The%20In-game%20Economics%20of%20Ultima%20Online

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The In-game Economics of Ultima Online

• Description and Analysis
• Zachary Booth Simpson
• www.mine-control.com/zack
• CGDC 2000

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Who am I?

• Previously Director of Technology at Origin,
  Titanic Entertainment
• I was not a UO team member
• I am not an economist
• Consultant for Origin in 1998-1999, studied UO
  economics

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Acknowledgments

• Members of the UO team, especially
• Raph Koster
• Rich Vogel
• Starr Long
• Damion Schubert
• Economic consultants
• Andrew Stivers (U. Texas)
• Timothy ONeill Dang (U. Arizona)
• cregtog8_at_barriodevo.org
• Prof. James Galbraith (U. Texas)

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What is this talk?

• Brief description of the economy
• An analysis of how the economy evolved
• Harp on things that went wrong
• Not enough time to get into solutions, sorry!
• An occasional interlude for Economics 101

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What this talk is NOT

• Not a how-much-is-it-going-to-cost-me-to-build-my
  -UO-clone talk
• Not a debate over how fun UO is
• Although that is ultimately more important
• Not about UO characters sold on eBay
• No matter how much Mary Margaret begs! )

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What is economics?

• Not the study of money not finance.
• A set of tools developed to analyze how people
  behave when allowed to trade.
• people behave however that damn well please no
  matter what the math says.
• Tools are not bricks

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Right tool?

• Be careful people dont necessarily behave the
  same in a game, some tools may not apply.
• I highly encourage you read up!
• Politicized topic bias bad science
• I like the economists who still treat the subject
  as psychology and not as calculus.
• J.K.Galbraith and P.Krugman are both very
  readable.

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What is an economy?

• Any system that involves people exchanging goods
  and services
• Does not imply currency or prices
• Ideal economy is meeting everyones needs
• Even the ones they didnt know they had.
• Ergo hard to say if an economic state is good.
• Maybe its easier to say if it is bad...

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Bad Economy Symptoms Part I

• Minimal person-to-person interaction
  dependence, especially between advanced player
  and newbies.
• Advanced player give newbies high-powered items
  because they have more than they need.
• Advanced players discard items that a newbie
  would love because it isnt worth their time to
  find someone to give it to.

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Bad Economy Symptoms Part II

• Supply is unpredictable
• Players hoard items, reducing availability
• They litter the world with unwanted junk
• They lose interest in the game because theres
  nothing left to acquire.
• Prices fluctuate wildly or become inflationary
• Demand is unpredictable
• Players cant find buyers for the items theyve
  been encouraged to produce
• Player manufacturers create unwanted junk

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Bad Economy Symptoms Part III

• Tragedy of the commons rules the public spaces
• The principle that something that is a lot good
  for me and a little bit bad for everyone else
  will inevitably be exploited until it is all bad
  for everyone.
• Classic example grazing sheep in the town commons

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Semantic Nit-picking

• A virtual economy is the simulation of an
  economy.
• UO is not a virtual economy it is a real economy
  involving the exchange of virtual goods and
  services.

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What virtual goods? A sample
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Where do baby items come from?

• Loot on creatures
• Raw materials from mines
• Extracted from automatically generated resources
  such as ore, wood, or wool from sheep
• Player manufacturing
• Applying skills with tools and raw materials
  generates finished goods such as weapons and
  armor
• Non-player manufacturing
• Shopkeepers produce many items that do not have
  player-production paths e.g. reagents

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Weaving Skill Rebus
Courtesy of uo.stratics.com
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Problem IOver-Production

• The Failure of theImprove-through-doing System

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Practice Makes Perfect

• Player skills improve through use
• Unused skills degrade
• Hard to become a jack-of-all-trades

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Incentives To Produce

• Market demand
• Hey Mr. Tailor, can you make me a shirt?
• Making now improves quality and price later
• Cant talk, making shirts!
• The sheer fun of it
• I built a fort out of fur boots!
• Cheating with macros
• When I wake up tomorrow, my character will be a
  rocket-scientist!

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The Result Oversupply

• UOs practice makes perfect rules create
  incentives to over-produce certain goods.
• The market in basic items is saturated and thus
  prices are extraordinarily low.
• Producers get upset at the low price but keep
  manufacturing anyway.
• Like Texas Oil Producers and DRAM chip fabs
• Tragedy of the commons

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Oversupply so what?

• Unlike the real-world, more stuff is very bad
• Servers slow down
• Backups get bigger and therefore less frequent
• Black-holes

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Econ 101 Shifted Supply Curves

• Non-market incentives push the supply curve
  right.
• Demand curve hasnt changed so the price drops.

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Problem IIBroke Shopkeepers

• The Failure of the NPC Shopkeepers

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The Shopkeeper Failure

• Shopkeepers intended to supply the
  un-manufacturable as well as solve transience
• AI was a complicated analysis of market forces
• Important NPCs are part of a virtual economy
  that is attached to the real economy.
• Its really weird

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To subsidize or not?

• NPC shopkeepers subsidize production to encourage
  character development
• Like Dad at a lemonade stand
• Shopkeeper cash-flow AI reasonably refused to buy
  junk already in over-supply
• Players report this as a bug -- expect a free
  ride
• Used to single player games
• Not everyone wants to be an entrepreneur

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But, before we punt NPCs...

• The shopkeepers have no cash, therefore give them
  something to sell that players want
• Extra advantage of removing gold from
  hyper-inflated economy due to counterfeiting
• Difficult to invent lots of new things
• New improved BLUE armor, a lot like silver
  armor, but its blue!
• Players upset by unfair competition
• Hey, how come the NPCs get to sell blue armor
  but I dont? This sucks!

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OK, punt.

• Designers gave-in, eliminated shopkeeper
  profit-motive AI
• Shopkeepers now subsidize up to X units of junk
  per hour.
• Inflating the gold supply, but at least newbie
  characters are developing.

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Black Markets

• Reagents most valuable commodity distributed
  exclusively by NPC shopkeepers
• Speculators with bots and Mafia cornered the
  market in reagents and inflated the price
• Amused a minority, outraged the majority
• Eventually fixed itself as everyone got into it
• No barrier to entry

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Econ 101. Soviet Retail

• Soviet Union had non-market incentives to produce
• Soviet stores filled with useless items that no
  one wanted
• Shortages and huge lines formed for the what
  people did want because trading was inefficient /
  illegal
• Subsidies and rationing common
• Black markets

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Problem IIIInflationary Gold,Depleted Resources

• The Failure of the Closed Economy.A Study of
  Macroeconomics.

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UO Resource Flow

• All items are made of resources
• metal,fur, meat, gold, magic, etc.
• Resources flow from item to item and are conserved

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Original UO Resource Flow

• Each world initialized with X meat, Y fur, Z
  gold, etc. in a bank
• Resources flow into world items from bank
• Items decay, break, sold, etc. flowing out of
  world back into bank
• Resources are conserved and thus no inflation!

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Original Flow
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Hoarding Is Rampant

• People hoard items like pack-rats
• Someday Ill need this
• Decoration
• Laziness
• Speculation
• Mementos
• Status symbols
• Achievement
• Tragedy of commons making server run slow
• Players dont even realize it

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Whats wrong with this picture?

• Drains all suck
• Botched manufacturing is insignificant
• Players hate decay especially when not online
• Players hate excessive degradation
• Selling to NPCs is great, but it involves
  printing gold!
• All resources eventually end up in inventory and
  thus...

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No dragons to kill!

• In closed economy no outputs no inputs. I.e.
  no dragons to kill!
• Again changing the rules midstream (taking
  things away) is politically unacceptable.
• Give us orcs to kill or were going to riot!

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Econ 101. Liquidity

• Two equally important factors in price
  determination Quantity and Liquidity
• Liquidity is the measure of how willing people
  are to trade in something.
• Even if theres a lot of something, it doesnt
  mean it will be cheap.
• If no one will give up their Pokemon cards, they
  will still be expensive even if theres millions
  of them.

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Econ 101. Liquidity of Currency

• Liquidity of currency matters too
• Currency is just another kind of commodity
• Inflation
• If it is created in excess, it becomes worthless
  and inflation sets in, i.e. prices rise.
• Deflation
• When people hoard currency as savings, they make
  it more scarce and prices or production will fall
• (Baby-sitter co-op analogy)

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Let it rain!

• The concept of closed economy was unsustainable
  without new drains
• Lots of drains proposed, none were politically
  acceptable/effective in the short term
• Taxes, Real-estate Maintenance Fees, Natural
  Disasters, Lotteries, Consumables, Indulgences,
  Recycle bins, Capital depreciation
• To hell with it disconnect the drain and pour in
  the resources
• abandon the closed-economy reduce player bitching

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New Flow
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So Now Its Inflationary

• The servers are filling up
• The backups are getting bigger
• Prices are rising
• But at least theres dragons to kill!

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Problem IVCounterfeiting
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Counterfeiting

• Hackers Law
• Developers are out-manned by hackers hackers
  have more time and great communication
• Therefore, exploits will always be found faster
  than fixes can be made.
• An obscure server fault allowed cloning of gold
  and reagents.
• Fixed after a few days
• Wrecked the experiment

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Effects of Counterfeiting

• People didnt stop playing
• Maybe the economy isnt so important after all
• Anything players wanted from NPCs, they could
  have.
• They didnt really want anything, except reagents
  which were also counterfeited.

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Effects of Counterfeiting (cont.)

• The worlds where there was early counterfeiting
  have a higher standard of living
• Players dont seem to care, they want challenges
  and relative wealth
• Not like the real world at all!
• People dont move to Mexico because the US is too
  rich!

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Lessons Learned

• A Massively Abbreviated Summary

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Lessons Learned Part I

• Hoarding is rampant.
• Failure of closed economy.
• The economy must maintain liquidity tying input
  flow rate to the output flow was a bad idea
  because hoarding froze the input making the game
  uninteresting.
• Failure of closed economy.

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Lessons Learned Part II

• Over emphasis on the macro-economy and under
  emphasis on the micro-economy made setting prices
  on NPC goods difficult and inefficient
• Failure of NPC Shopkeeper economy
• Institutions and opportunities for
  player-to-player trade need to be thought out and
  provided but not overly designed
• Failure of the NPC Shopkeeper economy

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Lessons Learned Part III

• Some design elements had unintended economic
  consequences. Economic motivations and
  incentives need to be considered on all design
  elements
• E.g. vendors used as storage containers
• Incentives to overproduce resulted in oversupply
  and devalued prices
• Side-effect of improve-by-doing system

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Lessons Learned Part IV

• Players expect to make a profit for their labor
  if it is encouraged through game mechanics.
• Side effect of the improve-by-doing system
• The economy is not the game
• Counterfeiting

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Thanks for coming!

• Article reprinted in proceedings(with unreadable
  graphs)
• Original on www.mine-control.com/zack