Econ Chat: Inflation in EVE, Part II

In my last post (hardly worth linking to, since it’s the one below this…) I looked at inflation in EVE; specifically, how inflation as most people think of it (price inflation, eg the increase of the cost of goods, typically as a result of the increase in money supply) is not a noticeable factor in EVE. I wrapped up by writing a bit about monetary inflation (eg, the increase in the money supply, something that is undeniably happening), speculating as to whether it’s actually a problem or not (it needs to happen but if it happens too fast, it probably is), and then posing a question that must be answered before attempting to fix it. That question was, “Where (or with whom) does all the isk from these faucets end up?“

First off, why is that question important at all? The answer is that the means of curbing monetary inflation in EVE are to either reduce the faucets, increase the sinks, or both. And, while faucets are easy to identify and adjust as necessary, increasing the sinks in the right place would be a little harder. Thus, you follow the money.

So, first. Where does the money come from? The two definitive primary sources are bounties on rats and payouts from NPC buy orders; Incursions were a very large source once upon a time as well, but we’ve had no data on them since their nerf, so it’s hard to say. Other sources include insurance and mission rewards. Meanwhile, isk leaves the game through (in no particular order) clone expenses, NPC sell orders (especially skillbooks), market fees and taxes, PI fees, and a host of others.

And finally, who does the isk end up with? I’d venture to guess that a significant portion winds up with manufacturers and traders. Manufacturers pay miners for minerals, nullsec alliances for moon minerals, and people performing PI for planetary goods, but in all three cases, players pay it right back to them to buy ships and equipment. Traders grease the wheels in all directions.

Where, then, to make adjustments? A combo of sinks and faucets is best, so as to have a minimal impact in any given area. I’ve had a few ideas for each. Some are new, some are less so.

Faucets

• Axing bounties is a common proposal; however, care must be taken to ensure the income remains acceptable, and if not, it’s necessary to either look elsewhere or replace some of the lost income with non-faucet sources. Similar caveats apply to Incursion payouts (although it can definitely be argued that they’re too high in Highsec) and Wormhole “bluebooks” (which comprise the majority of the ‘NPC buy order’ faucet)
• A less common idea: Refactoring mission rewards. Currently, the isk paid out in the form of mission rewards and time bonuses is more or less cancelled out by the cost to redeem that LP in the LP store. Awarding more LP and less isk in L4 missions would get you double the effect, simultaneously reducing a faucet and increasing a sink.
• Nerf insurance. It’s a contentious proposal. Default insurance at the very least ought to go away, though – the very idea is absurd. I suspect that were default insurance to be eliminated, the insurance program overall would be much closer to isk-neutral.

Sinks

• The single largest place CCP could increase sinks is manufacturing fees. Manufacturing fees may as well be non-existent; 333 isk per hour, and while that can increase, even the slots in Jita 4-4 are a mere 807 isk per hour to use, plus the default 1000 isk install fee. A frigate costs just a third of a percent of its sale price to build. A cruiser costs just 0.03%, a Tier 2 battlecruiser just .006%, a Tier 2 battleship barely .003%. This translates, gamewide, into roughly a 12b isk per month sink at most (the day referenced in the tweet was a Sunday, so odds are good the job install rate was higher than the daily norm that day.) And yet, imagine if that were a flat rate, calculated as a percentage of the input value for the build job instead. Battleships and battlecruisers account for nearly half of all mineral consumption in EVE¹. Factor in Tech II items, and assume that the result is that BS and BC construction accounts for a quarter of that 12b isk per month sink, and then do the math on the resulting sink if the fee were instead a flat quarter of a percent on the value of the inputs. You get a sink of almost 190b isk per month, from just those ship classes. The fees for blueprint research could be similarly set, perhaps a fee per level based on the NPC value of the blueprint itself.
• Market fees and taxes are already substantial sink. Last January, for example, 1.75 trillion isk was spent on taxes, and just shy of 2 trillion isk on broker fees, of which we can assume 5% or so went to player owned stations. CCP has already increased market taxes in the past, bumping the base rate from 1% to 1.5%. I’d like to see them do it again, but this time to broker fees. This serves a twofold purpose – it increases the sink, but also increases the amount that goes to player owned stations. That’s a valuable goal, since the broker fees earned in those stations are valuable and potentially very large source of bottom up income for the station owners who foster enough development in their space to warrant a market. Although, that said, I’d like those station owners to be able to set that fee as well, just like they can all the other station fees.
• As mentioned above, replace mission rewards and time bonuses with LP for L4 missions. This has a magnified effect, in that you lower or eliminate a faucet and increase the sink. Suppose for example that 5% of the combined mission reward/time bonus faucet – around 300 billion per month, in other words – were replaced at a 500:1 rate with extra LP instead, adding an additional 600 million LP per month. The LP store charges to redeem LP, upwards of 1000 isk/LP for items such as implants, so that translates back into a 600 billion isk per month sink. The total net change to the balance, then, would be 900 billion isk a month. Tweak the percentage of the reward replaced with LP, and you tweak the size of the sink.

Just a few ideas. More exist. The other, often overlooked aspect of this discussion is, what is our target? The economics involved in determining that exactly are beyond me. However, monetary inflation is necessary to some degree. At the very least, the amount of isk in the game needs to, at a minimum, keep pace with the number of players. Otherwise, players are battling it out for a piece of the pie that is, relatively speaking, shrinking.

And now, rather abruptly, I’ve run out of words. I’m sure this post and the last will change nothing, and all the misconceptions and misunderstandings regarding inflation will continue. But hey, can’t change everything…

 

1: Awhile back I painstakingly collected every reference to ship production I could find and filled in the gaps with careful assumptions based on other information I could find. The result was an estimate of EVE-wide mineral consumption.