The Economy As An MMO
It seems you can't go ten waking minutes these days without hearing someone talking about the awful state of the economy. Alas, now my blog is no exception. But as a gamer, it can get a little confusing to hear all about subprime mortgages and credit default swaps and stuff. So I figured I'd create an extremely loose analogy in MMORPG terms.

This will probably only serve to add to the confusion and chaos - in which case, my job here has been done.

The Game
So let's say there's an MMORPG out there that has been all the rage. It has been praised for its incredibly complex (yet cool) economy, which includes the ability to loan money to other players with a built-in system for charging players monthly payments with interest. As cool as this is, there's an even more cool and powerful guild system. You can even have subguilds-within-guilds, which has allowed for major "uberguilds" to pretty much take over the world, fashioning themselves as nations and collecting regular dues from all their members.

Guilds in this game gain bonuses for specialization amongst its members, so you have specialist sub-guilds that organize along the lines of crafting guilds and financial guilds. The financial guilds have grown very powerful lately, and a few big ones effectively merged in a bunch of smaller ones simply because they were so successful and so powerful - everybody wants to be with the winners.

This game also has an extremely deep and far-reaching end-game that doesn't require constant raiding - if you have the best possible gear (and really cool - and expensive - mounts). This stuff requires constant maintenance in the form of monthly gold payments, but at really high levels it is no problem keeping up. When you are killing dragons instead of giant rats, gold comes easy.

Finally, like Ultima Online, the game lets you buy land and build on it. Not only is owning a headquarters required for all the guilds, but having a place to call "home" - whether rented from another player or owned outright - greatly increases your character's stats. The bigger the home, the more powerful your character. However, in-game houses and land also cost a regular monthly maintenance fee proportional to their benefits.

The Situation
In an effort to recruit more members (and make sure their members are more l33t with higher dues-paying potential), the uberguilds have been working in conjunction with the financial guilds to help members get their own houses, and to twink them in higher-level gear which they normally couldn't afford or pay the maintenance costs for. This helps power-level new characters so they progress quickly to higher levels where they can kill dragons instead of giant rats - and thus easily afford equipment and house maintenance AND the loan payments.

So even characters still in single-digit levels are getting offered gear suited for level 50s (no problem, since this game goes beyond level 200), and houses which were originally intended to be barely affordable by characters level 70 or above. The financial guilds work with the uberguilds to loan newbie characters the money and equipment that they need, since they both benefit. The uberguilds get more money from the dues that higher-level characters can pay from dragon-killing rather than rat-killing, and the financial guilds get constant loan payments - which they in turn use to finance the absolute BEST gear and houses they can get in the game.

For a while time, it works fabulously well. Characters are advancing quickly through levels, hitting level 100 in under a year (the designers intended it to take at least 3 years to hit level 100). Since land and houses are a limited resource, prices keep climbing through the roof with every rat-killing newbie expecting to get into a house. The supply of gold seems nearly infinite, as is high-level equipment. The uberguilds are getting fat, regular dues, and the financial guilds are making money hand-over-fist with their loan payments.

The Problem Arises
The amount of money and high-level gear in the game doesn't seem right. Some of the gear comes from pretty rare drops on extremely high-level mobs. There should only be a few dozen instances of these items on the entire server, yet there are thousands. The programmers and designers do some digging, and find that there has been an incredible wave of duping of gold AND items by players.

The programmers implement a retroactive fix. All duped items - AND all duped gold - will slowly begin to expire. Not all at once - it's a slow process, starting with the most recently duped items and gradually "unwinding."

The problem is that most players don't even know whether or not their items (or their gold) was duped, as the item may have gone through three or four owners from the original duper. So they begin hunting around for replacements very quickly, just in case. But they can't even be sure their replacements are non-duped.

The Collapse
For twinked newbie players, the disaster comes swiftly. As their high-level twinked gear starts disappearing, they find their uberguild sponsors aren't offering free replacements. Suddenly equipped with nothing more than a newbie loincloth and rusty knife, they find every copper piece they earn being taken up by loan payments to the financial guilds. "Screw this!" they say. And they quit the game.

Suddenly, there are a bunch of properties left vacant in the game. The drop in demand drops housing prices all over the server. Players get mad because they are stuck paying maintenance and loans to the financials based on the original cost of their properties - and funds are pretty tight because they are frantically trying to get replacement gear for their dupes.

So a lot of them either sell off their property at a loss (and have no money left over to pay the uberguild dues), or just quit the game entirely.

The financial guilds, for their part, are no longer loaning money to people. Which really sucks because people are getting a little desperate for funds to "tide them over" so they can get replacement equipment that lets them fight dragons again. Everyone assumes the tighter loans are due to all the people who are quitting the game and no longer paying back their loans. But secretly, the financial guilds have a much bigger problem.

See, the financial guilds were the worst of the money-dupers. A lot of what they loaned out was "duped" gold. They never overdid it, because they feared this day would happen, and that the exploit would be turned off and the duped gold might go away. They'd hoped that by that time there'd be enough of a stream of legitimate gold coming back to their guild that it would not be noticed. After all, every duped gold coin was returning four legitimate gold coins every few months in payments. But as time had gone on, they'd gotten more greedy, duping more and more gold to increase their earning potential. When the dupe-purge came, they found themselves deeply "in debt" to the game, and the money wasn't coming back fast enough to keep their guild from getting disbanded.

At first, they thought they'd be okay, because they'd hedged their bets by buying "insurance" from other financial guilds called Gold Default Swaps. The insurance would be enough to cover any duped-gold losses. The problem is that the insurance sold to them was by other financial guilds who had duped gold problems of their own, and can't pay up all the insurance they'd promised.

So suddenly, all this duped gold goes away, AND the income from loans goes away, AND the insurance that was supposed to cover the losses also goes away. The financial guilds are about ready to quit playing.

The uberguilds try to step in, though they are also in a world of hurt because their own dues-collecting potential is getting clobbered. They loan a ton of gold to the biggest financial guilds, planning to increase the dues of all their members at some point in the future to compensate. But they realize that if they don't do something fast, this whole game that they have been the masters of is going to turn into a ghost town.

Unfortunately, the loaned money doesn't often go for more loans to the player-base - the financial guilds instead use it to buy up some of smaller financial guilds who never participated in duping. This helps keep the financial guilds from collapsing, but doesn't help the player-base, which is rapidly becoming armed with newbie loincloths and rusty daggers. The dragons are no longer being killed, because very few people have the necessary gear anymore. And everybody is afraid to buy new gear until the slow dupe-purge is complete.

And they are all royally pissed at the uberguilds and the financial guilds for causing the problem in the first place - even though everybody enjoyed it when the gear and loot were plentiful.

The End?
And so the MMO collapses under its own weight.

The analogy is far from perfect. I kinda look at the duped money thing as leveraging. You can look at the duped items as a combination of jobs and investments. And the Gold Default Swaps are an incredibly simplified version of Credit Default Swaps. I left out the part about all the bad loans being re-packaged and sold as good, income-generating loans to unsuspecting investors.

And in real life, you don't just get to quit when the game ceases to be fun.

Labels: Politics

- posted by The Rampant Coyote @ 8:23 AM (Permalink)