295: The Economics of Meat

Adam Greenbrier

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Nov 10, 2010
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The Economics of Meat

Economics lessons and meat don't usually get mentioned in the same breath, unless you're in the Kingdom of Loathing and a meat vortex has just made you rich.

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Juion

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Nov 7, 2006
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It's important to note that while Kingdom of Loathing was hyperinflated, the staff has been introducing tons of meat sinks since that day and now the economy is pretty much free of the bugmeat.

It's actually really interesting that they got rid of most of it without just removing it or resetting everything.
 

Baresark

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Dec 19, 2010
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Fascinating read. I hadn't considered looking at video game economics, but now that you mention it, it does provide a pretty good example of a strong commodity backed currency.

You won't learn much about trade deficits, for example, and if you're looking for insight into the mortgage-backed securities that brought the world economy to its knees in 2008, you'll have about as much luck as Lehman Brothers has money. You'll learn some about inflation and deflation but little about the programs governments use to prevent them or dampen their effects. Stocks? No. Bonds? No. Perhaps most noticeably, videogames in general lack any concept of savings or credit, two aspects of economics that everyone in modern society could stand to know more about.
I do find it funny that you think governments dampen or work to reduce inflation. I mean, it only makes sense to relieve, reduce, or even get rid of inflation. Some people actually think inflation is something that increases quality of life, which is completely false of course. Governments cause inflation, they create inflation. That is what the US has done with the Federal Reserve. It's what happened in Rome. And it is what happened in Greece only recently. Hyper inflation is what happened in the game you mentioned and Zimbabwe. All inflation reaches this point eventually, it's only a matter of when. The governments make promises that cannot be kept, then they make more money to cover those promises, and this of course is based off of credit. Which is fine if you're not handing it out all willy nilly. But all credit should be based off of savings.....

I could go on and on.

Great article, though your ideas in at least this one instance were backwards.
 

BonsaiK

Music Industry Corporate Whore
Nov 14, 2007
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An article on game economics and no mention of EVE Online? Damn, economics is pretty much the only thing that game gets more or less right.
 

teknoarcanist

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I'd be interested to play a very minimal, browser-based market game where players buy and sell resources, riding market highs and lows and trying to pull a profit from the margins. Think day-trading, at ten times the speed. Add in multipliers, conditional min/max buy/sell macros, etc...that could be pretty darn addictive for a certain class of gamer.
 

Daemascus

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Mar 6, 2010
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The Auction House in WoW is almost a game in and of its self. Making a killing at the Auction House is almost as fun as taking down a boss.
 

JMeganSnow

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Aug 27, 2008
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Nice article, but this is a spectacularly oversimplified (and erroneous) view of how supply and demand operates, even in video games. Very few people in a game evaluate up front how much it's going to cost them to get certain things for sale and then base their price off that. They go after certain things based on whether they evaluate the current price as being worth it. Prices generally fluctuate within a certain range because most people sell by slightly undercutting the lowest price currently on the AH, until the price goes down far enough that they'd rather hang onto what they got rather than sell at that price.

DDO recently underwent a similar inflation due to some (perhaps) poor planning with the recent Anniversary event. The devs gave us an event where you could farm components to make some really nice items. That's okay as far as it goes, but due to the way they structured the event you wound up with an ENORMOUS surplus of some of the ingredients. And those ingredients could be used to buy items that you could sell for a good amount of cash.

I only farmed enough to fully upgrade 3 of the nice items, and I made over a million plat just liquidating my leftovers. Many, many people farmed far more than I did and got a correspondingly larger amount of money. (Keep in mind that this is a game in which it can take a year of solid work to pull down your first million plat--it gets easier once you have a stock built, just like in real life, but building up that stock when you still need to buy stuff regularly is really, really difficult.)

So, a lot of people have been posting high-ticket items on the AH for really inflated prices as a result. (The low-ticket stuff has not been affected one bit.) Here's the interesting thing though--for the most part, things aren't *selling* at the newly-inflated prices. There's been no rush, because most people who've been playing DDO for a while have a really solid underlying grasp of what an appropriate price is for those high-ticket items--and they exist in *theoretically unlimited quantities* just like everything else in the game. There's no limit to how many large dragon scales can come into existence, no ultimate scarcity.

So, instead of hyperinflation, the situation we have in DDO is actually *wealth creation*, albeit not the way it generally works in real life. (In real life, advances in production of goods/services have to precede increased money, because there IS real scarcity. In DDO we got a sudden influx of investment funds pulled literally out of the air, a feat governments are constantly attempting to accomplish and always failing at because, huh, REAL LIFE IS NOT A VIDEO GAME and tax money doesn't fall from the sky.)

In real life, wealth creation is a system that few people understand and is what leads to many economic misconceptions, like the idea that machines and less labor-intensive methods of production put people out of work, which is precisely the opposite of the truth--improvements in production are what ultimately allow for *more people* to be employed in easier jobs and get more out of the time they spend working, which they can then spend on luxuries they could not dream of prior to the process improvements.

Basically, you're doing what most armchair economists do, and ignoring the great and interesting complexity involved in these processes. It's great to explain things to "laymen", but don't dumb them down. Otherwise you wind up with people fearing wealth creation because they think it will lead to inflation, which was actually a big problem among academics and led to John Maynard Keynes's horribly incorrect fears about "overproduction" and the need for protection of markets and other nonsense.
 

garion333

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Apr 14, 2010
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What happened in Diablo II was similar to what happened in a lot of locales during the heavy part of the latest economic crisis. Local communities started bartering with their own goods and services because money was such an issue. In some placed they even created local currency, some which Douglas Rushkoff [http://rushkoff.com/] has been calling for a long time. Those local currencies didn't really stick, as far as I know. The almighty dollar and the Federal Reserve perhaps proved too terrible.

/ramble
 

metalarmsglitch

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Feb 2, 2011
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"Economics is a science that's often shrouded in jargon and politics."

As an economist this saddens me. It's sad but true.

@JMeganSnow nice retort
 

CounterAttack

A Writer With Many Faces
Dec 25, 2008
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There's one part of the article that I don't quite understand.

Because there's so much more money in everyone's pockets, each piece of money, be it a stack of meat or a Zimbabwean dollar, is worth less than it was before.
This doesn't make sense to me, largely because I tried studying it at university and I didn't understand it there either. A dollar is still a dollar whether you have one or a million. They're valued the same in either case. Am I not correct?
 

Crazy_Bird

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Oct 21, 2009
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CounterAttack said:
This doesn't make sense to me, largely because I tried studying it at university and I didn't understand it there either. A dollar is still a dollar whether you have one or a million. They're valued the same in either case. Am I not correct?
You are right one dollar is still a dollar. This is called the nominal value.
What decreases is the real value which means that a dollar is still a dollar but you can buy less. So a dollar might be worth a pretzel before inflation hits but afterwards you can buy only half a pretzel for a dollar. So the value of the dollar stayed the same, but your purchasing power decreased because prices were/are rising.

I really liked this article as an accounting/finance major myself and economics is really a subject that is very important in daily life yet many people do not grasp fully or worse they believe they did and spread half-truths.
It might be interesting to note that regular inflation (about 2 % p.a. in industrialized nations) is mostly harmless. It is hyperinflation like in Zimbabwe which causes huge cost for the people and can downright destroy an economy.
 

Sylocat

Sci-Fi & Shakespeare
Nov 13, 2007
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This reminds me of that incident [http://www.google.com/url?sa=t&source=web&cd=1&ved=0CBQQFjAA&url=http%3A%2F%2Fterranova.blogs.com%2Fs14733099077021283.pdf&ei=-U5tTaOAJ4XegQeCxbmhAw&usg=AFQjCNH7db7GEiNj4x-BvsRVJlg_UL7LcA&sig2=sE1CMSKeVNYGPQsjLnGzFQ] where a viral outbreak in WoW let epidemiologists learn some amazing things about human behavior in times of pandemics, that the CCD's computer simulations were unable to predict because of the human factor.

All this makes me think of a possible sci-fi scenario where governments worried about financial and biological destabilization would set up an MMORPG and run fantasy simulation of various outbreaks and financial crises, and base security and policy decisions on the outcome of those simulations. And the outcomes would start being manipulated by learning-program-equipped NPCs who have developed sociopolitical agendas of their own...
 

CounterAttack

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Dec 25, 2008
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Crazy_Bird said:
CounterAttack said:
This doesn't make sense to me, largely because I tried studying it at university and I didn't understand it there either. A dollar is still a dollar whether you have one or a million. They're valued the same in either case. Am I not correct?
You are right one dollar is still a dollar. This is called the nominal value.
What decreases is the real value which means that a dollar is still a dollar but you can buy less. So a dollar might be worth a pretzel before inflation hits but afterwards you can buy only half a pretzel for a dollar. So the value of the dollar stayed the same, but your purchasing power decreased because prices were/are rising.
I don't get it. People have tried to explain this to me before...
 

Tulks

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Dec 30, 2010
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CounterAttack said:
Crazy_Bird said:
CounterAttack said:
This doesn't make sense to me, largely because I tried studying it at university and I didn't understand it there either. A dollar is still a dollar whether you have one or a million. They're valued the same in either case. Am I not correct?
You are right one dollar is still a dollar. This is called the nominal value.
What decreases is the real value which means that a dollar is still a dollar but you can buy less. So a dollar might be worth a pretzel before inflation hits but afterwards you can buy only half a pretzel for a dollar. So the value of the dollar stayed the same, but your purchasing power decreased because prices were/are rising.
I don't get it. People have tried to explain this to me before...
Instead of looking at it in terms of increase over time, consider changing location.

Say you have a $12/hr job, and pay $3 a beer in your local boozer. One hour of work is worth four beers for you. You then go to a bar in a wealthier part of town where people can afford to spend more, and discover the same beer selling for $6. One hour of work is now worth two beers to you.

As commodity price increased (as a function of location here, rather than time), the usefulness of your $12 decreased.

Same idea, except that we now live in a wealthier time than we did last century decade year month week.
 

CounterAttack

A Writer With Many Faces
Dec 25, 2008
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Tulks said:
Instead of looking at it in terms of increase over time, consider changing location.

Say you have a $12/hr job, and pay $3 a beer in your local boozer. One hour of work is worth four beers for you. You then go to a bar in a wealthier part of town where people can afford to spend more, and discover the same beer selling for $6. One hour of work is now worth two beers to you.

As commodity price increased (as a function of location here, rather than time), the usefulness of your $12 decreased.

Same idea, except that we now live in a wealthier time than we did last century decade year month week.
Nope. Still doesn't make sense.
 

vxicepickxv

Slayer of Bothan Spies
Sep 28, 2008
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CounterAttack said:
Tulks said:
Instead of looking at it in terms of increase over time, consider changing location.

Say you have a $12/hr job, and pay $3 a beer in your local boozer. One hour of work is worth four beers for you. You then go to a bar in a wealthier part of town where people can afford to spend more, and discover the same beer selling for $6. One hour of work is now worth two beers to you.

As commodity price increased (as a function of location here, rather than time), the usefulness of your $12 decreased.

Same idea, except that we now live in a wealthier time than we did last century decade year month week.
Nope. Still doesn't make sense.
It's kind of tricky to explain, but we'll go for something maybe a bit easier.

Okay, I noticed the magic icons, so we can use that as an example. We're going to go in the opposite direction with a reverse hyperinflation.

As you may know, there are around 10,000 Black Lotus cards ever printed. We'll say the average price is 1,500 dollars. The fact that there are so few that were printed makes it cost as much as it does. If somehow the number was raised to say, 50,000 of the card(and several were sold off), the price on the card would drop very rapidly. After the number was at 50,000 and another 50,000 showed up, the price would drop even lower.

Basically the more total money exists, the less the money is perceived to be worth.
 

CounterAttack

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Dec 25, 2008
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vxicepickxv said:
Basically the more total money exists, the less the money is perceived to be worth.
To me, that is illogical because an individual piece of money is hypothetically worth the same no matter how much you have. Whether you have $5 or $5000, a dollar is still a dollar and it is not made less so with the increase in quantity.
 

Bre2nan

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Nov 18, 2010
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CounterAttack said:
vxicepickxv said:
Basically the more total money exists, the less the money is perceived to be worth.
To me, that is illogical because an individual piece of money is hypothetically worth the same no matter how much you have. Whether you have $5 or $5000, a dollar is still a dollar and it is not made less so with the increase in quantity.
Seems like we're all beating around the bush here, with nominal and real values, and changes in commodity value vs. changes in place/time. vxicepickxv, you're almost there, but we need to go deeper.

Let's scale it all the way back to Supply and Demand 101.

Considering that there is more money flowing around in the economy, people on average have more of it. They will most likely buy more stuff, or buy things that they normally wouldn't buy. This doesn't always happen, but that's getting into a completely different subject.

Ok, considering that people are buying more stuff, aggregate demand is exceeding supply. Stores can't keep enough product on shelves because people are buying it up quicker than it can be replenished. The only way this imbalance can be equalized is to increase supply or decrease demand by raising prices. Increasing supply takes a whole lot of work, a lot of capital and a lot of money is required and it takes a while for results to happen. The quickest and easiest way to solve this problem is to raise prices.

Prices go up, and if they go up across the board in many different areas of the economy, than the average price for all goods goes up. This is inflation, the driving up of prices on average due to there being more money in the economy. The theories behind it are based on a lot of assumptions like the ones I've been making here, but it still happens.
 

CounterAttack

A Writer With Many Faces
Dec 25, 2008
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Bre2nan said:
-snip for length-
Um... I tried studying Economics in uni. That didn't go so well. More importantly, it's still not making much sense. To me, at least: this may seem as simple as one plus one to you guys.