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Zebritar
Posted - 2010.06.08 12:12:00 - [1]
 

Hi

I'm not a financial type person in real life so perhaps this is a stupid question..
But I like to understand things a little better so found this interesting.

I was talking to a buddy and it seems we agree that there is always a lot of new isk coming into the eve world.
But not much leaving..

Isk is generated by.. bounties and mission rewards mostly.
Isk is lost with things like: buying at LP store. buying skillbooks. insurance.
buying of POs modules was a big isk lost but that is now no longer the case.
I might've missed some but thats the main things I suppose.

Now "stuff" comes into the game in large quantities from:
(ice/roid/gas) mining / moon mining / loot drops / salvage / research agents / radar&mag sites
But now in time most stuff gets destroyed again:
minerals becomes ships.. ships becomes salvage .. salvage becomes rigs ... rigs gets destroyed.
more or less something like that?

So from my point is seems that overall in eve the amount of isk in the universe grows quicker than the amount of stuff.
So wouldn't that cause inflation over time?
I'm aware that this is not the case.. but unsure why?
Is it perhaps because players are hoarding massive amounts of isk? (Older players sitting on billions of isk not doing anything with it thereby effectively its been removed from the game for now? .. what happens when everybody starts spending?)

Or perhaps the in and out is somehow balanced?
at least compared to "stuff" ?







Imiarr Timshae
Caldari
Funny Men In Funny Hats
Posted - 2010.06.08 13:20:00 - [2]
 

Lots of jackasses lose lots of ships.

I'thari
Minmatar
Posted - 2010.06.08 13:41:00 - [3]
 

Originally by: Zebritar
Isk is lost with things like: .... insurance.
depends: if you lose ship before insirance expire it adds isk to the game.

Originally by: Zebritar
Or perhaps the in and out is somehow balanced?
at least compared to "stuff" ?
Ever heared of "insurance 'fraud'"?
Besides there are some people around who mostly just accumulate isk in their wallets instead of spending them thus acting like any other "ISK sink".

Dariel Ash
Caldari
Foetus Mart
Posted - 2010.06.08 13:51:00 - [4]
 

I think what OP means is this;

ISK enters the game world through bounties and missions.

ISK leaves when you insure ships, when you buy from NPCs, when you use stations services etc.

When you lose a ship that has been insured there is a net gain of ISK into the game because;
You got say 1X isk from missions/ ratting. (isk comes into the game)
You spend 0.75X isk on the ship. (isk remains in the game, other players get the isk)
you spend 0.25X isk on the insurance (isk is lost from the game)
You lose your ship and get about Y for insurance (based on mineral prices).
So long as Y > 0.25X there is a net gain of ISK in New Eden.

The question is;
If ISK keeps entering the game, then surely the value of each isk gets less?
This gets offset by the amount of players (the distribution of the isk) and the items available to spend isk on.

Are there any other offsets like this?
Is there any mechanism in place to control this?
Is it inherent in an economy that this system will remain stable? (I don't think so)

Skex Relbore
Gallente
Red Federation
RvB - RED Federation
Posted - 2010.06.08 14:55:00 - [5]
 

Edited by: Skex Relbore on 08/06/2010 14:58:23
Edited by: Skex Relbore on 08/06/2010 14:56:50
The problem with the OP's premise and the point missed by most people crying about inflation in EVE is that while yes isk is probably entering the game at a higher rate than it's leaving. Minerals and other material goods are entering at an even higher rate.

Currency in it's most basic form is a representation of the actual value in an economy. So in theory if an economy had 100 units of production (labor/materials) and 100 units of currency then each unit of currency would represent 1 unit of production. If one were to increase the number units of currency while production remained stable then each unit of currency would represent less units of production so that in our theoretical example if you were to increase the units of currency to 200 then it would require 2 units of currency to represent each unit of production. That is inflation, Deflation is the opposite.

Now in practice it's much more complicated and fluid. Since goods and currency are constantly entering and leaving an economy even in EVE with it's far more simplified economy.

See while missioners and ratters continue to create new isk from their activities they are also creating some resources to counteract that increase (loot, LP store items) at the same time the miners and other resource harvesters continue to create new resources for that new isk to represent.

Now once again it's complicated and there are a large number of additional factors affecting the situation but in general inflation would manifest in an increase in "price" across the board on goods and services. Particularly on commodity level items. In Eve this is probably best measured by looking at the mineral market since these items represent the most basic building blocks of the EVE Economy (in the RL I say look at oil since that's the basis of our economy)and to a lesser extent food (primarily grains)

Eve's economy in my opinion is primarily deflationary. Because there are far more material inputs than there are currency inputs.

The changes to insurance were stupid in my opinion because they only exacerbate the oversupply of materials. Insurance and by extension insurance fraud was a great mechanism for counteracting deflation because it did two things. One it was a mineral sink offsetting to some extent the oversupply of materials. Two it was an isk faucet creating more isk to actually represent all those new materials that keep entering the economy.

Ideally a stable currency situation is what is desirable neither high inflation nor high deflation. To do so there has to be a balance between material creation/destruction and isk creation/destruction.

In it's current state that means that the game needs either more isk faucets or more material siks or some combination of the two.

The problem is that while CCP hired an "Economist" they hired one of these supply sider idiots who doesn't believe in interfering with the natural ability of the "market" to self regulate. As if the market is any more natural than aspartame.

Markets are the result of human actions and their behavior dictated by the rules and regulations created by humans. There is no "free market" there is no natural market. So it isn't even possible to give it free reign.

Tyranis is an economic disaster that has yet to completely manifest. Unless there are massive NPC buy orders planned to buy up all those additional resources that the PI crowd is going to be harvesting it's just another damned material faucet and isk sink which is exactly the opposite of what is needed to achieve some level of stability.


TL:DR There is no Inflation in EVE

Skex Relbore
Gallente
Red Federation
RvB - RED Federation
Posted - 2010.06.08 15:15:00 - [6]
 

addendum:

Another reason that the insurance changes were dumb is because they increase the cost of PVP which discourages risk taking which reduces the amount of ship destruction (which is the primary material sink of the game)

Prior to the changes a PVP fit battleship (a real fit not a that cheap suicide nonsense) would still represent a net isk loss to the pilot but the hull was effectively free and the excess above hull cost helped to offset the costs of modules to some extent. This encouraged pilots to fly bigger ships who's destruction removed large quantities of materials out of the game.

The number one rule in EVE "don't fly what you can't afford to lose" dictates that the reduction insurance payouts is going to less the amount of PVP both in frequency and size of ships involved by encouraging pilots to fly cheaper ships or spend more time on non-killmail generating activities.

It will also encourage more risk adverse behavior in general as PVP'rs avoid engagements they'd normally commit to because of the potential cost of a loss is greater. This of course results in less combat and also encourages more blobbing to mitigate risks.

I really wish people would get this point. Because I'm afraid that the devs have actually come to believe that inflation is a problem (despite all the evidence to the contrary) Which is the only explanation I can come up with for the apparent stupidity I've seen with this expansion.


Aurum Bellator
Posted - 2010.06.08 19:43:00 - [7]
 

Originally by: Skex Relbore
long tirade against Tyrannis insurance fix

Yes, I did read your entire dissertation above and while I agree with the majority of your observations I disagree with your contention that the insurance fix was misguided.

Simple reason: Eve is a science fiction game that must have some semblance of congruity with real life, especially in the market / business models. As far as insurance goes, how the heck do you justify a business model that involves manufacturing ships just to insure and intentionally destroy them, making a profit in the process?

The insurance fix plugged an important loophole, and was more than justified and appropriate.

However, that being said CCP has made it too easy to 'gather' materials (and isk) and has thus decreased the ultimate price (time) in obtaining finished goods.

Best solution is to increase material sinks in some way or make it more difficult to obtain materials (eliminate all tech0 drops; reduce mineral values of tech1metaX modules; make asteroids more scarce; remove sources of nocxium and better from highsec, etc.). Just my two cents.

AUB

hgedsku
Posted - 2010.06.08 19:55:00 - [8]
 

@ skex: Most hardcore pvpers fly t2 ships, dint they boost t2 ship insurance? More incentive to pvp and destroy stuff? Also having insurance control the prices of pretty much every t1 ship and ultimately the entire mineral market is just bad for a game with such a heavy player driven economy imo. Even if its gonna be way more hectic I think players should be deciding what things should be worth.

also to op: you forgot the npc transaction tax. Even though its a small percentage of the total there are several hundreds of billions being exchanges everyday so the amount of isk being taken away can get pretty big.

Tarhim
Caldari
Posted - 2010.06.08 20:38:00 - [9]
 

Originally by: Zebritar
Hi

Isk is generated by.. bounties and mission rewards mostly.
Isk is lost with things like: buying at LP store. buying skillbooks. insurance.
buying of POs modules was a big isk lost but that is now no longer the case.



You missed blueprints and one great and relatively new sink: sovereignity fees.

Skex Relbore
Gallente
Red Federation
RvB - RED Federation
Posted - 2010.06.08 22:06:00 - [10]
 

Originally by: hgedsku
@ skex: Most hardcore pvpers fly t2 ships, dint they boost t2 ship insurance? More incentive to pvp and destroy stuff? Also having insurance control the prices of pretty much every t1 ship and ultimately the entire mineral market is just bad for a game with such a heavy player driven economy imo. Even if its gonna be way more hectic I think players should be deciding what things should be worth.

also to op: you forgot the npc transaction tax. Even though its a small percentage of the total there are several hundreds of billions being exchanges everyday so the amount of isk being taken away can get pretty big.


One no most hardcore PVP'ers fly T1 because except for specialized roles the T1 hulls are more cost effective even with the insurance changes which brings us to.

T2 insurance is still a joke and doesn't come close to covering the price of the hulls. My Helios insures for something like 7 million on a hull that still costs 18mil. Now I don't have numbers on other T2 hulls but if that's representative then it's not going to come even close.

So once again it's bad game design it's bad economic thinking it's fail on so many levels that I'd never have enough characters in one of these posts to express how fail it is.

I'd be all for fixing insurance had other steps been taken to address the current mineral faucets or the isk shortage.

Instead of increase isk inputs or either increasing mineral sinks or decreasing the faucets they simply removed the one mechanism that actually counteracted the deflationary trend of the economy.

It was sort sighted cow-towing to a vocal minority who had no clue what the hell they were talking about.

Thrasymachus TheSophist
Posted - 2010.06.09 02:42:00 - [11]
 

Originally by: Zebritar

Is it perhaps because players are hoarding massive amounts of isk? (Older players sitting on billions of isk not doing anything with it thereby effectively its been removed from the game for now? .. what happens when everybody starts spending?)



This.

Every theory of inflation I'm aware of considers the "velocity" of money to be one of the key inputs to inflation. "Velocity" of money means how many times it changes hands over a given period of time.

In IRL, savings are typically put invested actively, or put in the bank. The bank then invests it (subject to reserves). IRL, most all money remains in circulation even if its being "saved". Very little is "under the mattress".

In EVE (as in most MMOs) this is not true. Most ISK sits in a wallet and does nothing, effectively removed from the economy.


Zebritar
Posted - 2010.06.09 07:36:00 - [12]
 

thanks for replies!

Wel I didn't really want to have a discussion about insurance.. but seems its a very emotional thing people can't avoid.

Yes I missed BPO's oops..

ok so what I come to understand now is that eve does indeed have some very big isk sinks..
So over time isk is accumulated in large quantaties and then spend on large sinks..
like say an alliance putting up a outpost (wel I suppose that is less of an isk sink now than it was?)
Or buying of a set of capital ship BPO's or something like that.
Or on a smaller scale this also happens.. A player saves money for a few weeks and then buys a CNR from LP store for isk (stupid perhaps? but yes it happens) or he buys that BPO he wants.
And then off course continually lots of isk is sinked in implants and sov upkeep.

And while this saving happens lots of isk is taken out of the system and left in player wallets. :)
So effectively that tends to somewhat balance the system in terms of stuff vs isk.

But also I realize that the effect of deflation we see is mostly because of supply vs demand..
For example t3 cruisers.. when they came out they were well over 1 bil each.
But as more people start to supply them it pushes prices down and as prices goes down more poeple can afford them.
So the quantity rises but the profitability per item is reduced.
So as more and more people gets involved ... profitability on a per item bases becomes very marginal.

Like I said I'm no expert on this, just finding it all pretty interesting. :)

Would be interesting to see what is going to happen in the planetary resource and POS module markets in the coming months.



Charlemagne
Posted - 2010.06.09 13:50:00 - [13]
 

Originally by: Zebritar
And then off course continually lots of isk is sinked in implants

Except for LP stores (which were already mentioned) to my knowledge implants are not available for purhase from NPCs and thus would not be considered a sink of any type . . .

Charles

Cosmic Rainbow
Posted - 2010.06.09 19:47:00 - [14]
 

imo - which should be taken with a grain of salt because Im not an economist, nor do I specialize in economics, but I think the issue CCP is attempting to solve is that there is:

Too much ISK in the game. There are too many faucets and not enough sinks. Combined with a lot of vets sitting on piles of ISK (especially from the moon goo phase of the game), it has changed game dynamics making the value of the currency decline. At the same time CCP has waged an active campaign to reduce the price of modules and ships right across the board, resulting in a "doubling effect". Things are cheaper, and there is an excess of isk in the game. Not good.

They have made several changes to counteract this - notably the huge costs associated with Sov now, and also the costs associated with capital ships (most notably the Titan capital buster, and the insurance issue). Furthermore, they have reduced the mission and drone payouts by limited mineral drops.

Moreover, Ive also noticed a significant trend with plexes and professions sites:

1) In many of the first plexes that were established in null sec, its easy to make billions on a small amount of work. Comparatively, new plexes that were added in expanded areas are much harder than the original set of plexes that were added, and yield less isk.

2) Professional sites ie: radar etc; they yield very little isk vs work involved because the ultimate goal of Radar sites - the ship data interfaces are non-destructible, resulting in a glut on the market and little to no isk yield (again small payout)

3) Wormholes. For the amount of time and effort put in to run some of these sites, the risk is great, and often so is the loss. The overall isk yield is nowhere near the old plexes in null sec.

Conclusion: CCP has reduced payouts tried to taper the ISK faucets, at the same time as lowering the cost of items. However, they have found that there is an ISK glut sitting in some wallets (I got a funny email from them about one of my characters wallets and assets a few months ago when my sub was cancelled for a few months), and is causing theoretical problems, and in some cases real problems with the economy overall.

End - feel free to tear apart.

Gunner77
Posted - 2010.06.09 20:19:00 - [15]
 

Edited by: Gunner77 on 09/06/2010 20:22:50
Isk sinks:

ArrowAlliance/Corporation Creation
ArrowBPOs
ArrowBroker Fees
ArrowClone Activation
ArrowCorporate Office Fees
ArrowIsk Hoarding
ArrowInsurance Premiums (Even though eventually it pays out, initially it is a sink)
ArrowLP Store
ArrowSkill Books
ArrowSov Fees
ArrowStation Services (Refine Tax, Repair Shop, . . .)
ArrowTransaction Taxes

Drivensane
Posted - 2010.06.09 21:37:00 - [16]
 

Originally by: Cosmic Rainbow
imo - which should be taken with a grain of salt because Im not an economist, nor do I specialize in economics, but I think the issue CCP is attempting to solve is that there is:

Too much ISK in the game. There are too many faucets and not enough sinks. Combined with a lot of vets sitting on piles of ISK (especially from the moon goo phase of the game), it has changed game dynamics making the value of the currency decline. At the same time CCP has waged an active campaign to reduce the price of modules and ships right across the board, resulting in a "doubling effect". Things are cheaper, and there is an excess of isk in the game. Not good.

They have made several changes to counteract this - notably the huge costs associated with Sov now, and also the costs associated with capital ships (most notably the Titan capital buster, and the insurance issue). Furthermore, they have reduced the mission and drone payouts by limited mineral drops.

Moreover, Ive also noticed a significant trend with plexes and professions sites:

1) In many of the first plexes that were established in null sec, its easy to make billions on a small amount of work. Comparatively, new plexes that were added in expanded areas are much harder than the original set of plexes that were added, and yield less isk.

2) Professional sites ie: radar etc; they yield very little isk vs work involved because the ultimate goal of Radar sites - the ship data interfaces are non-destructible, resulting in a glut on the market and little to no isk yield (again small payout)

3) Wormholes. For the amount of time and effort put in to run some of these sites, the risk is great, and often so is the loss. The overall isk yield is nowhere near the old plexes in null sec.

Conclusion: CCP has reduced payouts tried to taper the ISK faucets, at the same time as lowering the cost of items. However, they have found that there is an ISK glut sitting in some wallets (I got a funny email from them about one of my characters wallets and assets a few months ago when my sub was cancelled for a few months), and is causing theoretical problems, and in some cases real problems with the economy overall.

End - feel free to tear apart.


Are you sure you're keeping seperate that you can "make" isk by getting non-isk things and selling them to players, and that you can MAKE isk?

People didn't make billions of isk from old complexes. They acquired billions of isk from other players by farming the plexes for faction mods and selling them for exhorbitant amounts of money.

Also, I'm sure CCP knows how much money is the game, and I'm sure they know it directly... not by observing things in the market.


 

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