|
Bags of Win, Gaia Macroeconomy |
|
|
|
|
|
|
Gaia's economy was at the center of attention for many people this week. The bags of win have stirred up quite a commotion. So I'll talk a little bit about it, now that every one has calmed down.
The way I'm going to talk about it, will be like this: 1. Very basic("real world" wink Macroeconomics 2. Why and how is Gaia's economy different 3. Bags of win
Very Basic "real world" short term Macroeconomics (Quantity theory of money)
Suggested reads: Quantity theory of money Velocity of Money
A very simplified way (but useful for our purposes) to think about money, prices and inflation in the real world, in the short term (assuming that growth is irrelevant), is to use the quantity theory of money, that posits:
M * V = P * Q M is the amount of money in the economy, V is the money velocity (the number of times money changes hands each period), P is prices and Q is quantity of goods. Read the wikipedia entries for better definitions, and deeper discussion of those, and then come back. I'm waiting smile .
Real World Monetary Policy is policies that are focused on influencing the amount of money in the economy - M. For example - raising the interest rate pulls money out of the economy (for a while!), which (assuming the amount of goods and the money velocity stay the same) lowers prices. Printing money, for example, increases M, which (again, if Q and V remain constant) drives prices up. For different reasons, in most real world countries, the central bank is in charge of the money supply, not the government directly. And central banks mostly deal with monetary policy - influencing the price levels (and potentially, in the long run - other factors such as growth and employment, but that is debatable) through changing M.
The important point is that in the real world, changes in the money supply have no real effect - new goods are not created when money is printed, and money itself is completely valueless. This is the basis of the quantity theory of money - that the amount of money in circulation (factored by how fast the money moves around) equals the value of all the goods (quantity times prices), and chaning the money supply changes only M and not Q, therefore it translates into changes in P to maintain this equality.
(As a side note, I pity the student that has to understand anything they didn't know before from having me explain it. Considering my current career choice, that may be something to worry about). But now - back to economics. One last thing about measuring things in the real world before we get back to Gaia:
Measuring stuff: there are some things that are directly observable, or at least directly measurable with varying degrees of accuracy; Q, the quantity of goods, can be measured (usually - GDP or GNP), P, prices, are measured (which is why we have price indices), and there are different definitions for M (there is M1, M2, L of different kinds...). There are also ways to measure V, the velocity of money, but usually V is just a calibrating parameter people use for their model. If they observe M growing by 5% and prices growing by 10% with no change in the amount of goods, they deduce that V changed by almost 5% (or they change the definition of M to fit a 1:1 transmition ratio between money supply and prices).
Very Basic Gaia Macroeconomics
Gaia behaves differently, because there is a direct translation between M, money, and Q - the amount of goods. A significant portion of Gaia's goods are store items, which can be bought from the stores, or "manufactured out of money". That means that the quantity theory of money is not directly relevant - injecting money into the economy increases both M and Q, in different ratios that depend on the relative importance of store items and collectibles... Gaia gold is not fiat money like the money in the quantity theory of money.
It's not that putting more money into the economy does not get prices to rise. It's just that the relationship between the amount of money and price level are more complicated. If you'd like to stick to the quantity theory of money, V changes in a very different way on Gaia when the money supply changes. So a 5% increase in the money supply can lead to a 1% increase in prices, but also to a 20% increase in prices - depending on how much of it is directed at store items and how much towards collectibles and old event items...
Bags of win!
The bags of win, without doubt, injected more money into the economy, and the effects of this injection could not have been quantitatively predicted In advance. They still can not be assessed now, since this kind of shock (and when I say shock, I mean it in the scientific stochastic sense, not with any negative connotation, just the same as a mechanical engineer would talk of sound traveling through solids as a series of shocks) takes time to dissipate. We are also a bit behind on measuring economic indicators the way we should be (which is one of the reasons why we're not publishing a price index and other indicators a lot of people would like to see). Once these things are up and running the way the should be, we'll have to discuss what exactly it is that we'll be publishing (price indices, gold flows, numbers of collectibles in circulation...) and what not. I am the staff economist, which means I deal with the virtual economy - but some of these things can be directly translated to Gaia's revenues, which are a totally different issue, of which I'm (luckily) not in charge.
One of the reasons to release the bag of win was to experiment with a new type of product that many Gaians have been asking for. I'll be frank and admit that I didn't like the idea at first. We tried it anyway xp . One day it will make for a great research paper - it's very rare to find examples like this in the real world. Too bad I'm not a macro- economist, I would have been excited about doing it smile So we released it, and then pulled it out (if you follow Panagrammic's journal, you could have seen the evolution of opinions during that day. You still can). We all have big plans for Gaia (economy included!), and experimenting with new products is something we have to do.
Not about the bag of win!
Nothing much, really. I'm working all the time. On Gaia stuff, on school stuff... I should get back to work RIGHT NAO!
Sagger-AT3 · Fri May 02, 2008 @ 11:05pm · 13 Comments |
|
|
|
|
|