Production needs to outstrip destruction, because of people leaving. What we don’t have a good gauge on is what value of assets leave the game when people go inactive enough for their isk to not count, as I suspect including that would show a massively different picture on production vs destruction.
Much the same that faucets need to outstrip sinks so there is isk for new players.
What do you mean by “inflation”?
INFLATION
ECONOMICS
a general increase in prices and fall in the purchasing value of money.
“policies aimed at controlling inflation”
While I realize you’re attempting to be snarky, I’m going to answer your questions as if you’re legitimately confused… as they way you’re attempting to be snarky suggests you really are confused.
You have to understand what an economy actually is.
The simple definition is this: “The economy encompasses all activity related to production, consumption and trade of goods and services in an area”
You’ll notice the lack of the word “money” or “currency” in that definition. It’s important to realize that money is just a means of exchanging value… that EXCHANGE is what the economy is made of, not the money itself.
What makes an economy healthy is the exchange of money for goods and services (or interests). Technically, the money itself is just a marker for ease of exchange. You 1 isk is really just worth a portion of “X” (be that ‘X’ a ship, a plex, or a long limbed roe). It’s a symbol of part of the power to purchase a product.
But for money to matter in an economy, it needs to be “in circulation”… or effectively be used for exchange. Money that is kept in your mattress has no economic effect until you spend it. If you never spend it, it has no impact on the value of that currency. It has to be used to have any inflationary impact. If you inherit a million dollars, never spend it or invest it or put it in a bank (so that others can use it)… it is exactly the same as burning it… it’s not in the economy. It has no impact on the production, consumption or trade of goods and services.
In eve, our bank accounts (isk balance on your character or corporation) earn no interest by default. That isk isn’t borrowed by other players like deposits in a real world bank are. It’s the equivalent of keeping cash under you mattress. It’s stagnant money. I personally keep a billion isk in reserve… I keep it for if some sort of emergency happened and all my eve possessions were lost, I wouldn’t start from scratch. I never let my wallet drop below that point. It’s a trivial amount of isk… but if 50,000 players act the same way (not concurrent… total players), that’s 50 trillion isk that effectively never enters the eve economy because of our personal reserve levels.
So, in the real world when the US Federal Reserve and Treasury gave dollars to banks who then just put them in reserves… it didn’t impact the economy or cause inflation… because they didn’t loan out the dollars like the Federal Reserve wanted. They put it under their mattress and the economy was not impacted.
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You used the word “general” in your definition, but what happens if the price of everything doesn’t rise? What about when only the price of some things rise, or even just one specific thing? That’s not a “general” price increase, but it does diminish the purchasing power of the money used. And, what about if people began to barter directly or use an alternate currency to enable their exchanges of value? Is that still “inflation”?
Each product can have price changes based on supply and demand. This is generally NOT referred to as “inflation”.
Economic inflation is an increase in prices in aggregate.
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So is the economy all activity or just exchange?
You are positing that an economy can be “healthy” but what criteria are you using to determine its health? So what if nobody exchanges anything for money and space children are starving? Why should we seek to avoid such a state in EVE Online?
This is a very broad statement. If we subscribe to this idea, the world looks one way. If we do not, the world looks very different. Depending on which definition you ultimately settle on, an economy being “exchange” or an economy being “activity”, the assessment of the economy is very different.
I happen to think that money under my mattress DOES affect the economy, because it affects ME, and I affect the economy. And, in fact, the most salient aspect of an economy, in my mind, is the concept of economic agency, the capacity of economic agents, people usually, to make decisions based on knowledge and objectives. So, if I am hungry and have a million dollars under my mattress, I might do something very different than if I am hungry and dead broke.
And I’m not being snarky, although, maybe a little misleading. But it’s not malicious.
But supply of what? And demand of what? And why is increasing price not “inflation”? And how do we determine the price of “everything” and whether it’s going up or down?
Quoting would get massive, so I’m just going to answer.
- While production/consumption are economic activities, the measure of the value of those activities only occurs at the point of exchange (at least when talking about currency). You can see this in countries who have a “value added tax”.
You buy raw materials and then use manufacturing to add value then sell the resulting product. While the actual manufacturing process is what adds the value… it can’t be realized until you sell it (make an exchange). At that point you’d pay a value added tax on the increase in value from the raw materials to the final product. You can’t know what value was added until the sale. So the difference ends up being rather meaningless (at least as far as the math goes).
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When people talk about “healthy economies” they aren’t talking about goals of a society (like feeding children) but simply the amount produced. We often measure national economies by looking at the gross domestic product, which is simply a measure of all goods and services purchased. If the dollars in the economy cycle faster (gets exchanged more often), more goods can be bought with that same dollar. In Eve terms… let’s say you use isk to buy a ship. The guy who sold the ship buys ore from a miner. The miner uses the isk to buy a mining laser. The mining laser was purchased from a mission runner who got it from a drop. That mission runner buys another ship because you used the ship you bought to destroy his ship. The same cycle repeats. The more times it repeats, the more production the eve economy has… the higher the domestic product and the healthier the economy.
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Money under the mattresses of others has no effect on you. It only has an effect if used. Knowing it’s there might impact your decisions, but it doesn’t impact what makes up an economy… that being the parts of economic activity we listed earlier.
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I don’t consider the word “snarky” to imply maliciousness.
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You’re starting to argue semantics… which is kind of pointless.
The term inflation when talking about the economy is intending to talk about an increase in the aggregate prices of all products (or more particularly, all transactions for products) in that economy.
You can say you intend to talk about single product inflation… but that really has nothing to do with what others are talking about with inflation. That’s simply discussing the price of a single product. It’s not a macro-economic question anymore.
As to “how”… in eve it’s quite easy as every transaction is recorded in the database. That’s how they produce those economic reports. It’s a lot less concrete in real life… and it’s probably not all that relevant when talking about EVE.
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The measure of something’s value is not only taken when it is exchanged. It is also taken when it is NOT exchanged. Consider a man dying of thirst in the desert. If he had a million dollars under his mattress, he would trade it for a glass of water, but if he suddenly happened upon a glass of water, he wouldn’t trade that glass of water for a million dollars. In the second instance, he has not exchanged the water, but he has still taken a measurement of its worth.
Of course I can take a measurement of something’s value by simply valuing my time, effort and the associated risks. Exchange only occurs when there is a misalignment of valuations. I wouldn’t trade away a dollar for something I thought was worth less than a dollar. When I think A is worth more than B, I trade it for B. When you think B is worth more than A, you trade it for A. That is the only time exchange occurs, but not the only time something has value.
Then why should what they are saying concern us?
You stated what you thought made up this thing called an “economy”. I disagreed.
More to the point, money under someone else’s mattress certainly does affect me. Have you ever tried to get a person with lots of money under their mattress to take their clothes off or kill someone or dig a ditch? They won’t do it! But if they have no money under their mattress, you can easily get them to do all sorts of things by just offering them some money to put under their mattress.
When a person with a million dollars under their mattress or a billion ISK in their wallet looks at what they have and what they can do and judges the worth of those in relation to money, they come up with a different valuation than someone who has no money under their mattress or in their wallet in EVE. That makes them behave differently. Thus, I would say that money definitely affects me and the economy at large.
If you want to discuss alternative market theories can I suggest making your own thread for that.
Inflation, CPI and how it is calculated are well known accepted terms with specific meanings. And you can do research easily to verify what people have told you here.
Using utterly irrelevant analogies and nitpicking at words isn’t going to help this thread.
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And who are you to decide which theory is the “correct” one and which are the “alternative” ones?
And who are you to decide what is relevant to this discussion? This thread seems to concern the overall amount of ISK in the EVE economy and its effect on prices. Some of you are declaring some of the money to be “ineffective” and thus not a concern. Prove it!
And there are well known differences of opinion as to how to calculate them. If these concepts were well understood and settled, there would be no starving people, no public debt, and no murdering each other over resources. We’ve got a long way to go so buckle your seat belt.
I have CNBC in my browser bookmarks if I want to listen to people who agree with you.
And there you go again judging what is and is not relevant, what is and is not significant. I don’t think I’ve said anything unreasonable and I eagerly await a reasoned and measured response . . . but I won’t hold my breath. lol
Uh, No.
The reasons for those things are totally different than disagreements over how to calculate things like inflation.
As for the ‘proof’ for why the isk supply increasing as a general trend (It’s currently decreasing) not being a concern because not all that money is in circulation, it’s already been linked.
It’s the CPI graph from the economic report showing that the CPI is not in a perpetual growth trend, which is what signifies inflation.
Plex prices, which you seem to be referring to with your arguments are increasing for totally unrelated reasons to inflation.
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Cool story, bro.
Right, right. The extra money doesn’t matter because it’s not “in circulation”, and it’s not “in circulation” because it’s not being exchanged, and money that is not being exchanged has no value . . . well, mathematically, anyway . . . according to the math YOU’RE using . . . based on rationales that you have chosen because . . . ?
Here’s two problems with “CPI”:
- if I don’t sell/buy/use everything on the CPI, then the inflation in the things I do sell/use/buy has an outsized effect and causes CPI to be . . . wrong. It isn’t measuring REAL inflation for ME, and if I am a member of a prevalent demographic, then CPI is wrong for that entire demographic. What good is it?
- when prices are low, it requires less money to buy things, so more money stays in players’ wallets. When prices go up, guess what happens to that “ineffective” money in their wallets.
Right, right. It couldn’t possibly be an indication of inflation. No way! No how! No sir! So, tell us why it’s going up.
Inflation is not an individual measure. So your personal experience is not relevant to inflation.
However if you want to claim this, please point to an entire group of goods that is experiencing a price increase that correlates to the increase/decrease in money supply, and isn’t entirely related to CCP patches changing things. And explain why all the other groups that make up the CPI are actually irrelevant to you.
I provided my proof despite you being the one trying to assert something different to the norm here, you provide your proof without trying to point at a single item but at the very least an entire category.
Plex prices are mainly going up for two reasons. It’s a small enough market being driven by investors, much like housing bubbles do, CCP told us a while back that most plex go through 2 or 3 intermediate holders before actually reaching the person who uses the plex, meaning the majority of plex sales are not to people who actually use them. On top of that have increased demand of plex’s by a number of changes, which is what drives the investors to believe it will increase in price and then magnifies that impact.
Wealth inequality probably also ties into this with the 1% being the people who are the investors having budgets that are orders of magnitudes larger than most people.
But that is basic supply & demand of a luxury item, not inflation.
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Inflation, as measured by the CPI, is subjective. That’s what you’re not understanding. It is only useful in its ability to indicate the general velocity of prices, but if it doesn’t DO THAT, for me, then what good is it to me? And if it doesn’t do that for anyone, or for most people, then of what use is it? No, seriously . . . what’s the point of it?
I can partially answer the question by saying that there is a set of goods and services from which one could make an index that would be relevant to my own experience, but you’re trying to foist some abstract monstrosity on me and on the average player and then saying, “You don’t matter to the the CPI and inflation.”. Well, IT doesn’t matter to ME.
Point to an entire group of goods or services that is both scarce and ONLY coupled to the supply of ISK. You can’t. There is no such good or service category. Every good or service in EVE has a viable substitute. That is the nature of a free market, and EVE is quite possibly the freest market ever devised. Even PLEX has a substitute, two actually: alpha clone status and subscription via real currency. You can’t just look at a number and say “It’s going up. There’s too much money.” or “It’s going down. There’s not enough money.” which is exactly what a CPI tries to do.
If tritanium goes up, people mine it themselves. If ships become expensive, people shift their priorities to losing fewer of them. If the PLEX is too damn high, there are more alpha clones running around, more money is spent on subscriptions, fewer characters are subscribed. THAT is economics.
Why would you call them “investors”? They are obviously speculators. And your comparison of PLEX to housing is as vulgar and callous a display of financial elitism as I have seen. Virtually every human on Earth requires some form of housing. For you to refer to that as a small market is the clearest indicator of how out of touch you are with reality.
On the topic of PLEX, which you seem preoccupied with, over-demand leads to inflation just as readily as “too much” money. People will forego the least useful things first. But skillpoints are incredibly useful and PLEX enables many players to access their skillpoints. Within the context of EVE, skillpoints aren’t exactly a “luxury item”.
Overall, the story you are trying to tell about the economy just doesn’t work. PLEX (and some other things) couldn’t even rise in price if there wasn’t already excess ISK IN the economy, not just “under someone’s mattress”.
The question this thread is asking is whether there is STILL way more ISK generation than destruction and whether or not there should be. Your thoughts?
So as I thought you don’t actually have anything concrete in rebuttal, just lots of fluff and denial.
You were the one who alluded to plex initially in your talk of a particular product that escalated. I just called it out explicitly rather than letting it linger as a ‘vague’ item.
On the Ops topic, if you had bothered reading the thread you would have seen that I’ve already answered that quite clearly.
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What did I deny? What “fluff” are you referring to?
I didn’t allude to PLEX. YOU brought up PLEX, probably because you know what a glaring counter example it is to your narrative. I could tell you that the price of Elite Drone AI or Zbikoki’s Hacker Card have gone up, or drone salvage, but there are probably reasons beyond simple inflation, like an increase in the value of their utility. An economy is a much more complicated thing than you are making it out to be. It’s not as simple as “Price go up.” or “Price go down.” so I don’t know what kind of “concrete” example you are requesting. What is it that YOU think would prove there is too much ISK being generated?
‘Too much isk’ in the economy isn’t a problem in itself.
Too much wealth being generated or redistributed to a small amount of players could be. Or too much wealth being generated for small amounts of effort/risk could be.
Why couldn’t plex go up in price if there wasn’t too much isk in the economy? Some people just REALLY want to play for free. The price of a plex on the chinese server is many times the price of ours.
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