| Author |
Topic |
Dex Timor
Valklear Guard
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Posted - 2010.01.14 09:34:00 - [ 31]
 Originally by: LaVista Vista
Originally by: Kerfira
The EVE economy at the moment is not in a good state.
That's quite a claim to make.
Care to back up your statement with facts?
The amount of ISK in an economy is really quite worthless as a factor for anything. What matters is the price inflation.
The amount of money does play a role in inflation. Quote:
Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.
I know it's not the only factor in Inflation, but it's been a while since I had economy in school. Also "price inflation". The price [of a selected number of items] is a measure of inflation. The price of items can lead to an upward or downward movement of the prices of other items. For example rising oil prices can cause inflation: both because it will lead to an increase of costs to firms which will have to raise their prices AND because most of us buy products which are based of oil-products. The economy is split into two spheres: the REAL economy (all stuff you can touch) and MONEY. What happens in one sphere WILL impact on what happens in the other sphere. So yeah, the amount of ISK can cause inflation. |
Reem Fairchild
Minmatar
Punic Corp.
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Posted - 2010.01.14 10:50:00 - [ 32]
Originally by: Cibo Seidensha
The question is, if mining injects ISK into the economy. There is a direct connection from mined material to ISK over the insurance mechanism. On this basis you can calculate a base price in ISK for each material mined. So it is mining that injects ISK, because thats what a player does. It takes time and effort. The insurance is only a mechanism to cash in on that.
That's like saying 'car manufacturing causes trafic accidents'. Many minerals that are mined will eventually cause more ISK to enter the Eve economy, but many minerals will not. Some minerals will even make ISK leave the economy (ships being insured for several periods without blowing up). |
Tippia
Caldari
Sunshine and Lollipops
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Posted - 2010.01.14 11:04:00 - [ 33]
Originally by: Cibo Seidensha
The question is, if mining injects ISK into the economy.
And the answer is: it doesn't. When you mine, your wallet does not change. No ISK appears. Instead, you get ore. What you do with that ore is a different matter, and it may or may not end up with you making ISK appear. You can sit and mine your entire career and never see any ISK as a result, because mining does not generate ISK – it generates items that through a number of completely different mechanism can be used to create ISK. It's those other mechanisms that are the faucets (and sinks) of ISK – not mining. Quote:
There is a direct connection from mined material to ISK over the insurance mechanism.
…in the same way that there is a direct connection from the mined material to the ISK over the mission running mechanism. Or the bounty mechanism. I.e. not a very direct direct connection at all. Again: just because you can use mining to create things that in turn create things (that in turn … etc) that create ISK doesn't mean that mining creates ISK. The fact that you can trace the ISK payout back through these various mechanisms to get a value on that ore doesn't mean that the ore is that value in ISK – it's still just ore, still just an item, and still not an ISK faucet. |
LaVista Vista
Conservative Shenanigans Party |
Posted - 2010.01.14 11:15:00 - [ 34]
Originally by: Dex Timor
The amount of money does play a role in inflation. Quote:
Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.
I know it's not the only factor in Inflation, but it's been a while since I had economy in school.
Nice try at applying RL-economics to a MMO. Just a shame that monetary theory has no place in EVE the same way it has in RL. Quote:
Also "price inflation". The price [of a selected number of items] is a measure of inflation. The price of items can lead to an upward or downward movement of the prices of other items. For example rising oil prices can cause inflation: both because it will lead to an increase of costs to firms which will have to raise their prices AND because most of us buy products which are based of oil-products.
Price inflation merely means that the average price level in an economy is higher, yes. However it's not a measure of monetary inflation, even if certain schools argue that they are connected. So using the fact that cross-elasticity exists doesn't support the argument. Quote:
The economy is split into two spheres: the REAL economy (all stuff you can touch) and MONEY. What happens in one sphere WILL impact on what happens in the other sphere. So yeah, the amount of ISK can cause inflation.
Money is simply credit. It's something you use to trade, to represent actual value. It still doesn't support the awful argument that monetary inflation(Increase in money supply) causes price inflation(Increase in prices). Reading the first QEN should make that really damn obvious to you. |
Reem Fairchild
Minmatar
Punic Corp.
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Posted - 2010.01.14 11:33:00 - [ 35]
Originally by: LaVista Vista
It still doesn't support the awful argument that monetary inflation(Increase in money supply) causes price inflation(Increase in prices).
More money in the economy -> more money to buy stuff with -> people buying more stuff -> prices rising A pretty simple case of supply and demand. Of course, that doesn't mean that a larger money supply will always lead to inflation. It might not. It depends on what else is going on in the economy. If the money supply increases but production of goods also goes up at the same time, then the general price levels won't necessarily rise. |
LaVista Vista
Conservative Shenanigans Party |
Posted - 2010.01.14 12:13:00 - [ 36]
Originally by: Reem Fairchild
Of course, that doesn't mean that a larger money supply will always lead to inflation. It might not. It depends on what else is going on in the economy. If the money supply increases but production of goods also goes up at the same time, then the general price levels won't necessarily rise.
And that is exactly why your argument is flawed. The fact you point it out as if it's a "small" factor. Your supply and demand argument is too simple and doesn't take several things into account. |
Reem Fairchild
Minmatar
Punic Corp.
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Posted - 2010.01.14 12:55:00 - [ 37]
Edited by: Reem Fairchild on 14/01/2010 12:58:33 Originally by: LaVista Vista
And that is exactly why your argument is flawed. The fact you point it out as if it's a "small" factor.
Your supply and demand argument is too simple and doesn't take several things into account.
What do I point out as if it's a small factor? The supply of goods? If that's what you mean then no, it's not a small factor. It's a major factor, as is the money supply. In other words, supply (goods) and demand (money). The relationship between those two will determine the general price levels. If one increases more than the other or if one decreases more than the other then you will have inflation or deflation (depending). Yes, it's complicated and there are other factors, but those are the two major ones, especially when we're talking about inflation in the long term. Or to put it like this, increase in money supply gives inflationary pressure. It won't necessarily lead to inflation, if there are other factors to counteract it with deflationary pressures, but if everything else remains equal then it will. You wouldn't be able to just suddenly say double the amount of ISK in Eve, while everything else remains the same, and not have inflation. And you wouldn't be able to suddenly double the amount of goods in the economy and the rate of production, without getting deflation (with the exception in Eve of tech 1 ships where insurance artificially keeps the price from dropping below a certain level). |
Kerfira
Kerfira Corp |
Posted - 2010.01.14 18:29:00 - [ 38]
Originally by: LaVista Vista
Originally by: Kerfira
The EVE economy at the moment is not in a good state.
That's quite a claim to make.
Care to back up your statement with facts?
The amount of ISK in an economy is really quite worthless as a factor for anything. What matters is the price inflation.
If you think an economy where battleships are routinely self-destructed to convert them to ISK is healthy, be my guest.... The EVE economy is more than just the ISK, it is ALL types of resources! The problem, quite simply, is that there are more resources being pumped into the economy than are used by player activities (ie. being kaboom'd primarily). The way a non-controlled market would handle this would be to keep prices dropping down until an equilibrium was reached between production and use, but insurance totally screws that by keeping prices artificially high. What we instead have are artificially high prices, which hides a runaway deflation scenario. Deflation is normally seen as even more dangerous (in RL at least) than inflation. Now, at least in the short term, this MAY work for EVE (I'm still worried for the long term because of the ISK pileup), but it is NOT a healthy economy! IMHO, CCP would be better off removing insurance completely, and let the markets settle naturally. There'd be a hell of a lot of disruptions from it, but in the end it would end with a healthier economy. They should probably also look into reducing the influx of non-monetary resources. |
Ozone71
Caldari
Taishi Combine |
Posted - 2010.01.15 06:31:00 - [ 39]
Ore, Minerals.. Ships etc are ASSETS
ISK is CASH.
Inflation and deflation describe changes between the relationship between Assets and Cash. ie: How many assets can you buy with your cash today, as compared to yesterday? or If you sold all your assets today, would you get more, or less Cash than if you had sold them all yesterday? As long as people continue to mine, and loot rats, there will be a continual influx of assets, offset only slightly by the removal of assets from Pew Pew (and failed missions). As the number of assets increase, you need more ISK entering the game to maintain a balance.
Some activities generate or remove Cash from the game. Namely buying and selling from NPC's, Mission rewards, fees and taxes.
Some activities generate or remove Assets from the game. Mining, and looting generate assets, blowing things up usually removes assets. (Blowing up Rats comes under looting).
Some Activities changes assets from one type to another, for example, Manufacturing and Research (and sometimes there is waste as well).
If you really want to look at the economy of Eve, you would look at several factors:
Changes in volume of ISK in the game
Changes in volume of Assets in the game (Multiple indices would be needed here...)
Changes in volume of Assets and ISK changing hands in the game.
Note that a robust economy is typically one where there is some inflation (ie: assets are rising in value), although in the gaming world, neutrality is probably favoured so that newcomers start at the same Square 1 as players from last year, and for Eve, insurance remains balanced. More importantly though, the economy should be measured on high trade volumes, where assets and ISK are continually changing hands. Just looking at ISK and Assets is not enough, but also the market trade volumes as well. |
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