How to Actually Deflate Icecrown's Economy: From an Economist

[FRESHShaZaM7]

INTRODUCTION

This is essentially a compilation thread where I provide my own theories, also compiling other people's comments and theories, giving them credit, explaining their ideas, and even expanding upon them. This research is meant to be analyzed appropriately from the economics discipline to find the most pareto efficient solution to massive inflation. It is also a discussion to bring all walks of Warmane life together to find that pareto efficient solution. Thus, the perspective of this research stems from the view that the current proposed Gold Squish has many problems left unaddressed, particularly in an underdeveloped perspective of all sources of economic value. within a WoW economy. The standard 50% gold reduction relies heavily on the perspective from experienced level 80 players using the auction house, and doesn't consider all. There are both fixed and variable price rates within a WoW economy. The fixed prices from vendors, and variable prices from auctioneers (the community). Due to this mixed view of value, many new players, alt accounts, and fresh 80s will be affected by the 50% gold squish more than the experienced players, as they are more reliant on the vendor economy. It should be excused that many thought this solution was entirely efficient. However, it is extremely important to implement a more wholistic solution.

It should also be noted that Icecrown is only the natural experiment , but many methods below can be applied to any server.


SHORT-RUN THEORIES

1. Progressive Gold Squish

This is based on the Progressive Tax System.

Part of the economy in a WoW server is actually based on vendor prices. They are fixed prices, as opposed to variable prices of the auction house. When you are created a gold squish on Gold at a flat rate, you are basing that flat rate according to the variable price standard. Thus, you need to establish a gold squish that accounts for flat and variable prices. This means the gold squish should be progressively increased by how much gold an entire account has so that those who are new players, who largely use vendors, aren't as affected.

Example: Three people just started playing on Warmane. One is entirely new to WotLK, another is new to Warmane but has played Wotlk, another is starting alt character. When each of these players' Gold totals are cut in half, each will have a different effect. The first player is hurt the most, because he has been saving for a flying mount strictly through quest funds. The second has an easier time than the first because he knows how to manipulate the AH and even farm for Gold easier. And the third has the biggest advantage because he can use gold through funds.

To even out the Gold squish, you can use this system (or with more brackets):

1-1000g p/acct = 10%
1000-5000g p/acct = 20%
5000g-10000 p/acct = 35%
10000-∞ p/acct = 50%

For other ways to help new players or alts see my other theory.

2. Negative Gold Squish

This is based on Milton Friedman's Negative Income Tax.

Essentially everyone received a tax credit under this tax system, and the rest of their income is a flat tax. Translating this to Gold is fairly easy, and would be fair for all players:

.5(Current Gold Total)+1000g= New Gold Total or (Current Gold total - 1000g).5= New Gold Total

Whichever way you want the squish to work here^

This means there will be a 50% squish of gold, but only after 1000 gold. That means players below level 80 are largely unaffected by the gold squish, and only people who make over 1000g will It is much more deflating than the progressive bracket squish and could be considered more "fair."

3. Lottery System

Pretty simple here. Lottery system where people can gamble their gold, especially those who have a lot of it. Naturally deflates currency.

"What is actually needed is something to spend the gold on for players who have obtained large amounts of it. On Molten there used to be lottery and gold was one of the methods to obtain tickets. But apparently they don't want to make anything similar again because it would let gold buyers use it. In retail there is The Mad Merchant, which seems to fulfill that purpose." -anyone0

4. Vendors for Transmogs, Mounts, and post-Wotlk items

"One effective solution would be to add mounts, non combat pets and cosmetic items from other expansions and make them very expensive. Also possibly add a black market like in retail and make players bid on the items so they spend a lot.
I think this would take a moderate amount of work and they would probably have to release a new client with the added items that everyone would have to download. So it wouldn't be a too easy solution but it should be effective to prevent prices from going up.

Alternative method would be to just add a npc that sells items for transmog from previous expansions, for high prices. This wouldn't require changing the game client I think and would be effective at draining gold from the players.

Also selling gold for coins in the trading section is very effective for using up gold. What I said above would make it slightly more effective as there would be more ways to spend the bough gold to vendors.
A lot of the bough gold is eventually used to buy riding training, dual spec, learn abilities or anything else like that so it leaves the players hands." -xandor

Essentially getting rid of gold via vendor will deflate currency. This is also a better alternative than a tax because people have worked for their gold, and won't feel stolen from.

5. 50% Vendor Price Squish *CURRENT MAXIMUM EFFICIENCY*

A major problem addressed is that there's no way to completely avoid people trying to hedge their bets against any gold squish. It's only in each persons self-interest to try to avoid as much loss as possible. However, the point of the discussion is to be completely fair about this gold squish. Personally I would rather have people try to avoid the gold split, while not punishing newer players and alt characters as hard. However, another method could be implemented alongside the original idea.

This is essentially solving the variable to fixed price issue apparent. From the perspective of a new player or alt character, and even early level 80s (even some mid level 80s use vendors), the gold value is not just represented by auction house prices, and also adjusted according to vendor prices. That means value is measured by both fixed prices and variable prices. Essentially, players hold value according to both vendor goods and auctioned goods.

The fix here would be alongside the the original 50% gold squish. It would be to also reduce vendor prices by 50% so that the value of gold for those earlier players stays consistent. In fact, this solves the original goal of considering all sources of economic value. Both fixed and variable rate reductions will contribute to deflation, while simultaneously fair for all players.


LONG-RUN THEORIES

1. Obsolete Vendor Theory

For one, this is based on Marx's theory of value as labor, combining Chicago styled distribution theory. It largely will not contract Gold supply, but will contract player-based economy value of Gold, rather than player-vendor-based economy. It is also the long-run method, which is why many seem to disagree with it. The purpose to make the economy function like the real world.

Essentially, make everything from a vendor cost 1 copper or just significantly less for higher deflation. Essentially the more things cost by vendors, the more deflation occurs, however the price of Gold is then based on variable and fixed rates unnatural to standard working economies in the real world. If vendor goods don't cost anything but 1 copper, the price of Gold will be based solely off of labor, marginal utility, ie farming capital by profession, creation, or finding.

Reducing the amount of Gold available will definitely deflate the currency. However, much of that gold was still working for according to the marginal inflated utility of that gold. That's quite literally stealing if you consider value by the means of labor. But more importantly, the reduction of Gold will not entirely deflate the currency. You will have to deflate it again eventually when Gold is being distributed at a higher rate again, because the demand for gold will actually not decrease due to demand still partially being based on vendor goods.

This also entails that many methods above like transmog, new items, etc are obsolete, but only given that they are implemented as described. There can be other methods to obtaining these new items, through labor and then potentially sold on the auction house. The price will then be determined strictly by the market, rather than a vendor. The prices are variable, but the value can also circulate.

More simply, making the economy run like the real world economy, where value isn't lost, and all value is circulated, the economy can be easier to manage and deflate in the long-run.

CONCLUSION

So far it looks SHORT RUN #5 would be the most pareto efficient method.

Thanks to Xandor and anyone0 contributing ideas and research.

Also, much of economic theories discussed here were based on the writings and research by many economists: Ludwig von Mises, Adam Smith, Milton Friedman, Karl Marx, John Maynard Keynes, Vilfredo Pareto, and more. If anyone desire the works used in this research, please DM me, or if I get enough requests I will make a work cited.

[Anyone0]

Changing vendor item prices would only affect new players. I don't remember spending any substantial amount of gold on vendor items lately. Gold from auctions is mostly spent on other auctions, not vendor items. And it doesn't make sense for all bags to cost 1 copper. That would make crafted bags useless. Making everything free and making gold useless is also not a solution.

With reducing the amount of gold available do you mean what Warmane is already planning to do next week? If so, that only reduces the number visually, while actually causing inflation. If gold rates are not changed, it only makes the gold obtained before (or the work done to obtain it) less valuable. But that will only affect players with low amount of gold, who are not able to profit from the change or avoid it. If gold rates and vendor prices are also reduced, that only reduces the number visually while not actually changing anything. If you want actual deflation, you would have to lower gold rates and vendor prices, without reducing the amount of gold that players already have. But doing so continually would only make players keep their gold instead of spending it because it becomes more valuable.

What is actually needed is something to spend the gold on for players who have obtained large amounts of it. On Molten there used to be lottery and gold was one of the methods to obtain tickets. But apparently they don't want to make anything similar again because it would let gold buyers use it.

Second best option is not doing anything at all. There is a slow and steady inflation happening naturally, which incentivizes spending gold instead of keeping it without causing chaos. Prices are slowly increasing but that doesn't really affect anything til value of items gets closer to the gold limit of 214k, which is very far for items that players regularly buy.

[FRESHShaZaM7]

Whether or not it's new players or alts, from spells to mounts, the amount of Gold spent there could actually be distributing around the economy resulting in growth. When vendors exist , the Gold is completely dropped from the economy, thus value is lost. Gold is a means to only represent value, and when you expel value from an economy, it deteriorates, which is the sole source of the inflation problem. The problem isn't particularly inflation of currency, because vendors do actually deflate currency, it is the inflation of value.

[Anyone0]

Inflation of item value comes naturally with inflation of currency. And as I said in last paragraph of my previous post (which I added later), that alone doesn't really affect anything. If the goal is to slow down inflation of item value, more gold has to be taken away by vendors or other means, because there is a steady flow of new gold from quest rewards and mob drops, which keeps increasing the total amount of gold. But what Warmane is doing seems to be to incentivize players with large amounts of gold to spend it. Which could be best achieved by giving them something to spend it on.

[Fullthrone]

I agree that if players got something to spend their gold on it would fix the situation somewhat. Blizzard gave the option for players to buy game time and other stuff with gold. Making account services payable with gold might be a good start.

[Anyone0]

If your account is premium, you can already use trading on website to sell your gold for coins. That's very similar to what Blizzard has but it doesn't actually take the gold out of the economy, it just passes it to another player. But it might still be good for economy. If the target is players with high amount of gold, they often don't really need coins anymore and they are often the ones setting item prices in auction house, so it doesn't solve that part.

[xandor]

Reducing cost of vendor items (and possibly training spells, riding skill etc) would have the opposite effect, it would increase prices since no gold leave the market.

They need to add more ways to make the gold leave the players hands because the less gold you have the less willing you are to pay too much for something.
One effective solution would be to add mounts, non combat pets and cosmetic items from other expansions and make them very expensive. Also possibly add a black market like in retail and make players bid on the items so they spend a lot.
I think this would take a moderate amount of work and they would probably have to release a new client with the added items that everyone would have to download. So it wouldn't be a too easy solution but it should be effective to prevent prices from going up.

Alternative method would be to just add a npc that sells items for transmog from previous expansions, for high prices. This wouldn't require changing the game client I think and would be effective at draining gold from the players.

Also selling gold for coins in the trading section is very effective for using up gold. What I said above would make it slightly more effective as there would be more ways to spend the bough gold to vendors.
A lot of the bough gold is eventually used to buy riding training, dual spec, learn abilities or anything else like that so it leaves the players hands.

[angrylol]

Wasn't there some "event" where spectral tiger and such were posted on AH by staff? Cool way to drain out some gold.

[FRESHShaZaM7]

Yes these are all good ideas. Included them in the first post. I'm also just making this into a compilation thread.

I have a current theory regarding the gold squish that could work too:


Part of the economy in a WoW server is actually based on vendor prices. They are fixed prices, as opposed to variable prices of the auction house. When you are created a gold squish on Gold at a flat rate, you are basing that flat rate according to the variable price standard. Thus, you need to establish a gold squish that accounts for flat and variable prices. This means the gold squish should be progressively increased by how much gold an entire account has so that those who are new players, who largely use vendors, aren't as affected.

Example: Three people just started playing on Warmane. One is entirely new to WotLK, another is new to Warmane but has played Wotlk, another is starting alt character. When each of these players' Gold totals are cut in half, each will have a different effect. The first player is hurt the most, because he has been saving for a flying mount strictly through quest funds. The second has an easier time than the first because he knows how to manipulate the AH and even farm for Gold easier. And the third has the biggest advantage because he can use gold through funds.

To even out the Gold squish, you can use this system (or with more brackets):

1-1000g p/acct = 0%
1000-5000g p/acct = 25%
5000g-10000 p/acct = 50%
10000-∞ p/acct = 75%

[Anyone0]

That won't work because I could send my gold to multiple different accounts to avoid getting the highest percentage or to avoid it completely. Also 75% gold squish is equal to sudden 300% inflation, which should not happen in a healthy economy. 50% is already pretty high, which is equal to 100% inflation.

[FRESHShaZaM7]

That won't work because I could send my gold to multiple different accounts to avoid getting the highest percentage or to avoid it completely. Also 75% gold squish is equal to sudden 300% inflation, which should not happen in a healthy economy. 50% is already pretty high, which is equal to 100% inflation.

That's the whole point of the brackets. If you send the gold to another account, the program should detect that much gold is on that account, thus still "taxing" it.

The only ways to hedge the squish are:
a. storing your gold in goods (never guaranteed)
b. Your gold total/1000=b*. Where b* is the number of accounts to create to distribute the gold.

And if you make the squish brackets more like:

1-1000g p/acct = 10%
1000-5000g p/acct = 20%
5000g-10000 p/acct = 35%
10000-∞ p/acct = 50%

It could work better, avoiding your concern for percentages. And it takes a lot of time for people to create b* number of accounts to store the gold. I do not think many people would go that far. At most they would have two accounts and have their gold squished at the 20% rate. Instead of a 35% and 10% or so.

Plus, if Warmane doesn't announce the day or time it will initiate the squish, most people won't even try.

[Anyone0]

Those percentages look more reasonable and would be harder to manipulate. I could still send some of my gold to different accounts to lose less gold but it wouldn't have that high impact when percentages are closer to each other.

a. storing your gold in goods (never guaranteed)

Chances are better with high value vendor items, after waiting a few months for everyone else to sell theirs at lower prices. It would not be worth it if gold squish was lower - around 25% max. Then it also wouldn't cause chaos before it happens. But it also wouldn't force players to spend that much of their gold, which seems to be the goal.

3. Lottery System [Proposed by anyone0]

That's not really my idea. Many people have suggested bringing it back but seems like Warmane doesn't want to. I am not sure if lottery is the right solution but something that would allow players to spend high amounts of gold would be useful. On retail, since the beginning of Legion, there is The Mad Merchant, which seems to fulfill that purpose.

[FRESHShaZaM7]

Those percentages look more reasonable and would be harder to manipulate. I could still send some of my gold to different accounts to lose less gold but it wouldn't have that high impact when percentages are closer to each other.



Chances are better with high value vendor items, after waiting a few months for everyone else to sell theirs at lower prices. It would not be worth it if gold squish was lower - around 25% max. Then it also wouldn't cause chaos before it happens. But it also wouldn't force players to spend that much of their gold, which seems to be the goal.




That's not really my idea. Many people have suggested bringing it back but seems like Warmane doesn't want to. I am not sure if lottery is the right solution but something that would allow players to spend high amounts of gold would be useful. On retail, since the beginning of Legion, there is The Mad Merchant, which seems to fulfill that purpose.

There would probably be some way to manipulate the code into just squishing everyone different percentages, so it's just 1% at a starting value and capping at 50% at a certain value. Hypothetically speaking let's say you have 2000g you would be squished 27% then at 2050g you would be squished at 27.05 and so forth.

It could mask the effects better, and would be even harder for people to calculate where they should be storing their money.

That's if the progressive squish is chosen over the negative gold squish, if you have read about that one. Essentially just giving everyone 1000g and then taxing the rest at 50%.

Also, do you want me to remove your name? Most of these ideas are citing multiple people to begin with, so I felt it was fine to credit those who bring up the ideas.

[Anyone0]

There would probably be some way to manipulate the code into just squishing everyone different percentages, so it's just 1% at a starting value and capping at 50% at a certain value. Hypothetically speaking let's say you have 2000g you would be squished 27% then at 2050g you would be squished at 27.05 and so forth.

That could work but 50% squish still seems too high since it incentivizes people to look for workarounds.

That's if the progressive squish is chosen over the negative gold squish, if you have read about that one. Essentially just giving everyone 1000g and then taxing the rest at 50%.

Allowing some amount to have 0% squish would just create more chances to abuse something. Simply having 10% minimum seems like a better solution. In real life such systems work better since a person can only use it once. Here you can use it with multiple accounts.

Also, do you want me to remove your name? Most of these ideas are citing multiple people to begin with, so I felt it was fine to credit those who bring up the ideas.

I guess it's fine. I just wanted to point out that it's not really my idea and that we could use something like that, not exactly the lottery if Warmane doesn't want that. But I guess that's closer to what Xandor suggested.

[xandor]

I have 15 accounts. So with rates like that I could send 4999g to each account and then keep 74985g at a 20% rate while someone else that has 5000g would suffer a 50% gold squish.
If it would detect if someone mail from 1 account to another to link the accounts, then it would also have to track face to face trade. Then if you trade with another player in face to face trade or send gold to a friend then the system would fail and both of you would end up getting punished with a higher squish percentage. Could also sell items on ah to your own characters on another account, would lose 5% in ah cut but reducing loss from 50% to 25% would still be big.

There is already ways to avoid losing any gold from the squish (no matter how much gold the player has, they can reduce the loss to 0-10%). The ones that are going to lose gold from the squish is the people that don't know it happens or haven't played in a while or doesn't think about how to save their gold.

All the newcomers can just buy trade materials for all their gold and then resell it after squish. Same thing for those that have quite small amount of gold they don't want to lose.