I think it would be even more interesting to examine trade strategies in a game like Eve online. There's a giant simplification that occurs in games like World of Warcraft and now Team Fortress 2, where the only cost of arbitrage is the cost of finding out where opportunities exist. There are still interesting things to examine in games where transactions are instantaneous and safe, like how much risk people are willing to float by holding stock in intermediate goods, but the really interesting thing to me is examining communities where moving items around has real costs associated.
I would expect that the TF2 economy tends towards an equilibrium that is as simple as Yanis describes. This is probably not true in a game such as Eve. If one item is cheap to produce in on sector of space, and expensive in another, the equilibrium will reflect this fact: "arbitrage" opportunities will exist, and be stable, and be known by another name, "trade routes". There are real costs in transporting goods in Eve, for example the time cost of having a human pilot navigate a freighter, and the risk of being attacked by pirates.
In Eve you can have perfect information on the price and volume of transactions that occur, the movement of goods, the sovereignty of territory in which there are markets, the corporate affiliations of the people who operate firms and trade routes, and the wars and conflicts that arise between individuals and sovereign states. That sounds like an amazing playground for someone who is interested in liberal international relations, free trade and pacification, and any number of things that go beyond pure economics.
The EVE economy is much more complex than the TF2 and WoW economies, of course, but I think the simpler cases are especially instructive precisely because they don't possess many complicating elements that would make economic analysis difficult. Here all Yanis V. has to look at is the relative trade data of a mere 4 commodities; he probably wouldn't be able to go into so much depth if he were analysing EVE, simply because of the many additional confounding factors.
A simple economy can be more easily used to put predictions of basic economic theory to the test, as opposed to a complex one. So while I'd agree EVE offers even more interesting scenarios (and I say this as a big admirer of EVE), I'd say this analysis of a simpler model may be more instructive and clean-cut for economists.
EVE Online actually has a very well-working economy. Regardless of whether such an approach would work be optimal in real life, it very closely resembles what a free-market economy is supposed to look like.
The news item you linked to isn't a problem of someone misunderstanding economic principles, but of a simple mistake and the resulting bug - there shouldn't have been an additional reward for surviving cargo.
Yeah, no argument there, the EVE economy feels a lot more solid than other videogame economies.
But I don't think the surviving cargo thing was a required factor for the LP loop, it only sped up their initial gains. When they figured out how to manipulate the game's idea of prices upward, they basically were able to exploit infinite arbitrage that resulted from the bits of hardwired game logic that made up part of the market without being subject to/responding to market forces.
At this stage of the economist and gaming intersection, economists are still generally being pulled from the outside of the gaming industry. Finding exploits is not something that they've really had to think about in the way a gamer has.
I wouldn't blame him for it. Besides, all systems can (and will) be bent, broken, or subverted. Perfect identification of bugs is pretty much impossible. You can get a lot of obvious ones, and assume that the rest are above the ability/will threshold of the playerbase.
Comments
I think it would be even more interesting to examine trade strategies in a game like Eve online. There's a giant simplification that occurs in games like World of Warcraft and now Team Fortress 2, where the only cost of arbitrage is the cost of finding out where opportunities exist. There are still interesting things to examine in games where transactions are instantaneous and safe, like how much risk people are willing to float by holding stock in intermediate goods, but the really interesting thing to me is examining communities where moving items around has real costs associated.
I would expect that the TF2 economy tends towards an equilibrium that is as simple as Yanis describes. This is probably not true in a game such as Eve. If one item is cheap to produce in on sector of space, and expensive in another, the equilibrium will reflect this fact: "arbitrage" opportunities will exist, and be stable, and be known by another name, "trade routes". There are real costs in transporting goods in Eve, for example the time cost of having a human pilot navigate a freighter, and the risk of being attacked by pirates.
In Eve you can have perfect information on the price and volume of transactions that occur, the movement of goods, the sovereignty of territory in which there are markets, the corporate affiliations of the people who operate firms and trade routes, and the wars and conflicts that arise between individuals and sovereign states. That sounds like an amazing playground for someone who is interested in liberal international relations, free trade and pacification, and any number of things that go beyond pure economics.
The EVE economy is much more complex than the TF2 and WoW economies, of course, but I think the simpler cases are especially instructive precisely because they don't possess many complicating elements that would make economic analysis difficult. Here all Yanis V. has to look at is the relative trade data of a mere 4 commodities; he probably wouldn't be able to go into so much depth if he were analysing EVE, simply because of the many additional confounding factors.
A simple economy can be more easily used to put predictions of basic economic theory to the test, as opposed to a complex one. So while I'd agree EVE offers even more interesting scenarios (and I say this as a big admirer of EVE), I'd say this analysis of a simpler model may be more instructive and clean-cut for economists.
Actually, he simplifies it down to four for explanation purposes. In reality, the TF2 economy has many, many different tradeable items.
If the CCP economist had any grasp on their economy at al, we probably wouldn't have gotten http://news.ycombinator.com/item?id=4146298
EVE Online actually has a very well-working economy. Regardless of whether such an approach would work be optimal in real life, it very closely resembles what a free-market economy is supposed to look like.
The news item you linked to isn't a problem of someone misunderstanding economic principles, but of a simple mistake and the resulting bug - there shouldn't have been an additional reward for surviving cargo.
Yeah, no argument there, the EVE economy feels a lot more solid than other videogame economies.
But I don't think the surviving cargo thing was a required factor for the LP loop, it only sped up their initial gains. When they figured out how to manipulate the game's idea of prices upward, they basically were able to exploit infinite arbitrage that resulted from the bits of hardwired game logic that made up part of the market without being subject to/responding to market forces.
At this stage of the economist and gaming intersection, economists are still generally being pulled from the outside of the gaming industry. Finding exploits is not something that they've really had to think about in the way a gamer has.
I wouldn't blame him for it. Besides, all systems can (and will) be bent, broken, or subverted. Perfect identification of bugs is pretty much impossible. You can get a lot of obvious ones, and assume that the rest are above the ability/will threshold of the playerbase.