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