[Mud-Dev] [DGN] Money supply in game economies (formerly Brok en economies)

[Daniel.Harman at barclayscapital.com]

On 05 April 2001 02:38, Matt Mihaly wrote:

>   a) If anyone has any ideas on how to make loans in a virtual world
>   feasible? It has to be extremely difficult to defraud the banks
>   (or interest rates will skyrocket to the point where there's no
>   incentive to borrow).

>   b) Has anyone implemented systems in their worlds that allow
>   players to act truly entrepreneurially? I'm sure someone else can
>   come up with a better list of requirements for this, but I'd think
>   that it would at least need:

>   [snip long list of things]

Hmm this is all interesting, but I think perhaps you are starting from
the wrong direction here. It would probably pay to look at how banking
has evolved and follow a similar path layering the complexity on top
of the correct foundations. I just dug up my copy of 'An Introduction
to Global Financial Markets' (S. Valdez) to remind myself how banking
started. From what I can see :

1400's

  a) Banks started out lending money and nothing more (no shareholders
  etc.)

  b) Bills of exchange and letters of credit followed.  1762

  c) Barings started - first investment bank. They financed trade
  using bills of exchange (guaranteed paper saving having to lug
  currency around). They also sold government bonds.

1800's early

  d) Banks began to have stock holders and thus grew in size.

Much after this and I wonder if it doesn't start to get too complex.

To support the above evolution this is a list of what I consider
fundamental necessities :

  a) Multiple currencies.

  b) Limited and expensive travel/movement of goods. To an extent
  where its not worth the effort for most people to pop over to
  another realm for a particular sword or food etc. This one might be
  tough although you might be able to have these other realms as
  almost seperate servers that one can jump between, probably implies
  having a certain amount of semi random terrain etc to model so much
  land mass - even harder in text muds (I can't help thinking in terms
  of gfx ones generally lol)...

  c) Distributed markets with differing prices. One should be able to
  make a margin importing/exporting with skill and luck.

  d) Perishable products? Prevents hoarding of food which is a basic
  necessity and probably the first commodity I'd play with in
  anger. In addition, a large shipment of armor could get damaged in
  shipping if its not adequately packaged, or the boat gets lost. Who
  wants a salt air damaged breastplate?

I suppose it might be easier to look at what is defined as a perfect
market, and do whats necessary to prevent it happening. Perfect
markets = no profit generally (just look at Euro/US government bond
markets now, the margins are pitiful). A perfect market is:

  - completely transparent (i.e. everyone knows the price of something
  wherever its sold. Oops there goes your margin).

  - sufficiently liquid such that everything is tradeable. This
  prevents manipulation of the market by big players buying and
  selling on it.

Transparancy is interesting as a lot of games have interworld tell
systems.  I don't think this is necessarily helpful to a profitable
market. As I mentioned, you end up with tiny margins and that
necessitates huge volumes.

Liquidity being too good is also bad as otherwise the market won't
move as people buy/sell. It can of course go too far as it did in UO
with the reagent mafia.

As I see it, you don't necessarily need to start with having people
able to actually farm crops etc. You just need to be able to modal bad
harvests in certain regions affecting pricing and availability.

As an aside though, I'm not sure how well this can work baring in mind
people can't be logged in non-stop. Markets close and give people time
off, not sure how that would work in a game. You might have to
implement some form of limit trading...

On how to guarantee loans, you probably need to ensure they are
secured on property or perhaps equipment. Equipment is tough though as
you'd need some kind of database that reflects prices. It might be
nice though to build trading into the game in such a way that the
going price of an item can be determined. An added bonus of this is
that you could build indices to track inflation. In fact it wouldn't
just be the borrowers needing collateral, the lenders would need a
certain amount too. Then you could set limits to how much a banker
could lend based on their assets - which is what they do in the real
world.

Another important idea to support paper debt would be user created
documents that can't be forged, and maybe have them tied to the
bankers real in game assets.

This is one complicated topic and I hope my brain dump wasn't too
disorganised. I'm trying to work things out in my head as I go, but I
made an attempt to detangle it somewhat!

Dan
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