Whether or not they’ve had formal education in the subject area, most people today seem to know a thing or two about economics. The ideas and concepts are simple enough to understand: supply and demand, limited resources, trade, industrialization, etc. Now this is all good and fine until we encounter economies in other places, specifically on the internet or in video games. Though some of the same principles apply, these economies do not function the same way real life economies do. If you value your play time and have to deal with an economy in a game, it would do you well to understand the basic differences between real life and in-game economies.

The Basics

The aim of this first article is to introduce you to the basics of real life and gaming economics. The better you understand what is going on with economies, the better able you’ll be to manage your own resources, to maximize your potential gains, and minimize large loses. If you already have a good grasp of economics, a lot of this information will be redundant. Still, it’s always good to have a refresher once in a while.

What history tells us is that the earliest people were self-subsisting. They started out hunting and gathering for themselves or for their families. But hunting and gathering is difficult and inefficient since resources in an area do not replenish quickly or move elsewhere, making moving around from place to place the only way to survive. Eventually, someone came up with the bright idea of planting seeds from plants, cultivating the ground, and then harvesting the food when it was ready. Yes, the creation of agrarianism, otherwise known as farming. This, along with the domestication of animals, allowed people to survive without moving around a lot and needlessly expending energy. Soon, communities began to be created, forming villages and towns. The largest settlements were akin to cities of today in terms of size. Because farming was so efficient and produced excess food, less people had to farm. These people could then do other things like invent wheels and fire and what have you. One might say this early development could be considered the world’s first economy.

So where did this economy come from? To begin with, an economy’s key aim is to find a way to manage resources more efficiently. You as an individual only have limited time and energy to use. But you are not the only person in the world. There are other people out there who have the same goal to survive. Eventually, some of these people produce more resources than they can use. Though you could be self-sufficient, the truth of the matter is that it’s not an efficient use of your time or energy to do everything on your own when there are already existing resources available to suit your needs. In order to spend more time on the things you want to do, you could use these extra resources, either freely or in exchange for something else. This is the most basic reason why an economy comes into existence.

Trade is what makes economies continue to exist and grow. Eventually, the fellow with the extra resources will want things other people have time to make because of their free time. Rather than give his extra resources away, he’ll start to trade them for other resources in return. A trade in its simplest form is an exchange of goods, typically similar in value. Trade becomes much more common when people specialize in professions and become dependent on others for resources and services. In this way, maintaining the economy becomes important. The more people specialize, the more they become dependent on other for basic necessities such as food and shelter.

Though it’s been alluded to already, explaining supply and demand helps in understanding why economies form and continue to exist. Demand represents the collective need for a resource. Supply represents the availability of a resource and to a certain degree the capacity to obtain that resource. Where supply and demand meet is where we get the value of a resource. If supply goes up or demand goes down, the value decreases. Vice versa, when supply goes down or demand goes up, the value increases. Both supply and demand are constantly changing thus the reason why one day a gallon of gas could be $3 and a month later it could be 50 cents more.

One last aspect to consider is the development and usage of currency. Over time, many specializations are developed, but it becomes hard for one to find the resources they need and to find others to purchase their resources. Currency is developed and holds value within an economic system. It provides a means for people to trade for other things of value without needing specific resources for trade that another person may or may not want. Now that we’ve covered some of the basics, we’ll move on to the key difference between real life and gaming economies.

Differences

Many of the same principles from real life economies also apply in video game economies, but it is the few differences that truly matter as to how a game economy functions.

Availability of Resources- Unlike real life where materials are limited and do not replenish, video game resources often do replenish and are infinite. For example, while mining in a video game, you may exhaust a rock eventually, but that rock will eventually come back or be replaced. Thus, in terms of supply and demand, supply is unlimited. Supply is only dependent upon how much of the resource is being collected or will be collected, not upon the finiteness of the resource. Resources can always be replenished in a game whereas in the real world, we can only work with the few resources we have.

Resource Collection- Another difference between real life and video games is the existence of bots, or rather programs that can do the work of a player. In the real world, the gathering of resources is limited to the number of people working and the equipment they can use. In a game on a computer, resource collection is entirely dependent on the number of individuals collecting and their equipment too, but bots can be created in video games to do the work for the player. A computer program can mimic the actions of a player gathering resources and thereby collect the resources without a player being on the computer. And there is no limit to how many bots can exist. Like resources, an infinite number of bots can be created to accomplish a task or collect resources. In effect, this produces a false economy whereby the resources being collected are much higher than if only real players were conducting it. Additionally, bots can collect longer and usually more quickly than human players.

Currency Creation- The last difference I want to talk about is the creation of currency. In the real world, currency tends to be based on a standard or, if not, to only be created when necessary. In a game, currency is being created constantly. In games like RuneScape, items can be alchemized into gold, doubling the amount of gold in the economy. The trouble with this is inflation and the devaluing of currency. The more currency is produced, the far lesser value it has. It’s important to try and balance the inflow and outflow of currency in an economy lest prices fluctuate often and erratically.

Conclusion

This concludes the first part of talking about in game economics. It’s important to understand the basics and differences of game economies and real economies in order to understand how to deal with them and use them to your best advantage.