Inflation Revisited

First, a preface: I haven’t written anything in a week or so. Real life exploded in a mildly dramatastic way. Welp.

Anyway, at the request of a topic submission, I’m going to revisit an old topic here, and tackle the topic with updated information. The question:

I was recently having The Inflation Discussion, and I’m afraid I didn’t do well presenting the usual counterarguments. Those I was arguing with Just Know that there has been a lot of inflation because, well… because battleships are twice as expensive as they were in 2010. They then went after the usual targets of incursions (not a significant source of payouts compared to nullsec rat bounties) and FW (which increases money velocity but that’s about it) as sources of inflation, and I know the counterarguments are out there. I would be very interested in seeing an extension of your classic “inflation actually follows rebalancing” graph since 2012. I don’t know if the data or existing graphs are available out there, but it’s one of my more favorite graphs on this topic. Unfortunately, all the recent targets for “causing inflation” are things which were added after that graph ends.


To spare you the need to go back and read the previous two articles, I have a longstanding hypothesis on inflation – defined as most people tend to think of it as the increase in cost of goods over time, usually due to increasing money supply. That hypothesis is simply that inflation due to growing money supply isn’t really a thing in EVE, or if it is, it’s drowned out by inflation (and deflation) brought on by mechanics changes – in other words, changes to supply & demand.

First thing’s first, a bit about what the market indices actually are. There are four of them – Mineral Price Index (MPI), Primary Producer Price Index (PPPI), Secondary Producer Price Index (SPPI), and Consumer Price Index (CPI), and they each track the relative price index of a bundle of goods. The Mineral index is just what it sounds like, tracking the price change in minerals. Taking things out of order (it will make more sense that way), the CPI is anything and everything consumed in the game – ships, modules, implants, etc. It also, in what is I believe a fairly recent development, seems to include PLEX. The SPPI is made up of components and materials used directly in creation of items in the CPI – components of all kinds, salvage, etc. And finally, the PPPI in turn is made up of items used to build things in the SPI, which means it’s primarily comprised of moon materials (raws for sure, I assume intermediate and advanced materials as well), though it’d include Tech III inputs and probably some other stuff that’s escaping me right now as well.

The most recent information on the indices, alas, is only available in graph form, and was found in a devblog looking at the economic impact of the battle of B-R5. As with the last time, I’ve gone ahead and marked this one up.

Up to about the end of 2006, I don’t have much a clue. I’d only barely started playing, info is scarce, so who knows. I will point out that Level 4 missions were introduced in mid-2005, which makes for a humorous correlation to whatever caused that enormous drop on the PPPI. The more likely explanation, though, is that the Cold War expansion increased reaction outputs, monkeyed around with reaction cycle times, lowered fuel consumption for POS slightly, and added in the fuel bonus from sovereignty. It also added outposts, creating far more convenient staging areas for mining moons (and, for that matter, regular minerals) in nullsec. While chatting with Ranamar a bit, he also pointed out that Dreadnaughts were introduced in that same expansion, offering previously unheard of jump drive based logistics capacity, making the movement of moon materials much simpler. So it’s a hypothesis, but unfortunately one that came after marking up my graph.

Towards the end of 2006 is when things start to get interesting. Invention was introduced in Revelations I, though it took a few patches before they got things right.  In context, “got things right” meant tuning the availability of invention materials. That explains the precipitous drop in the PPI; and the CPI followed (albeit more slowly) as invention became more widespread and the old Tech II cartels were broken. Revelations I also introduced the drone regions, and the drone rats there dropped alloys that refined into minerals, rather than giving a bounty when destroyed. The increasing population in the drone regions helped push minerals down continually until mid 2010, when meta 0 loot drops were removed from the game.

Moving on forward. Thanks to invention, consumption of moon materials skyrockets, turning certain moons into “supermoons”. That prompted the introduction of Alchemy in late 2008 and, well… oops? Not necessarily. While I had originally attributed the resulting spike to Alchemy driving up its own inputs, Ranamar pointed out something else – the old Ferrogel duping exploit was discovered (technically, rediscovered) by CCP around that same time. No doubt the dupers were keeping the price of anything they produced suppressed, so their elimination allowed the market to spike in a big way. A year later, Tech II build requirements were messed with, laying the seeds for the rise of Technetium. That’s plainly visible in the PPPI through mid 2012.

Fast forward to mid 2010 and the release of Tyrannis. Tyrannis brought with it Planetary Interaction, which meant taking many formerly NPC seeded goods and subjecting them to the whims of player creation. The effects speak for themselves. Something to note here is that I think that the wiki’s explanation of indices is a little misleading with respect to PI. The raw planetary materials that you extract may be PPPI items, but P1 through P4 materials are made from those raws and used in all manner of other things. That makes them secondary items, and explains that green cliff. Meanwhile, every other index continues to rise with only brief interruption as the removal of Meta 0 loot and upward march of Technetium ripples through the economy. The spike in mineral prices culminated with the simultaneous removal of drone alloys, Hulkageddon V, and the start of Tiericide.

Last time I wrote about this, that’s where we ended. It’s been awhile. At this point we’ve pretty cleanly explained why the battleship mentioned in the question costs twice as much now as in 2010 – minerals are hell of a lot more expensive! Still, two more years of price changes to explain.

For starters, the Technetium nerf in mid-2012, which is rather obvious on the graph and led to a sharp decline in the PPPI. That drop is only just starting to turn around. Meanwhile, mineral prices stay high for quite some time, thanks to vastly heightened demand due to Tiericide. That slacked off in July 2012 with Retribution 1.1 and Battlecruisers, however, and dropped off even harder with the release of Odyssey and the completion of Tiericide. With virtually every Tech I ship having been built ahead of time in massive quantities, the market was glutted for months.

In the past six months, however, the mineral markets have largely turned around. With the surplus hulls finally cleared out (for the most part), mineral demand returned in a big way, and is only continuing to go up. Meanwhile, R64s are slowly but surely creeping upward as stockpiles are depleted and demand continues to rise. Combine with Alchemy & Metamaterials driving demand for lower end moon minerals, and the PPPI is slowly rising as well.

And in the future? Who knows! The biggest thing to watch are the tweaks to invention in Crius. CCP will be rebasing invention to yield positive, rather than negative, ME numbers on blueprints, and adjusting material requirements accordingly. On top of that, they’re playing around with numbers for copy times, invention times and build times, adjusting them to yield a less click intensive process. That’s liable to increase demand for moongoo, and doesn’t even get much into whatever is planned for a proper revamp post-Crius.

One last note – as mentioned earlier, the CPI includes PLEX. This annoys me to some degree. Here’s why:

One was PLEX prices, which rose by only 1% but weighed a whopping 24% in the index.

Needless to say, that’s kind of a distorting effect. And to make matters worse, unlike everything else, PLEX prices do react, and react significantly, to “all the usual suspects”, though perhaps not quite in the way or for the reasons many expect. More on that one in an article I wrote a few weeks back.
And that, for now, is that!

6 thoughts on “Inflation Revisited

  1. Imagine a world where we had some data to work with.

    I absolutely agree, if I read your hypothesis correctly, that much of the price changes are more closely related to changes in mechanics than it is to money supply. Changing build requirements, adding/removing supply, adjusting bottlenecks and adding moons and alchemy, all have a larger effect than just rising incomes. I’m quite certain we can also throw in the introduction of the PLEX system in late 2008/early 2009 and the runup in alts as probably having a bit of a deflationary effect in areas like the MPI. Tons of mining alts basically resulting in an increase in overall supply.

    Also, within any index there are typically quite a few changes that occur at or about the same time, that looking at a single line for the MPI (or any index) just doesn’t tell the whole story. Introduction of the hidden belts in late 2009 (Dominion) resulted in the price of what were then the high end ABC minerals being crushed, but it didn’t have much effect on low ends. Shortly after that though was a change, which I don’t recall the catalyst, that caused Nocxium to skyrocket. Then of course in April 2012 the drone alloys were removed, which boosted low-end construction mineral prices at a time when Supercap production was escalating. Of course this also coincided with the Russian civil war between XIX and Solar that reduced supply out of the Drone Regions just before this change. So even just trying to follow the MPI becomes tedious to decipher with all of the underlying changes that have occurred over time.

    At FanFest, Dr.E mentioned making more data available to harness the analytical power of the playerbase. I’d certainly like to see some raw data on PLEX quantities sold and consumed. I’m hoping they still follow through on that, but with his departure, I’m wondering.


    • Yeah no kidding, I’m hoping someone goes and does it anyway, even without him around. Merely putting the data out there would be easy…in theory.


  2. Some economists argue that the increase in money supply actually comes after other market forces cause the increase in the price level, so I agree with you that money supply is not the driving force of inflation in EVE. I think you can attribute it to entities that have enough market power to drive prices up, and shocks to demand and supply coming from patches or major game events.

    I enjoyed reading this post, I enjoyed your analysis.


  3. Where do you get the data for CPI, MPI, PPPI, and SPPI? I assume CCP publishes these figures somewhere? I’d like to know what other economic data there are…

    inflation due to growing money supply isn’t really a thing in EVE

    Well, the dilution is real. Given that dilution causes inflation according to economic theory, and that we know there is dilution and we see inflation, connecting them causally would seem to be the null hypothesis. So I cannot see why you’d say this. Do you have numbers for “ISK M1”?

    PLEX should not be counted in the CPI. They originate from out of game, and arguably are consumed out of game as well. (They do nothing for you in game, as such, and are substituted by other out-of-games means that are not measured in CPI.) With PLEX weighted 24%, and since we know PLEX:ISK has increased considerably over the last year, then CPI must be lower than it looks.


  4. There can be a massive mismatch between what economists mean by inflation and what unreflective end consumers psychologically experience as inflation. The immediate response to the sample consumer claiming inflation is afoot because battleships cost twice as much now as they did four years ago is that they are comparing apples and oranges. Today’s battleship doesn’t match yesteryear’s battleship. It’s as if they’ve switched their typical dinner from chicken to lobster and then whined about increased meal expense.

    To continue hammering our hypothetical consumer, one could ask why they even care. Sure battleship prices have doubled since 2010 but you mean to tell me you haven’t improved your income during that same period? What kind of minimum wage slave are you?

    Eve, of course, lacks a minimum wage (there’s no innate human dignity here) but a good proxy might be located in the New Player Experience arc. Can a typical noob (whatever that is) self-support as they grind through it? I don’t know if CCP tracks this. T’would be interesting to find out.




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