed in DN and always will it just wasn't as noticeable or prevalent before BHT was spammed.

The best bet for new players is to realize that they are not going to become high tier players overnight and they will almost assuredly need to either spend money in game to even hope to be or essentially make grinding DN their life for the foreseeable future. The only real way to ensure you will be moderately well off is to get ahold of as many cubes as you can and craft Genesis accessories as soon as you can and sell them.

Every mid-high tier player has some skin in the game. If you are not willing to put in either time or money, you'll languish in mediocrity and that's all there is to it.

[DrewBear]

I was crafting U gems when it first came out. Sold 2 int+damage gems to nado for 37k each back then. Ice conversion I sold for 18k gold. That would be like 600k gold today lol..

[LunarForce]

make 30,000G in a week pre-BHT(with 4 characters). Make 30,000G in a day post-BHT (With one character)

prices went up 250% but your income went up 2800%. stop whining about "Inflation" and actually look at the income -> expense list.

[Olleh]

Just a side note to all those people who think "omg this is just a game lul".

If you have any degree of econ literacy, you would know empirical studies in econ are all models based off assumptions and reductions of the real world. Those models, however reduced they are, are more complicated than what I've posted in huge magnitudes. If you can't even apply and extend what is econ 101 taught in micro principles, what hopes do you have in doing anything meaningful for the real world. Especially true if you are in the economics field.
If you are not in the field of economics, inflation should not be a buzz-word to throw around whenever prices rise. This does no one any good, and it leads to misinterpretation of an important economic indicator used to implement policy. In the face of negative headlines and mass misinterpretation of "numbers can't lie" dominating the news, it is very difficult to get out of this. Don't continue it.

[aaron]

Pretty sure this is a post to inform, not to complain, at anyone who thinks otherwise.

[cleftobismalz]

I pretty much stated mats are the best way for new players to get gold.

If they sell the free mats that they obtain. Will the gold they receive from that be enough to be self sufficient or to be at-least relevant in a party? That's another debate.

[Olleh]

I wrote this post in hopes of raising awareness of fundamental econ that affects everyone here. Many people dismiss the importance of it and restricts it in a classroom, but inevitably economics is all over our lives.

When theory becomes common phrase and gets thrown around carelessly, it's a slippery slope. When Trump says "NAFTA is the single worst deal ever approved". Are you going to take his word for it? There are a lot of literature on the effects of NAFTA done by competent economists that says otherwise. Economists are very careful when claiming something, correlation, causation, endogeneity (reverse causality) are all accounted for through econometric methods. They hold themselves accountable, but who's going to do that for Trump?

With the recent tariffs in which many people seem to think they're experts on the subject. It makes me sad reading statements such as "The EU puts X% tariff on American cars, so it's only fair we tax them the same %" It reduces the entire international trade policy study to some math equal sign game.

Policy implications are not easily reached, and people's ignorance just destroys any progress other people have worked extremely hard for.

[Peanut]

Dn gold is not money/currency in real life. Please dont bring politics into a small (200~pop) game. This is just a game.
Recent inflation is due to the rarestone event aka zimbabwe event. GM says they removed 95% of the gold from event. but this is not true. what they removed was gold generated during the event. the rarestone itself was not removed. so alot of ppl who kept the rarestones still have them. some even have 300+ rarestones aka the total amt of gold left in the server from the event as stated by the gm.
if one person got to earned and kept 15-20mil gold from a 12 hr event u can imagine how much inflation is when the total gold in the server was 300mil <as stated by GM

that being said, many players who played through the 90s is probably aware of the lack of available gold in our server. L grade enhancement cost was basically unobtainable. Many items on marketplace was sold for near vendor price.... because that was our only source of gold generation. Imagine trying to enhance your medea/calapsio with vendor price gold. It was and will be very unpleasant.
Thus players have asked GMs for gold injection/gold generation event, the first few were gold coupons & gold eggs which were only available to a handful of players willing use $ to rng for gold. In the end, not much happened and we were back to where we started.

The rarestone event albeit was unintended, but have addressed the lack of gold in the server. end game/mid game gear is easier to achieve through farming entry level stuff and selling for high amts of gold. the process is still a MMO thus grinding, but it has become healthier than what it was in the previous cap in terms of gold available to players

[Peanut]

economic policies addresses the distribution of money in this case gold. I believe I said something related to that.
also I have never stated my opinion was more or valid than others. I did not debunk other peoples comments. I only stated what has happened before and what the situation is now from my point of view. I dont know why you are writing me off like I am some idiot

[Olleh]

"Dn gold is not money/currency in real life. Please dont bring politics into a small (200~pop) game. This is just a game."

As far as i'm concern, I have stay cleared of politics and focused on the econ part. So i simply stated econ and politics while related, should be treated differently.

[Peanut]

Ill be straight with you, I stopped reading you comments when you started to mentioning real-life economic policies... etc..... cuz i felt like it?

I skimmed your comments and i think we might even be in agreement. Real world economic policies doesnt work in DN and I think you have stated something along that line. That is why we asked for gold injection in the past.
Anything outside the character creation, aka gear is not a necessity only a luxury. This should be the characteristic of any game. Having only luxury and no necessity, the value of currency.. in this case value of 1 DN gold means very little. again we agree on this. The only thing that matters is the total gold in circulation in the relation to the cost of gear.

when given time the economy will stabilize, what bots/rarestone do is destabilize these in short bursts giving unfair advantage to certain ppl. This is also the reason why we cannot have too many update patches at once when we were many patches behind. It happened post transfer n it killed the economy and thus killed the game
Regardless inflation or no inflation, if the in-game economy cannot stabilize it will only die. We are stabilized around the rarestone, for better or worse is unimportant.

People buying gold from bots is the same as p2w events. too much is bad. (in reference to zues's comments in regards to p2w) He worded it out very nicely.

for my personal opinion, bots lag server. the only reason why I dont like them.

[Olleh]

I do think we are in agreement for a lot of things and even i think this post have become a bit too long and serious. My original motivation is simply to make ppl think past the technical definition of econ terms and start thinking about what it actually means and their implications

[spacem]

Ed need to increase market gold bag listing limits or implement alternate currency trading (eg. sea used to have dnp trading in market). Also what happened to getting rid of bots? there are swarms of them everywhere..