Market Discussions

Lets look at all the actions CCP is taking, and how it relates to inflation:

#1) Special ship skins for plex- increases PLEX demand, drives price up. Plex being the most common benchmark of inflation, ISK per plex will increase - although pretty minor and not really worth complaining about.

#2) Manufacturing cost increase - will temporarily increase prices as the manufacturing cost is passed on to the consumer, but acts as an ISK sink, so in the long run will help keep inflation down.

#3) Increase jump fuel costs by 50%, essentially driving the supply of jump fuel down by 33%. Less supply, same amount of currency = inflation
As JFs are the premier way of moving a lot of items, the cost of pretty much everything will increase accordingly.

Marginally/ indirectly, the effects we may see: large fleets to still move as often for strategic reasons, but smaller groups (which are looking to make profits on the high meta drops and such) to move less often. The result may be a slight decrease in deadspace/officer module supply... but I suspect a much bigger effect will be that if they don't move systems as often, they will be destroyed more often, driving up the cost of everything (increased ship destructon rate = higher prices)

#4) Changes to POS requirements/incentives- should lead to more POSs being anchored, will reduce the ISK sink effect of point 2, and supply vs demand for ice will drop, currency stays the same - effect: ISK sink reduced, less resources available for the same amount of currency = inflation

#5) Reprocessing changes: Lower mineral supply, less resources per unit currency = higher prices/inflation.
This is a straight up nerf to the salvaging profession. High sec carebears (as if people cared about them) will stop being a mineral faucet, and will become even more of an ISK faucet.
Normally, as inflation proceeds, the ISK/hour from looting a mission becomes more favorable relative to blitzing a mission. However, this recent change will result in a large decrease to the ISK/hour of salvaging: expect more mission blitzing with no salvaging to pour ISK out of the faucet, and less mineral supply. Inflation will thus proceed faster, but it may still be quite a while until it becomes worth the time to salvage again.


Lastly: such high inflation results in high plex prices, which will have the imediate effect of driving down the number of players online, although not income for CCP.
The number of paying players would initially be the same, the number of plexing players will decline.
However... a shrinking player base (paying or not) is not good for the long term health of the game.

Guess what time it is, time to define inflation again, the most wrongly used word in Economics.

Inflation has only one meaning, an increase in the supply of money. That's it. The bastardized common usage relates to a general increase in prices caused by ... an increase in the supply of money.

This slight of hand allows all sorts of shenanigans from banks and governments. When a central bank increases credit, and all the prices of houses go up, but the price of gas does not, the central bank will claim they are not creating inflation, and most of the rubes fall for it.

Now on to this stuff ...

#1) This is not inflation. This is a change in the utility of PLEX and results in an increased demand for PLEX. The interesting head spinner is, add an increase in demand for PLEX in an environment of an increasing money supply and the price of PLEX has no where to go but up. *That* is the inflationary part.

#2) The value to the buyer is what determines price, not the costs to the producer. And yes, this is a new sink so should reduce the growth of the money supply, but it is still going to inflate.

#3) No, CCP is not changing the cost of jump fuel, they are changing the usage.
"Less supply, same amount of currency = inflation" Wrong. The price might go up, but it is not due to inflation. How much the price could go up can be attributed to inflation however.

#4) If more people anchor a POS to do production, then the demand for ice products is going to go up. This will put upward pressure on ice prices, which in turn will encourage more people to mine ice. When they are out miming ice, they are not shooting rats. When they are not shooting rats, they are not producing ISK.

#5) When rats stop dropping minerals, the price of minerals will go up, this will encourage some people to stop shooting rats and instead go shoot rocks. When they are shooting rocks, they are not producing ISK.

It may seem contradictory, that to reduce inflation, CCP must let prices rise by increasing demand (ice) and reduce supply (minerals). As those other prices rise, the activity that produces those resources becomes more attractive relative to shooting rats.

The long term solutions to Eve's inflation problem are, divisions of labor and specialization. ISK production should come from one activity only, and that activity should produce only ISK and nothing else.

Reexamine your points, with a proper definition of inflation and a full accounting of opportunity cost as it relates to player time, and I think you will find these changes are a good thing.

If you can, go watch the Economics presentation from Fanfest.

Adunh Slavy is actually quite accurate in his posts.

Inflation is an "all in one, jack of all the trades" controversial term that in RL lingo is usually associated with goods prices increase due to a warm economy (others also introduce additional concepts like: "monetary inflation and others). I'd leave it at this. Talking about inflation to describe EvE's goods prices increase is misleading. Prices may perfectly rise a lot without any inflation, all it takes is some change in the demand - offer balance even with no ISK depreciation.

In general - as I have also posted on my blog and in these forums, the next expansion is not "just" about changing industry but is also an ultra-massive ISK sink introduced to counter the endless smart ways EvE pilots avoid sinking the faucets they farm.

Shall prices rise? Some will. Is it inflation? Not really. It will be based on artificial or real scarcity of / competition for resources (slots are a "resource" too). In the beginning prices will spike because EvE got a massive oversupply of ISK therefore scarcity will be rewarded with higher prices. As ISK will get "eaten" over the next years, we'll get to a point where this reward will hit diminishing returns quicker and quicker... and then prices will drop, will overshoot (this is how I and many RL traders earn money: waiting for "overshoots", milking them and then setting trades in the new direction) and later will stabilize.

It'll take years and years. But hey, EvE is possibly one of the two MMOs that can afford to take years to stabilize.

Quite a few do. There are many people that refuse to fall for such lies, mainly anarchists, libertarians, reforming monetarists, the entire Austrian School. I'll let you go hunt for names, and you can play the Saul Alinsky polarization game to your own content.

The original use of the word as it relates to economics, was as I use it, an increase in the money supply. This is how central banks and economists used the term for many many years.

The term became more distorted as Brenton Woods frayed and again after the closing of the Gold Window in 1971. Central banks and Governments, and the economists that were being paid by them, had, and continue to have, every incentive to blame upward price changes on anything other than what they are doing, printing more money and expanding credit, putting you in debt to them.

Rubes and others, assume that bank and government paid economists must surely know what they are talking about at all times, so accepted the distortion of the term, and continue to do so.

Examine the common usage, more properly termed "price inflation", and examine how it is commonly measured, a collection, a "basket of goods", its price change over time. Why would anyone possibly need a basket of goods to measure inflation if it were not a monetary phenomena?

If you can answer this question, then you are more than welcome to ignorantly go about your business.

isk sinks will cause deflation.

next.

I think OP missed the economy talk stream from Fanfest.

The economy has been within the target inflation / deflation rate of +-1%, and the economy has in fact been experiencing mild deflation for the past year.

If anything, the economy has been stagnant. Deflation would be a serious real-life concern for economists, but the upcoming summer expansion is expected to shake things up.

The new industry system has many variables available for tweaking should that be necessary.

CCP definitely isn't driving the bus blindfolded.

The real takeaway from the econ presentation at fanfest was (to deliver the abridged version) "PLEX are a speculation bubble".

If I sell tritanium or whatever on the market I will lower the price of tritanium or whatever. Thus selling stuff will reduce inflation. Now there may be isk faucets going on at the same time but people who are mining or doing whatever and then selling stuff on the market are offsetting people who use isk faucets. Ergo if they all balance then there is no inflation, and there is no evidence of inflation, hence it looks like they balance out. You can substitute pyerite for trit and so on.

So inflation is not just a monetary phenomenon in a vacuum. You really should read that book. I did. Recently. There is an assumption that the author states, and I can quote it for you if you would like. God knows you like to drop names. You should not assume that I cannot do likewise.

The quotation "inflation is always and everywhere a monetary phenomenon" is from Milton Friedman's Free to Choose. Read that chapter on inflation in full. There are a couple paragraphs after this quote that you should read specifically. Then you will see where you had gone wrong. A small price to pay rather than living the rest of your life misinformed. I do not care enough to prove you wrong to type these paragraphs up over here. But if you do then we can discuss them here.