[Mud-Dev] Money supply in game economies (formerly Broken economies)

[Matt Mihaly]

[Note: In my last post to Philip Lendhart(sp?) I said I'd start a new
thread to talk about some economic ideas for MUDs. No need though, as
Jim S here has done a darn good job of that already. --matt]

On Tue, 3 Apr 2001, Jim S wrote:

> [Matt Mihaly wrote:]
 
> [SNIP]
 
>> The other problem I can see is that since there isn't really a way
>> to earn interest, or to invest, then _any_ currency inflation is
>> going to kill much of the value of the currency. Some inflation is
>> acceptable to people in the physical world because it's a natural
>> effect of economic growth, and because you're able to make money
>> with your money at at least an equal rate to the rate of inflation.

> This last part brought a question to my mind.  Has anyone tried
> limiting the total amount of currency in their MMOG?  By this I mean
> taking up a role similar to the Feds and only 'producing' so much
> coin.

This is exactly what I wanted to talk about! This is great. I would
love to try to do this, but I can't figure out how to emulate a
central bank in a MUD, for reasons I'll give below.

> For an example let's say the limit is 200 million gold coins total.
> This could be any combonation of lesser or greater valued coins such
> as silver, copper, platinum or what-have-you all relative with
> exchange rates between the different types of coins.  This would be
> an absolute limit that would span the entire world.  The only way a
> player would be able to earn currency is to take it from the game
> world.  The only way the game world can get it back is to take it in
> the form of drains on the economy such as sold items from shops,
> ect.

I think you'd probably want to make a dynamic money supply, based on
the current population of your MUD (and probably some other things
that don't come immediately to mind).

> Eventually, I think, with this system you'd run into a situation
> where the currency was very valuable because with an expanding
> player base it would grow more and more rare.  Also you'd have
> players who would hoarde the currency by trying best they can to
> circumvent the economy drains.  Eventually these players would
> become rich and the rest poor.

Yeah, that's why you need a dynamic supply. It would be kind of
interesting, though, to see someone who is item-rich but unable to
liquidate due to the rarity of currency. I doubt it'd go over well
with players, but it'd be interesting to see happen.

> On a grand scale and with some intuative simulation this could
> evolve into a situation where players in your world become richer
> than NPC barons or even kings(or whatever fits the world) and
> eventually take over their land for themselves.  Combine this with
> active trading and banks which loan out money with interest and keep
> your money 'safe' while paying out interest and you might end up
> with a diverse economy.

Loans are the core of the problem, as I see it. One of the major
methods a central bank uses to control the money supply is by raising
or lowering the interest rate it charges to other banks. The other
banks raise or lower their rates in response to this, thus either
increasing or decreasing the cost of money.

But how does a bank avoid widespread fraud in an environment where
people can have multiple characters and where there is no way to
recover a loan from a player who just decides to quit?

Further, with loans comes the possibility of being in debt, and I
suspect that being in debt might be the sort of point in a player's
existence that Raph refers to as an exit(?) point? In any case, it's a
point in a player's life where it's easier to leave the game and/or
cancel your subscription.


> Also because you'd be acting similar to the Feds you could release
> more currency into the game if it becomes too scarse and devalue it.
> You could even have players who set themselves up as loan
> institutions.  These players could play with their interest rates in
> order to make themselves richer and could also require collatoral
> which if the loanee defuncts on the loan could be collected by hired
> mercenaries.

You can't get blood from a stone, if you see my meaning.


So what I'm interested in is:

  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:

    1. Multiply your efforts by employing (almost certainly) NPC
    workers.

    2. A wide range (hopefully open-ended, but I know in my case at
    least, that's beyond what I'm going to aim for) of interdependent
    businesses that can be formed and grown, or rather, a wide range
    of activities that a business may engage in.

    3. A competitive environment, in which the incentive to do well is
    that you will make more money.

    4. Game systems supporting the formation and funding of
    independent entities (ie a corporate format).

    5. Strong in-game legal systems with codified property, business,
    and contract law.

And then I think that the following would be nice, though not strictly
necessary:

  1. The ability to manage risk. This might be a little too
  sophisticated, but I just think it'd be neat if I could own a series
  of, say, lemon tree farms, and reduce my exposure to weather-related
  risk by buying options on tree-warming-equipment manufacturers, or
  sell futures to lock in a price now.

  2. Financial markets supporting, at the least, bonds and common
  stocks, so that companies can raise money from the general public,
  and because it'd be neat to try and make a living as a trader.

--matt   

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