Eorzean Economics: How Virtual Economies Manage Inflation

 Eorzean Economics: How Virtual Economies Manage Inflation

Quinn Gordon

Final Fantasy XIV has a robust in-game economy, yet one with a strange problem: every single person is effectively printing money all the time. Every monster slain, every quest completed, every piece of loot sold means more gil in your pocket. This poses a major threat to the economy, the same one we face in everyday life. That's right, it's that dreaded I-word: inflation. Since Final Fantasy XIV's launch in 2013, more and more players have been accumulating gil, the currency of Eorzea. Considering there's more than 36 million players all earning gil, how has the economy not succumbed to hyperinflation? There's a few reasons why, but it largely comes down to one thing: money sinks.

There's a few rules of Final Fantasy XIV's in-game market that control inflation. For one, players can buy items on other servers but can only sell on their home server, creating slightly different economies that still have trade between them. Players on the free trial can't sell items, so people can't create bot accounts that automatically obtain and sell items to inflate the economy. Most importantly, every single transaction has a 5% tax paid by the seller. It's not like there's a government that's funded with in-game money, so what's the point of this tax? It serves as a money sink, something that directly removes money from the economy to control the amount in circulation. 

Money sinks are essential to controlling inflation in an MMORPG. Since sources of money are often endless, there has to be a method of directly removing money from the economy. Buying consumables like potions and food, the market tax, non-refundable costs to buy a house, repairing gear--money sinks are everywhere. At the same time, if you have too many money sinks, players might feel like the game's more about paying fees than having fun. Market tax is a smart way to institute a money sink: it's a consistent percentage that applies to every sale, so players are used to it as just a fact of life. It's similar to a progressive tax, because the higher price of the item, the more tax you pay. Someone who never sells items won't pay any tax, though players would have a hard time making any gil without selling anything.

A similarly structured money sink is the cost to teleport between cities throughout the world. This fee increases with distance; you'll only pay 300 gil to go between two cities, but going to another continent or even another world could cost up to 1000 gil. Players unlock farther-off destinations as they progress through the story, so this fee actually takes more money from more established players who likely have more gil than a newer player (though the fee is still a small percentage of the player's wealth). In this way, it's similar to the real-world ability-to-pay principle. 

In addition to money sinks, the developers monitor the economy to ensure money is flowing as it's supposed to. In an interview, game director Naoki Yoshida explains that they keep tabs on how much money is flowing into and out of the economy per day, using this data to adjust how severe money sinks are. They also monitor individual items; Yoshida says "a remarkably high sales value for certain items would indicate to us that those items are not being made available enough." If an item is selling for much more than it was intended to, they increase the supply of it by raising the drop chance or lowering the amount of materials needed to craft it. Setting a sort of price ceiling like this keeps goods affordable, especially if they're sought-after like stat-raising food or gear for taking on high-level raids. 

In an MMO, economic management is incredibly important. Free-market purists may cry foul, but were it not for these systems, in-game economies may grow unfeasible altogether. Sometimes a game will fall victim to deflation, where there isn't enough money in the economy; in the case of the game New World, players started bartering instead of paying gold (why pay to repair your sword when you can buy a new one from another player?). To the contrary, Diablo 2 players used magic rings called Stones of Jordan as currency after gold became wildly inflated. It's all about balance: keeping inflation under control while still introducing money to the economy, intervening to keep the economy healthy but still allowing trade to flow freely. While game economies are much lower-stakes than real life--in the end, all that's at stake is fun--they are perfect demonstrations of economic principles and studies on how an economy should be run. 

Works Cited

Colbert, Isaiah. “New World’s Economy Is So Busted, Players Are Bartering For Items.” Kotaku, https://kotaku.com/new-worlds-economy-is-so-busted-players-are-bartering-1847904272. Accessed 17 May 2022.

MMO Economies - Hyperinflation, Reserve Currencies & You! - Extra Credits. www.youtube.com, https://www.youtube.com/watch?v=sumZLwFXJqE. Accessed 17 May 2022.

“Why Did Stones of Jordan (‘SoJ’s’) Become the ‘Currency’ at One Point in Diablo 2?” Arqade, https://gaming.stackexchange.com/questions/22688/why-did-stones-of-jordan-sojs-become-the-currency-at-one-point-in-diablo. Accessed 17 May 2022.

Wray, Chris. “Q&A with Naoki Yoshida on Final Fantasy, MMO Markets and Economies.” Wccftech, 7 Nov. 2020, https://wccftech.com/naoki-yoshida-on-mmo-markets-and-economies/.