[MUD-Dev] economy and population size

[Adam Martin]

[Note to editor: I showed this thread to an economist friend, and she typed
out this reply. Thought I'd forward it on to the list - hope this is OK?
(since she isn't a subscriber) - Adam  M]

> ----- Original Message -----
>> From: "Christopher Kohnert" <chris at achaea.com>
>>> Derek Licciardi wrote:
>>>>> -----Original Message-----
>>>>> From: Adam Martin

>>>>> Mostly I'd be interested to hear what anyone else has to think
>>>>> about how the whole ball-game changes as you rack up the
>>>>> number of players.

>>>> The next generation games will most likely try to handle a
>>>> larger number of users.  Besides the budgetary costs associated
>>>> with this level of server design, it changes the entire design
>>>> of the server and directly impacts the gameplay inside your
>>>> game.

>>>> IMO the first aspect of the game that should see a dramatic
>>>> improvement is the economy.  I believe it will be easier to
>>>> manage an economy given 50,000 or 100,000 plus players.
>>>> Today's games are fragmented populations that do not have
>>>> statistically large enough numbers to sustain the proper
>>>> buyer/seller relationship.  I use EQ as an example where you
>>>> can walk into Eastern Commonlands anytime and hear a pile of
>>>> seller and buyers with very few items actually being
>>>> sold.(based on the numerous repeat sell auctions and repeat buy
>>>> auctions by a single person in five minutes) By increasing the
>>>> number of players you increase the chance that the economic
>>>> transaction will take place and the flow of goods to and from
>>>> buyers and sellers will not stop.  that being said I think this
>>>> whole idea of improving the economic flow in these games will
>>>> bring with it increased problems from the admin side that we
>>>> have never seen.

>>> Let me begin by qualifying and saying that I am neither an EQ
>>> player nor any sort of economist. However, I really have a bit
>>> of a problem with people claiming that simply increasing the
>>> number of players somehow magically solves some of the problems
>>> in today's systems. (Recalling a couple other posts to this
>>> original post here...) For example, the problem above sounds
>>> simply like the the buyer doesn't want what the seller is
>>> offering, etc. This is a common trait when say, there are two
>>> different goods, one of which is easy to obtain, the other quite
>>> difficult. In the first, you're going to get lots of people who
>>> gather it up and try to sell it (because it was easy), but of
>>> course because it was so easy to obtain, nobody wants to buy it,
>>> they can go get it themselves. In the second case, few people
>>> harvest the hard to get good, and so there are less to sell. The
>>> rarity or difficulty in finding it is what makes it a good
>>> selling item (as opposed to going and getting it one's
>>> self). This is generally speaking of course, there's always
>>> going to be exceptions. If, again, for example, the economic
>>> system was perfectly modelled (ignoring the monumental task that
>>> is), then I should think that it would be independent of the
>>> number of players. Farmer Joe can sell his old John Deere to his
>>> neighbor for a couple of his neighbor's wife's blueberry pies if
>>> he wants. Small population transactions happen all the time.

>>> A small population isn't some sort of system crippling
>>> attribute. Of course, that being said, there is also obviously
>>> such a thing as a critical mass required to get things to work
>>> nicely. Which, I will claim, is nowhere near the 50k+ numbers
>>> people are throwing out as 'magic' numbers in most cases. It
>>> only takes a certain number of people to make a decent
>>> bell-curve, any more than that, and you're just wasting your
>>> time for marginal improvement.

>>> Hurrah for 100k+ players online, that will be extremely
>>> cool. But I hardly think it simply solves problems in and of
>>> itself. I should think it would introduce newer, possibly
>>> harder, ones.

[Response from an economist friend:]

Okay. Let me distil some facts from under the
description+evidence+examples. This is what I understand as the
basic problem. But firstly I'd have to point out that Derek & Chris'
disagreement is based on slightly different models of the economy;
or if I interpret wrongly, then they chose examples to forward their
respective arguements very selectively but inconsistently. In other
words they are not talking about the same thing.

Look at the assumptions below:

  Assumptions:

    [1] Agents in the economy are the sole producer of tradeable
    goods Each agent produce a different good Barter is the means of
    transaction [Derek]

    [2] the above+ there are tradeable goods which in essence are so
    called free goods i.e. they exist in the economy without being
    produced by an agent.  If time is not a factor in this economy,
    i.e. if there is no opportunity cost to the agent to obtain this
    free good, then everyone in the economy can consume the good.

     This time factor was unclear so I shall assume that if the
     agent chooses to go after the free good, he is not forgoing an
     potentially more profitable alternative.  [Chris]

  Problem:

    Too few transactions. i.e. How can the economic system be
    changed in order to encourage players to trade?

  Causes and Solutions:

    1) Too few players

    Given the assumptions, it would imply that there is too little
    diversity in the range of tradeable goods in the economy. People
    trade less because they cannot find what they need.

    Therefore, increasing the number of players would resolve this
    because the economy would have more goods to trade.

      - There is no automatic link between the number of goods in a
      market and trade. It is illogical to say that just because
      more tradeable goods appear, players will sudenly be gripped
      by an compulsion to exchange. If Kellogs launched a range of
      100 new cereals, are you likely to rush out and exchange you
      hard earned cash and buy them all? the answer is
      unlikely. Even if you do,in aggregrate, it simply means that
      trade in previously existing brands would diminish. The net
      gain in trade would probably be zero.

      - The key is to recognise that upon each individual in the
      economy there are constraints. Trade is rationed. An agent can
      only produce so much to offer in exchange for other goods.

      - Hence, trade is driven by need. It is possible to argue that
      if the number of players increase then the trade would
      increase proportionally, but the rate of trade which I suspect
      is the main concern would not neccessarily.

      - In a barter economy, transaction costs are high. Costs in
      terms of search, in real life we are talking about transport
      costs i.e. having to make a journey to find the person you
      need to trade with; inforamtional costs-one might need to
      advertise the wish to sell or buy a particular good; time
      etc. Increasing the no. of players would proportionally
      increase the transactions cost of trade. The problem here is
      the *double coincidence of need* The more people there are the
      nore difficult and more time consuming it is to find precisely
      what you are looking for. Unless the virtual world discussed
      here has homogenous needs. Again I need more background.So the
      rate at which people trade might even go down.

    2) Degrees of difficulty involved in obtaining particular goods:

      - I agree that a small number of players is not a problem or
      it shouldn't be. Economic modelling often starts with the
      Robinson Crusoe economy which consists of one person who
      simultaneously produces and consumes! When trade does enter
      the equation it could perform perfectly effectively with just
      2 agents.

      - The degree of difficulty involved in obtaining certain goods
      determines the supply side of the market. The point being made
      is that increasing the number of people is not going to solve
      this problem, which is a perfectly valid point except it
      wasn't what the dispute was about in the first place, bearing
      in mind the differences in the underlying assumptions.

      - This problem could be easily solved by monetising the
      economy. The lacking of the price signal mean that agents do
      not know and there are no signals to indicate waht the market
      wants. Hence masses of people go and collect the easily
      obtained item and can't sell it. If demand and supply dictated
      the equilibruim price then we should find market clearing
      because as soon as the price for an item rose to disequibrium,
      say higher than for another item, people would go and look for
      it.

      - The rise in consumerism is mainly driven by the increase in
      purchasing power. i.e. if you want the rate of trade to
      increase, given people the means to do so. In this context it
      would probably mean that players should be given more skills
      so that they can produce more tradeable goods.

      - Secondly, the rise in trade came through the improvement in
      infrastructure.eg The industrial revolution [ some historian
      will probably will start jumping up and down at this point and
      make threatening gestures at me] was partly driven by the
      emergence of the market structure on a regional basis.

Ran Shi
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