Diablo 3 Economy: Inflation?

Thanks to SparkFour and Elly for pointing me to this article (also on Zero Hedge) tracing the history of gold inflation in the Diablo 3 Economy.

I was eager to read it from the intro, thinking it would provide some penetrating insight into the workings of the game’s virtual economy. Unfortunately it does not do that. I can’t tell if the author doesn’t know enough about the game to present a complete picture of the economy, or if he only focused on gold value to make his hyper-inflation parallels work, but it feels like a very partial work. It’s informative about a lot of basic economic functions at least, albeit presented from an Austrian-themed PoV. Quote:

Hyperinflation is the economist’s equivalent of an astrophysicist’s quasar cluster or a marine biologist’s dolphin “stampede”: a rare exhibition of a unique set of circumstances which arise infrequently and are closely studied when they materialize. Such events are exotic enough that they become legendary: many individuals knowing little about monetary policy are aware of the recent outbreak in Zimbabwe, or familiar with the defining instance in the post-WWI Weimar Republic.

Economically, the tipping point in the transformation of inflation into hyperinflation is characterized by a profound drop in the outstanding demand for money: when holders of money expect the supply of money to increase — particularly without any sense of timing, bounds, or other guidance — monetary demand in the present drops in favor of surrendering money for vendibles.

The focus of possessors of money, therefore, devolves into an effort to capture known, present purchasing power against the likelihood of its decline in the near future. Saving, in any event, delaying consumption, is chastened; and if a cycle of declining purchasing power and rapidly rising prices ensues, ultimately the propensity to hold money declines precipitously and may fundamentally disappear.

The article is certainly correct that gold bots (and player improvements in gold harvesting rate) have increased the gold supply, but for the most part that has not caused the huge spikes in prices (inflation) that increases in the monetary supply create in real world economies. This is because players are constantly finding new items as well as gold, which is where the entire parallel to real world economies breaks down.

In real life you earn money to buy toasters and pizzas and automobiles. When there’s inflation, prices rise since there’s more money in circulation, and thus each dollar is “worth” less. But in real life you never just find a toaster or pizza or automobile that you can use yourself and/or sell to others, and the equivalent of that happens all the time in Diablo 3. In fact that’s the whole point of playing the game.

Inflation occurs in the real world when more currency is chasing a finite supply of stuff. In a virtual world like Diablo 3 where an infinite amount of “stuff” exists, where all players can find the stuff, and especially in softcore mode where (almost) none of the old stuff ever wears out or breaks, prices can fall even as the gold supply increases.

Which is where we are today, where most players in D3 complain about deflation, not inflation, and lament their inability to build up gold by selling gear since only the very top quality of items still has high value. And sure, the uber 99.9999% quality gear has constantly risen in price, but everything else is getting perpetually cheaper. Today you can outfit a character for success in Inferno for a fraction what it cost months ago. (Which will make you happy if you set a goal in concrete terms, but might lead to discontent if you evaluate yourself by the status of others.)

So, are you guys happy with how the game economy is working these days? Or do you feel somehow victimized by inflation and deflation simultaneously, as everything you want seems to be increasing in price while everything you have (and find) is constantly less valuable?

Tagged As: | Categories: Economy


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  1. Let’s say i personally wouldn’t invest my life savings in D3 gold.

    I think you can deal with these special traits that come along with D3s eco. You just shouldn’t get frustrated about the circumstance that you have to pick up gold for 1000 hours or something to get 3$ of value.

  2. Certainly not. The fiery brimstone price is ridiculous, when you compare it to starting price. Same goes for essences. Nowadays, there is no incentive to salvage any item, it far better to just vendor it. So you can say that inflation also killed item crafting.

    • yea i invested a 100 mill into brimstones when they were “cheap”. Eventually the price dropped even lower, and my brimstones aren’t worth anything 🙁

      • well, all it would take is a viable option to cause a brimstone sink and you will come out ok. i would hold those brimstones. think of it like this what if the current BoA items suddenly charged double what they cost now. And frankly they should. Make no mistake Botters are the main culprit here. The economy was never going to be perfect as everyone has the ability to create money in the game. But botters and the inability of Blizz to eliminate these players/accounts [which is completely unacceptable and reeks of incompetence might i add] have cause the economic implosion that you see in just 12 short months.

        in terms of using the current economy, target your items at the 98th percentile on the cheap with the hopes of getting some steals on the 99th. BoA also gives viable options. If blizz gave paths to our own 99th type items [BoA maybe] but made it costly [think paragon leveling type costly] then who would really care about the auction house.

        first things first though. blizz needs to find accounts with 100s of billions and just close them because seriously. they keep track of sales, time played, etc. this would not be hard to track and thwart.

      • I feel your brimstone pain.

        I was halfway out the door and about to quit when that big crafting patch notes were about to be announced. I was positive that brimstones would be used, speculated like many others that they would be the limiting factor in item crafts since they were saying brimstones needed more use and value.

        Invested the 250 million I had saved for months, bought as many brimstones as I could at a price of about 25-30k gold each.

        I was so sure Blizzard would put in a larger brimstone sink to get the over abundance of them out of the economy. I haven’t played since. Not really because I lost my Witch Doctor’s life savings in a bad investment, but this was one of the tipping points.

        Took forever to save up 250 mil gold, this was earned by selling many many 500k – 1mil gold items. All the while watching my lucky RL friend win the lottery every other night and find a 50 – 100 million gold item every other night. He had earned over a billion in about half the hours played as it took me to save up my 250 million.

        This is what made me throw in the towel. Win the item lottery to get your gold for an upgrade or you won’t progress much. Only other option if you are an unlucky bastard is to use your credit card.

        I just can’t see being able to afford any upgrade for many months if I were to come back and play again.

  3. Interesting article Flux, but I think you need a lesson in economics. Hyperinflation refers not to an extreme amount of price inflation of all goods, but where there is such great inflation of the value of holding goods as opposed to saving/spending money, as to cause the value of a currency to rapidly decrease in value. If you even try to argue that prices on the AH are not exponentially greater than they were months ago (for all viable goods – see below), then youre kidding yourself.

    In terms of the real world parallel, you cannot say that people just ‘find’ new items out of nowhere. The very process of farming is the production process, much like factories make toasters en masse to sell them. The only difference to the toaster industry is that the cost to enter the market is $60 and a computer, so there are many more suppliers in it proportional to consumers (pretty much 1 to 1 actually). This doesnt preclude hyperinflation however, in fact the very fact that all players can also ‘find’ (or produce) money in the game means that inflation is caused not only by natural forces, but compounded by the fact that the ‘toaster factories’ of diablo 3 not only produce toasters, but also have their own mints. This would be fine, the gold players ‘find’ would be more or less akin to what a consumer earns as a living and then spends on toasters (you need money to begin with to buy things after all) were it not for one other problem. As players get to a certain gear level, the odds of finding what I called ‘viable’ toasters get smaller and smaller (trifecta with main stat anyone?). To refer to another real-world analogy, it becomes as if everyone owns lamborghinis, while the cost of producing them largely remains the same (still takes the same number of farming hours on average – lets not pretend that MF paragon will continue to make a difference six months after its inception, economically speaking). Suddenly, any slight upgrade to the car (ie. new models coming out) get snapped up for a ridiculous price by the wealthy few, while your average toyotas (ie. junk items) sit on the market forever. This is what the article you speak of was on about, people ‘holding on’ to goods (what their character(s) have equipped) rather than constantly upgrading at the same rate (because as I said, that becomes impossibly the better you get). Suddenly, item upgrades on the whole become rarer and rarer while the ability to farm gold stays constant. Suddenly youve got less people purchasing items, but still pumping out money from monsters at more or less a constant rate. Thus, hyperinflation.

    The situation in D3 now is that everyone is putting up sub-par goods (that yes, dont change in price that much), while still earning gold at the same rate. In real life this would be like everyone keeping their jobs and earning the same amount, but all toasters (and all goods)produced getting relatively poorer compared to what people already have. So people stop spending their money trying to upgrade, while the prices of the few superior toasters skyrocket due to their increasing scarcity. All the while, everyone keeps getting ‘richer’ (on the whole) but not spending anything. Suddenly every dollar becomes more and more worthless. You also have ridiculous income inequality, just the same as in, you guessed it, Zimbabwe.

    If your point is that these sub-par goods keep getting cheaper and cheaper, that’s true, and also a symptom of hyperinflation. It’s one of those weird occurences in economics whereby despite having more money, people are forced to buy poorer goods. That’s fine if you think that being able to beat inferno on mp0 is the epitome of happiness in the D3 world, but that would be like saying that being able to breathe is the epitome of happiness in zimbabwe (everyone can do it). The best indicator of hyperinflation at the end of the day is not comparing the prices of sub-par goods within the economy, but comparing the currency’s strength on the foreign exchange. D3’s foreign exchange is the RMAH, where gold has gone from $.25 per 1 million to just $.33 per 10 million! Just like in zimbabwe they have to constantly slash zeros off their notes, blizzard has been forced to do the same kind of thing.

    • Good read. Thanks.

    • I mostly agree, but my comment about the article was that it was mis-comparing D3 to real life by acting as though players were only accumulating gold via finding it, and not ever finding/creating the items themselves. The article was actually perfectly accurate… to a gold farmer. If all you create in D3 is gold, then you see a model of hyperinflation as the more gold you produce the less it’s worth.

      I think impressions of hyper inflation and feelings of poverty in D3 are almost entirely based on “keeping up with the Joneses” as I linked in the post. In real life if you only compare your wealth and possessions to Bill Gates or to lottery winners, and hate driving any car but a million dollar Ferrari, you’re going to be unhappy and feel poor. Some people do, and are, but most of us set more realistic goals. Perhaps the issue is that in D3, we all want to hit the lottery and have the super highest quality gear, and anything less feels like a failure.

      As I said in a reply further down, I looked today at my softcore Monk’s gear, which I was happy with and had spent 30-50m per slot on 3 months ago, and saw that I could upgrade every single piece, literally using the same legendary with much better stats, for ~5m per slot. So does that make me happy that I can improve for cheap? Or does that make me unhappy that my current gear has lost so much value?

      That’s a question for psychology, not economics, but in neither case does it hint at hyperinflation, which exists in D3, if at all, only on the highest end gear. (Or for gold farmers.)

      • \I think impressions of hyper inflation and feelings of poverty in D3 are almost entirely based on “keeping up with the Joneses” as I linked in the post… Perhaps the issue is that in D3, we all want to hit the lottery and have the super highest quality gear, and anything less feels like a failure.\

        This is a great point, which admittedly I tried to touch on in the last paragraph but should have expanded upon. I think many people take it as a given that since Blizzard hasn’t actually released any content in the time D3 has been out, the entire end game revolves around constantly upgrading gear in order to move up MP levels, or as many people do, have a gold limit that they set themselves (these people include those you refer to as gold farmers). As such, the whole purpose of life in D3 is to get better gear. I won’t repeat myself, but it seems to me to be less about gamer psychology and more about what everyone has been pigeon-holed into aiming for by Blizzard’s refusal to add actual new content (besides oh look you can craft this one ring for months), such as never ending dungeons, new mini quests, new special monsters to hunt down, achievements, world events, mini-games, pvp with rewards (even different pvp arenas with environment-based goals maybe), just something else to do besides kill the same monsters over and over again!

        In my opinion, Blizzard focuses too much on the itemisation and class balancing. These things are only issues when people run out of things to do, so the only goal is to upgrade (and so people whinge when their class can’t do it as fast as others, or takes more effort to get to the very elite levels). I completely agree with you in that we should be able to feel like enough is enough. This would occur if we had new content to constantly try, and so it wouldnt matter that a barb could pwn everything on mp10 with less gold spent than a WD, both people would have something fun and new to try every so often, so the WD wouldn’t be as focused on his/her relatively inferiority to others. As for itemisation, I love what Travis Day appears to be doing, but I actually feel that the game is pretty good where this is concerned when it comes to the mid-tier levels, but only really breaks down at the very top when particular legendaries become BiS (and thus itemisation is the end-game in itself, which ironically is constantly being reinforced by Blizzard’s commitment to it). Being a loot-hunting game isn’t mutually exclusive with having new things to do while you hunt loot (or having particular ways of finding particular loot). I wouldn’t even mind a wow-style gear grind system whereby new content/quests every few months directly lead you to a BoA upgrade, then the game would be just as much about the journey as the destination so to speak. Right now, it’s like standing in the same river with a pan and trying to find nuggets of gold alongside everyone else, throw us down a mineshaft with a pickaxe once in a while!

  4. If the issue is to get brimstones to have a fair value, since they are linked to legendarys, a simple fix to create another brimstone sink is just require brimstones to repair legendarys and BOA items. As long as they dont make items break permanently if their durability is reduced to 0 this wont effect repair costs in the every-day, just once in awhile cause you could wait to repair those items.

  5. I am perfectly happy with the economy because I don’t participate in it. 😀

  6. So make monsters drop less gold? Or otherwise get more gold sinks to increase gold rarity maybe?

    I dunno, i just play because i actually (still) enjoy the game :p

  7. First, I want to say the Wikipedia criticisms of Austrian economics are funny since game theorists’ models tend to support the Austrian argument on taxation and government spending.

    Anyway, your argument about why D3 is different than real life is not quite there. Finding an item is analogous to providing labor. And finding gold is just a way for money to enter the economy.

    Really, the only significant difference I see between D3 and real life, as far as economics goes, is that most people don’t provide a service in real life when the market for that service is already saturated. You hit on that by saying finding items was the point of the game, but you seemed more concerned that more stuff was being produced, which happens in real life too.

    Basically, I’m saying, in real life people only produce so they can trade for goods. In Diablo, people produce because it’s fun. And that’s why your supply is going up while demand is not.

    • There are a lot of ways that the parallels don’t quite work, but I wasn’t doing a whole article on it and it’s been too many years since I did Econ 101 for me to bother. The replacement and wear/tear issue is a big one, which I did briefly mention in the post. Hardcore is a bit more like real life in that things are consumed by use (when you die) but in softcore everything lasts forever, and can be resold like new at any time.

      This greatly changes the demand side of the graph, since players don’t *need* to replace gear. Most of us do since it’s fun to upgrade, but it’s not like real life where people buy new clothes, cars, handbags, etc, all the time, both for fashion and function, and then simply give away or throw away their old stuff, or sell it for a fraction the new price, since it doesn’t hold much/any resale value.

      Gear in D3 is forever like new, and by the hyper inflation model described in the article, it should in fact increase in value.

      • I was only responding to your assessment that deflation was more of a concern than inflation. I actually don’t know if that’s true or not, I don’t even play Diablo, haha, but I just thought the way you arrived at your conclusion wasn’t quite right.

        About lack of wear and tear – that exists in the real world too. Just look at portions of the commodities market. Do you think anyone cares how old platinum or silver is? Those metals can be mined as well; the supply isn’t static.

  8. They’re never going to fix the games itemization to invalidate the auction house are they? I think it’s time we gave up hope for the expansion…

  9. Curious about where the market has gone lately, I checked out my P81 softcore Monk today, who I hadn’t played in about 2.5 months since I’ve been doing only HC since then. Spent 15m LOLing at the deflation.

    Every item I had on could be replaced for 1/3 or less than it cost me initially, and I bought most of them in Feb/March as I was leveling and upgrading the character heavily at that time. Lacunis, Ice Climbers, Echoing Fury, Inna’s pants/chest, etc. All the stuff my monk is wearing, most of which cost me 40-50m per slot, are available today for 5-10m. Or less.

    I was tempted to do some upgrading even though I don’t play the char anymore, just since I could have done it so cheaply. Same items, better stats, far less than they cost me 2 or 3 months ago. And I’m not even including crafting, since the mats are virtually free in softcore (ToS for 450g, while they’re 11k in HC) and I could have greatly improved my Monk’s wrists/gloves/shoulders for a few million total.

    That, plus the fact that RMAH gold is now a fraction what it used to cost, makes it ridiculously cheap to gear up a quite powerful character. Anyone coming back to D3 today after some months away, or starting up fresh, could immediately vault up to MP5+ farming for less than the price of a decent restaurant dinner.

  10. D3 economy is deeply flawed by design. First of all, everybody prints their own money. There are no real world parallels to this. If money supply is infinite, all hell brakes lose. The very idea of a currency, which holds value, implies that its supply must be limited. In D3 money supply is infinite. This makes the economy totally broken. Another problem is that items never leave the system. In the real world, all items eventually breakdown and are removed from circulation. In D3, all good items remain in game forever. This makes market saturated with decent and good items, which are selling for less and less. It makes mediocre items completely worthless. At the other end of the spectrum, godly items are worth far more than 2 billion, since gold value is inflated. All in all, it’s a poorly conceived system, which is completely abstract and almost totally not related to how real economy works.

  11. Gold hyperinflation.

    Just as Blizzard wanted it. Phase out gold, phase in RL money as the dominant D3 currency. I don’t think it was an accident that the game shipped with almost zero gold sinks, and even now, the options for players in the 1-59 range are still close to zero.

  12. I don’t think 1m/hour is what the best of the best pulls in. I am close to that on my Archon with no pickup radius.

  13. Flux, you touch on a really key point. “The keeping up with the Joneses” attitude of many players. I’ve seen countless players finding a mempo, inna’s pants or IK armor which rolled poorly, and subsequently blame the game, the poor itemization and/or the economy for the bad item, but the fact remains, it is still a good item, and would have fetched many millions a few months ago. People expect to find 1billion items regularly, but by their very nature , those items are exceptionally rare.

    Obviously, with more items entering the economy, the threshold for a top 0.01% (or whatever) continually grows, meaning your chances of finding such an item diminish. Any way you play the itemization game, in a softcore economy this is the reality. Many “noobs” fail to realise that while prices on the top end are rising, it’s never been easier to gear your char to a good level.

    Lastly, one can say that Blizz has dropped the ball pretty badly though. First off, a failure to combat botters has led to huge influxes of gold in the economy. (trust me, if these guys can economically farm gold to be selling it at $2.3/100mill as advertised in chat, Blizz isn’t doing a good job at all). Second, the AH. With a cap of 2bill, most of the good stuff goes straight to the RMAH, that which doesn’t is almost instantly snapped up for 2bill and resold. By raising the AH cap, you’d open the market up to more players.. and more importantly, provide a huge gold sink. (Imagine an item selling for 10billion.. that’s a 1.5bill sink right there).

    To those guys who bought brimstones and got burnt.. sorry, but you can’t really blame the economy for your unlucky speculations. You were hoping to make a quick buck and it didn’t turn out well. I’d love to see brimstones rise in value, but if you’re going to speculate with 100s of mill, you need the cajones to take the losses.

  14. Actually, what you’re referring to as “deflation” is not correct. In specific regards to gold, the main currency, yes is definitely INFLATING. People use blind arguments like “well now you gear is worth more” –DERP. NO, its not. Yes it has a higher pricetag of gold attached to it, but the net value of the gold is substantially less, which makes the item worth less. It’s a weird concept, but its basically just feel-good value. “Oh my weapons are worth 100 million now I’m a baller” – no, you’re not, and no they’re not, you’re whats wrong with this game.

    What is happening is simple: People find tons and tons of rares and legendaries on a daily basis. The existing top 1% of gear is so elite and rare than when these changes to the economy like dropping the gold price floor down to 10m/$.30 will raise the value of the incredibly rare gear, but substantially drops the value of the mediocre and even above average gear. As more items are introduced to the market every day with no decay, any item that isn’t on the very far end of the spectrum of “goodness” (very good or very bad) will see a large fluctuation in its value.

    What else is the problem with the economy you might ask? Well for starters, doing what Blizzard did to the cost of gold was selfish. Since gold is almost 10x worth less than it was before (I dont want to hear about the black market gold value) any gold you find is inherently worth less. This means that in order to obtain gold it is largely due to any items you find and sell. In case you havent gotten the memo, the vast majority of items you find will be utterly worthless and crap. Some people might argue that blizzard added things like the craftable items. Well, they still cost resources to create, still largely fluctuate in their effectiveness in regards to what stats they roll, and at the end of the day, remain completely worthless as you can’t sell them.

    In summary: the gold you pick up is worth less money – making it harder to farm currency, the items you pick up are more abundant with the new monster density – thus even more worthless than before and drag down the value of anything that isnt the very best or the very worst in its class, BOA items are a feel-good, poor response to itemization and largely still not worth it, and yes Gold has inflated – not deflated – and the items (if represented on a nice bell curve _/^\_ <—- showing very bad items slowly moving to the right where most everyone is , the hump, and then the super elite gear, which gets even more expensive and harder to obtain.

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