The In-game Economics of Ultima Online

1. The In-game Economics of Ultima Online Description and Analysis Zachary Booth Simpson www.mine-control.com/zack CGDC 2000

2. Who am I? • Previously Director of Technology at Origin, Titanic Entertainment • I was not a UO team member • I am not an economist • Consultant for Origin in 1998-1999, studied UO economics

3. Acknowledgments • Members of the UO team, especially: • Raph Koster • Rich Vogel • Starr Long • Damion Schubert • Economic consultants: • Andrew Stivers (U. Texas) • Timothy O’Neill Dang (U. Arizona) • cregtog8@barriodevo.org • Prof. James Galbraith (U. Texas)

4. What is this talk? • Brief description of the economy • An analysis of how the economy evolved • Harp on things that went wrong • Not enough time to get into solutions, sorry! • An occasional interlude for Economics 101

5. What this talk is NOT • Not a “how-much-is-it-going-to-cost-me-to-build-my-UO-clone talk” • Not a debate over how fun UO is • Although that is ultimately more important • Not about UO characters sold on eBay • No matter how much Mary Margaret begs! :)

6. What is “economics”? • Not the study of money; not finance. • A set of tools developed to analyze how people behave when allowed to trade. • people behave however that damn well please no matter what the math says. • “Tools are not bricks”

7. Right tool? • Be careful: people don’t necessarily behave the same in a game, some tools may not apply. • I highly encourage you read up! • Politicized topic = bias & bad science • I like the economists who still treat the subject as psychology and not as calculus. • J.K.Galbraith and P.Krugman are both very readable.

8. What is an economy? • Any system that involves people exchanging goods and services • Does not imply currency or prices • Ideal economy is meeting everyone’s needs • Even the one’s they didn’t know they had. • Ergo: hard to say if an economic state is “good”. • Maybe it’s easier to say if it is bad...

9. Bad Economy Symptoms Part I • Minimal person-to-person interaction & dependence, especially between advanced player and newbies. • Advanced player give newbies high-powered items because they have more than they need. • Advanced players discard items that a newbie would love because it isn’t worth their time to find someone to give it to.

10. Bad Economy Symptoms Part II • Supply is unpredictable • Players hoard items, reducing availability • They litter the world with unwanted junk • They lose interest in the game because there’s nothing left to acquire. • Prices fluctuate wildly or become inflationary • Demand is unpredictable • Players can’t find buyers for the items they’ve been encouraged to produce • Player manufacturers create unwanted junk

11. Bad Economy Symptoms Part III • “Tragedy of the commons” rules the public spaces • The principle that something that is a lot good for me and a little bit bad for everyone else will inevitably be exploited until it is all bad for everyone. • Classic example: grazing sheep in the town commons

12. Semantic Nit-picking • A “virtual economy” is the simulation of an economy. • UO is not a virtual economy; it is a real economy involving the exchange of virtual goods and services.

13. What virtual goods? A sample

14. Where do baby items come from? • Loot on creatures • Raw materials from mines • Extracted from automatically generated resources such as ore, wood, or wool from sheep • Player manufacturing • Applying skills with tools and raw materials generates finished goods such as weapons and armor • Non-player manufacturing • Shopkeepers produce many items that do not have player-production paths; e.g. reagents

15. Weaving Skill Rebus Courtesy of uo.stratics.com

16. Problem IOver-Production The Failure of the“Improve-through-doing” System

17. Practice Makes Perfect • Player skills improve through use • Unused skills degrade • Hard to become a jack-of-all-trades

18. Incentives To Produce • Market demand • “Hey Mr. Tailor, can you make me a shirt?” • Making now improves quality and price later • “Can’t talk, making shirts!” • The sheer fun of it • “I built a fort out of fur boots!” • Cheating with macros • “When I wake up tomorrow, my character will be a rocket-scientist!”

19. The Result: Oversupply • UO’s “practice makes perfect” rules create incentives to over-produce certain goods. • The market in basic items is saturated and thus prices are extraordinarily low. • Producers get upset at the low price but keep manufacturing anyway. • Like Texas Oil Producers and DRAM chip fabs • Tragedy of the commons

20. Oversupply: so what? • Unlike the real-world, more stuff is very bad: • Servers slow down • Backups get bigger and therefore less frequent • Black-holes

21. Econ 101: Shifted Supply Curves • Non-market incentives push the supply curve right. • Demand curve hasn’t changed so the price drops.

22. Problem IIBroke Shopkeepers The Failure of the NPC Shopkeepers

23. The Shopkeeper Failure • Shopkeepers intended to supply the un-manufacturable as well as solve transience • AI was a complicated analysis of market forces • Important: NPCs are part of a “virtual economy” that is attached to the “real” economy. • It’s really weird

24. To subsidize or not? • NPC shopkeepers subsidize production to encourage character development • Like Dad at a lemonade stand • Shopkeeper cash-flow AI reasonably refused to buy junk already in over-supply • Players report this as a bug -- expect a free ride • Used to single player games • Not everyone wants to be an entrepreneur

25. But, before we punt NPCs... • The shopkeepers have no cash, therefore give them something to sell that players want • Extra advantage of removing gold from hyper-inflated economy due to counterfeiting • Difficult to invent lots of new things • “New improved BLUE armor, a lot like silver armor, but its blue!” • Players upset by unfair competition • “Hey, how come the NPCs get to sell blue armor but I don’t? This sucks!”

26. OK, punt. • Designers gave-in, eliminated shopkeeper profit-motive AI • Shopkeepers now subsidize up to X units of junk per hour. • Inflating the gold supply, but at least newbie characters are developing.

27. Black Markets • Reagents most valuable commodity distributed exclusively by NPC shopkeepers • Speculators with bots and “Mafia” cornered the market in reagents and inflated the price • Amused a minority, outraged the majority • Eventually fixed itself as everyone got into it • No barrier to entry

28. Econ 101. Soviet Retail • Soviet Union had non-market incentives to produce • Soviet stores filled with useless items that no one wanted • Shortages and huge lines formed for the what people did want because trading was inefficient / illegal • Subsidies and rationing common • Black markets

29. Problem IIIInflationary Gold,Depleted Resources The Failure of the Closed Economy.A Study of Macroeconomics.

30. UO Resource Flow • All items are made of resources • metal,fur, meat, gold, magic, etc. • Resources flow from item to item and are conserved

31. Original UO Resource Flow • Each “world” initialized with X meat, Y fur, Z gold, etc. in a “bank” • Resources flow into world items from bank • Items decay, break, sold, etc. flowing out of world back into bank • Resources are conserved and thus no inflation!

32. Original Flow

33. Hoarding Is Rampant • People hoard items like pack-rats • “Someday I’ll need this” • Decoration • Laziness • Speculation • Mementos • Status symbols • Achievement • Tragedy of commons making server run slow • Players don’t even realize it

34. What’s wrong with this picture? • Drains all suck • Botched manufacturing is insignificant • Players hate decay especially when not online • Players hate excessive degradation • Selling to NPCs is great, but it involves printing gold! • All resources eventually end up in inventory and thus...

35. No dragons to kill! • In closed economy: no outputs = no inputs. I.e. no dragons to kill! • Again: changing the rules midstream (taking things away) is politically unacceptable. • Give us orcs to kill or we’re going to riot!

36. Econ 101. Liquidity • Two equally important factors in price determination: Quantity and Liquidity • Liquidity is the measure of how willing people are to trade in something. • Even if there’s a lot of something, it doesn’t mean it will be cheap. • If no one will give up their Pokemon cards, they will still be expensive even if there’s millions of them.

37. Econ 101. Liquidity of Currency • Liquidity of currency matters too • Currency is just another kind of commodity • Inflation • If it is created in excess, it becomes worthless and inflation sets in, i.e. prices rise. • Deflation • When people hoard currency as savings, they make it more scarce and prices or production will fall • (Baby-sitter co-op analogy)

38. Let it rain! • The concept of closed economy was unsustainable without new drains • Lots of drains proposed, none were politically acceptable/effective in the short term • Taxes, Real-estate Maintenance Fees, Natural Disasters, Lotteries, Consumables, Indulgences, Recycle bins, Capital depreciation • To hell with it: disconnect the drain and pour in the resources • abandon the closed-economy; reduce player bitching

39. New Flow

40. So Now It’s Inflationary • The servers are filling up • The backups are getting bigger • Prices are rising • But at least there’s dragons to kill!

41. Problem IVCounterfeiting

42. Counterfeiting • Hacker’s Law: • Developers are out-manned by hackers; hackers have more time and great communication • Therefore, exploits will always be found faster than fixes can be made. • An obscure server fault allowed cloning of gold and reagents. • Fixed after a few days • “Wrecked the experiment”

43. Effects of Counterfeiting • People didn’t stop playing • Maybe the economy isn’t so important after all • Anything players wanted from NPCs, they could have. • They didn’t really want anything, except reagents which were also counterfeited.

44. Effects of Counterfeiting (cont.) • The worlds where there was early counterfeiting have a higher “standard of living” • Players don’t seem to care, they want challenges and relative wealth • Not like the real world at all! • People don’t move to Mexico because the US is too rich!

45. Lessons Learned A Massively Abbreviated Summary

46. Lessons Learned Part I • Hoarding is rampant. • Failure of closed economy. • The economy must maintain liquidity; tying input flow rate to the output flow was a bad idea because hoarding froze the input making the game uninteresting. • Failure of closed economy.

47. Lessons Learned Part II • Over emphasis on the macro-economy and under emphasis on the micro-economy made setting prices on NPC goods difficult and inefficient • Failure of NPC Shopkeeper economy • Institutions and opportunities for player-to-player trade need to be thought out and provided but not overly designed • Failure of the NPC Shopkeeper economy

48. Lessons Learned Part III • Some design elements had unintended economic consequences. Economic motivations and incentives need to be considered on all design elements • E.g. vendors used as storage containers • Incentives to overproduce resulted in oversupply and devalued prices • Side-effect of improve-by-doing system

49. Lessons Learned Part IV • Players expect to make a profit for their labor if it is encouraged through game mechanics. • Side effect of the improve-by-doing system • The economy is not the game • Counterfeiting

50. Thanks for coming! Article reprinted in proceedings(with unreadable graphs) Original on www.mine-control.com/zack