The gold standard: A WoW economics course proposal
by Michael Sacco 
Jan 10th 2009 at 4:30PM
If you're like me, you're ... well, you're probably incredibly handsome and charming. But you're also probably interested in WoW's economy, given that it's the biggest and most involved metagame in WoW and a fascinating microcosm of a free-market economy.I personally think that the how and why of WoW's economy is worth a deep look, and it appears there are a lot of people who agree with me--even some academics. It might even be worth just as much as any other book-learnin'.
At least, that's the basis of David Friedman's World of Warcraft economics course proposal. Friedman is an academic economist from San Jose, CA who's assembled this article as a think-tank for what a WoW economics course would entail if you had to fill it with a semester's worth of content. There's a lot of neat stuff in here, talking about relative prices of ore based on character level and rarity of ore and supply/demand, but he also asks for your input as to possible course material, which I'm sure you could gladly provide in the comments section of his page.
Good idea with sound academic basis, or another in the long list of high falootin' academia's attempts to justify playing WoW on the government's dime? WE REPORT. YOU DECIDE.
Filed under: Analysis / Opinion, Fan stuff, Economy, Making money
Reader Comments (Page 1 of 2)
Zeplar Jan 10th 2009 4:53PM
That same David Friedman used to live like 2 blocks away from me O_O
that's... weird to be reading about him here lol
Lux Jan 10th 2009 8:12PM
This David Friedman is the son of famed nobel laureate and economist Milton Friedman, and has written quite a few books himself. I wish I lived near him!
Corth Jan 10th 2009 4:54PM
I think its a valid Course of study seeing that other games has actual economists working on other MMOs to help the games economy and i think WoWs Economy actually mirrors our own as far as the ups and downs of prices and such.
Cam Jan 10th 2009 4:56PM
I think looking at how and why prices change from server to server would be a great thing to include.
stonehead Jan 10th 2009 5:01PM
Michael Sacco is by far the best blogger on this site. I wish I had a successful WoW blog so I could poach him.
On topic: This is a total attempt to play WoW professionally. I can't lie, I have spent many a work day blankly staring at my computer screen thinking of ways to support myself and my wife by playing WoW. The difference is he's an academic, which gives him license to whatever he wants all day, write a paper about it, and get not only paid, but notoriety.
I'm going back to school.
Michael Sacco Jan 10th 2009 5:20PM
To be fair, I do think it's a legitimate course of study, but putting that bit at the end was too fun to pass up.
ZuWhowho Jan 10th 2009 5:03PM
I'd be wondering how much one person can change the market, and how oftern this happerns.
Would be quite intresting, I remember when I farmed for my first mount skill, I got into the hobbie of farming large amounts of copper ore and selling them for less than other people were every day, I've wondered how much damage I did to the value of Copper and it's products, and what happerned after I moved on to bigger ores.
Eisengel Jan 11th 2009 1:57PM
In fact I changed the server-wide economy a while ago, back in vanilla WoW. I was an Alchemist and Major level potions were the highest. I had a few stacks of Superior potions that I had been bouncing off of the AH for a while. I was tired of them not selling, so I priced them a little higher than the competition, and then bid on all the competition with long durations. I did this for a week or two and the natural price started to rise. It was a win/win situation for me. If someone bought my potion, they were buying at a higher market price and I got the money. If somone sold a potion for less than that and I bid it up, I would get the potion to resell at a slight loss (the difference in my price vs their price), or if someone else outbid me, they would buy the potion for even more than the price I was charging, and I would get my cash back... but it enforced the higher price.
After a couple weeks a guildie began supplying me with mats for the Superior Health potions and I gave him a cut. I would normally post about 5 to 10 stacks of potions daily, and easily a page or two on Thursday through Saturday. I was making about 20 to 50 gold a day, on average for the week. I also started selling Major Healing potions as well as the herbs for both.
After a little whlie people started posting as many potions as they could at extremely low prices so I couldn't bid them all up. So... I Bid the minimum and let the market crash. I picked up scads of potions for very cheap, in many cases below half the current market price, and in some cases even less than the cost of the vial to make them. Then I let the market stabilize, and I started selling my huge oversupply for regular price.
Verit Jan 10th 2009 5:09PM
Wow has one of the dumbest economies I've ever seen in any game.
I'll ignore the fact that the vast majority of all manufactured goods in the game are worth far less than the materials used to create them (here's a pro tip from an enchanter: want an enchant? Don't want to pay the high price for mats? Find a scroll on AH - thats what I do and I'm an enchanter).
WoW has no contract or escrow system in place - which means if someone wants something I can't go out and farm it to meet that contract and collect the money - I have to rely on the heavily broken AH (see above). Mats sell for more than the items they make, but its still not worth the time and effort. Here's another pro tip - want tons of mats? Buy them and do daily quests for money/rep and items.
JALbert Jan 11th 2009 12:08PM
The vast majority of crafted goods worth less than the materials used to make them in your statement are perfectly logical econnomically.
They are common recipes, available to everyone who is skilling up the profession. The large number of crafters creates a situation very close to a perfectly competitive market, where people will make zero economic profit. The thing is, the skillup point is worth enough to the crafters to where they'll gladly price at a cash loss because their true payoff is in levelling the profession. With the exception of a couple of weapon enchants and twink enchants, there is nothing in most servers that will turn a profit in enchanting until the high end, where rare drops make the market an oligopoly. This is because the cost of enchanting is nearly always higher than the cost of just buying those better stats on a new piece of gear in the AH for the midlevel range. Once you hit max level and there isn't an abundance of gear upgrades, then the marginal cost of improving your stats shoots up. (See green/blue/purple gem pricing in BC before Brilliant Glass and badges for Epic Gems)
Daugr Jan 13th 2009 4:19AM
Not only would you have to include the study of why the same items price differently on different servers but does it matter if it's PVP, PVE, RP or PVPRP? Why does leather sell on one server and not on another? Other things to think about are obvious like small eggs going up as demand goes up but are there other seasonal items that don't match a holiday.
Something that I have wondered is if people are trying to make a business out of their professions or AH selling or if most people are just trying to unload what they precieve as junk. Is the later the reason why they don't search out what the prices are and just put what an item for much less than what it is worth/selling for?
As for this being a valid academic pursuit or a way to play WoW, does it matter? I mean how many researchers get grants to research things that interst them? How many professors teach a subject including their own interests and ideas behind them? Go for it and get it as a class. I think it is a valid subject into the ideas of how even with virtual money it still seems to mimic real life. Probably because it is real people but who knows maybe this is just how money works.
Dez Jan 10th 2009 5:45PM
WoW doesn't have what I'd call a free market. Many prices are dictated by what NPCs sell the items for (fex. the new motorbikes), which in turn is controlled by Blizzard. The massive presence of gold sellers is causing inflation, on top of what is already being created from ever-increasing quest reward money.
In short, the economy in WoW is a complete mess. You don't need a degree in economics to see what's happening here.
Nizari Jan 10th 2009 5:47PM
OMGWTFBBQ YOU MADE AN INNOCENT HUMORUS REFERENCE TO TEH FOX NEWS SLOGAN YOU MUST HAVE A HIDDEN RIGH WING BIAS YOU CNAT BE TRUSEDAFMKWEFAMFMKLMQLQ.
Michael Sacco Jan 10th 2009 6:11PM
What? No way, man! I'm fair and balanc--oh no! He's right! How will I ever recover from this?!
MonJoe Jan 10th 2009 5:48PM
WoW's economy is the shallowest compared to the rest of the MMOs because there is no major focus on crafting. Read this before you start admiring WoW's: http://swg.mrap.info/star_wars_galaxies_and_the_division_of_labor.pdf
ArchVile125 Jan 10th 2009 5:52PM
Really? It's that easy to just start a college course? Just like that?
Hmmm, seems like Mr. Friedman didn't think things through.
First of all, he's acting like he can just walk up, make a proposal, and see it available on the academic curriculum by the next semester. But life isn't that simple, and he sure wants it to be. These types of proposals (even if they had any chance at all) need to go through ENDLESS amounts of approvals through various committees, councils and boards, and then have to be recognized by the state education board as a valid course for school credit.
Okay, now lets be realistic. How much longer does everyone think WoW has left in it? Maybe another expansion pack? Two if we're really feeling like pushing it? The game is already over 5 years old now and as much as I love the game, my drive has waned and so has most everyone else's. Already people are starting to feel "ho-hum" about the same old grind present in WotLK and showing signs of WoW burnout, admitting that they still play WoW almost out of habit, but the joy just isn't there. My girlfriend made a good analogy. Say you ate Cheerios every morning and loved them. Then after a few years, you gave Honey Nut Cheerios a shot and said, 'Wow! a different type of Cheerios. Awesome." And then a couple of years later, you switch over to Apple Cinnamon Cheerios and though, "You know, this is good and different and all, but I'm kinda starting to want to try something other than Cheerios soon."
Blizzard knows their game has a half-life, which is why they were smart enough to have already started working on their next MMO. It was a really smart move on their part, because they knew that if WoW was going to lose it's appeal eventually, why let another company steal away their fanbase, when they can just transfer their fanbase over to one of their own new MMOs instead? It's actually pretty smart. In essence, they are trying to ensure that they are only competing with themselves and their own products.
Now get back on topic, lets say this guy's proposal had ANY chance of happening, doesn't he realize that by the time anything actually came of it, people would read the course curriculum and say to themselves, "World of WarCraft? That game is soooooo 2006. Who plays that old game anymore?"
Essentially, he's proposing a course that will cost lots of money to implement (in the middle of an economic crisis, to boot) and is guaranteed to become obsolete, perhaps even the moment it would be implemented.
I would have bought his argument more if it was say, a game economics course for a school like "The Art Institute," "Gnomon," or "Full Sail" where they have programs geared for Bachelors Degrees in Game Art and Development, but not as a general economics course at a University where games have no relation to anything. Even then, I would say that it would need to be a general game economics course, that maybe has a special portion that discusses the WoW economy. I've had a game development course that had a section discussing game economy, starting with board games (remember Monopoly has an economy system too), but it was only a piece of a bigger pie.
Don't get me wrong, if your focus is to become a game developer, then I think the study of game economies is important, in fact, should be required study. This guy's proposal is beyond that, and really seems more focused on his personal desire to see WoW integrated into more of his facets of real life.
And if Mr. Friedman reads these responses (and he may very well do so) I hope he considers some of these issues, because if that wasn't enough I would like to hear his explanation of how he plans to deal with another critical flaw in the WoW economy (and game economy in general). I have seen him discuss the economics in WoW in relation to the AH and supply and demand but he's completely forgetting about the generation and destruction of money in the game entirely. In a real world economy, the dollar, or legal tender, is circulated. How many transactions has a quarter, minted in 1976, been involved in, up to this point. In WoW, outside of a personal transaction, or the AH, where does it go? WoW's economy has too many black holes where the money is either created or destryed. In the real world, for example, we can't kill Kobolds and take their money. We have to find some way to earn it through work or trade. But in WoW, when a mob is killed, money is generated, in essence, "appears out of thin air", and of course, where does the money go when you buy a flying mount from an NPC, lets say? Nowhere. The money is destroyed. Lost in a black hole. The money in WoW is initially generated by random number generation. A real economy doesn't work this way. Compound this with the fact that a real economy fluctuates. I've never heard of a recession in an MMO economy. Only inflation. That's because when money is easily and randomly "generated" or "created" in WoW or any other MMO, there's little room for any type of recession. Sure, on the AH, a recent patch can drop the price of an items demand on the AH, but this doesn't affect the overall economy of the game, just the market for that particular item. Of course, in real life, if you are all keeping up with the economic issue, we should all be aware that the idea of simply generating and "injecting" money into an economy doesn't work so smoothly, and opens a huge can of worms.
My overall point is, a WoW economy is so vastly different from the mechanics of a real world economy that I can't see any way you could possibly argue that it can be taught as an alternative to, or equal credit to a real-world economy course. With all do respect Mr. Friedman, you really didn't think this idea through.
Amaxe Jan 10th 2009 6:01PM
That may be a wall of text, but it was well worth reading through. Some excellent points here
Michael Sacco Jan 10th 2009 6:03PM
I think you might not have thought this comment through, because the very beginning of Mr. Friedman's entry is littered with "suppose"s and "let's say"s.
eadipus Jan 10th 2009 6:32PM
I think the differences between a real world economy and the heavily managed WoW economy where sources of money can be created/destroyed/adjusted at will is what would make a course/paper/article interesting. Considering how so many aspects of our life are moving online, particularly media purchasing, I think its relevant to study how a managed economy can work and comparing it to less controlled systems (eve comes to mind). Virtual economies are becoming part of our lives and understanding them properly is making people a small amount of money at the moment (gold farming etc) but in the future its likely to become huge.
Just because its massively different to the system we use in the real world at the moment doesn't mean its not relevant to us. For example whats happening in Zimbabwe is unlikely to ever happen here (UK) but I'd still expect an economics student to study it.
ArchVile125 Jan 10th 2009 6:36PM
Sorry about the wall of text. I actually didn't realize that my response had gotten so long until after I had posted.
Also on a second reading, (after personally cringing at some of my typos and syntax - what can I say, I tend to rush these types of posts), I feel that maybe I came off as a little more combative in my response than was deserved. I still stand by my original points, but there tends to be a natural combative or defensive tone that I take on by default on WOWInsider, and perhaps it got the best of me.
And also on a second read, and from some points that were brought up to me by other posters, is that this is not necessarily a serious proposal with serious plans to be pitched as an actual college level course, but perhaps was more of a hypothetical idea or just one of those "wouldn't it be interesting?" types of ideas.
As i said, I still stand by my points, but I admit that I may have misunderstood the intentions of Mr. Friedman's blog article.