Meet Ohnekase: WoW, Adam Smith, and the Invisible Hand.

OK, so no, Ohnekase will not be joining us today.  He will be referenced, but will not be joining us.  Instead, I have a different kind of article today.

Hey I resent that.

So, before I get into the meat of the question this week, I will give you a little background on myself.  I attended the University of Utah (Utah Connection) and received my Bachelor of Science in Economics.  One of the classes I took was the History of Economic Thought (I have a second degree in History, so yeah it really fit).  The class was extremely intersting, revolving around the different Economic thinkers:  Smith, Marx, Keynes, etc.  I felt it was really intersting.  One thing I found fun was looking at WoW through these particular thinkers.  It makes for some fun philosophy.

Now, I don't claim to be an expert.  I am just a man who had a bit of knowledge from them and I really enjoy a good debate.  So, I will admit I can have facts wrong and I will admit that there are other viewpoints.  These are mine, and that is that.

So, with that out of the way, if you want to debate this, I welcome comments.  However, I do not welcome trolling.

So, lets look at one particular piece of economics and see how we compare:  Adam Smith and the Invisible Hand.

Invisible Hand?  Is that like when I tell my Footman to go attack that tower in Warcraft 3...?

First things first, let me educate on what I am talking about for those that do not know.  Granted, a lot of this is taken from Wikipedia.org, so it may not be 100% accurate, but for the discussion it should be pretty close.

The Invisible Hand Argument comes from a man named Adam Smith.  Adam Smith was a social philosopher back around 1750-1775.  He is considered by many to be the father of modern economics and is quoted by an awful lot of people.  Whether you agree with his views or not, I would say he is a pretty smart guy and has some interesting points.

The Invisible Hand Argument comes from his book An Inquiry into the Nature and Causes of the Wealth of Nations (We will call it The Wealth of Nations for short).  The passage I am referring to is here, taken straight from Wikipedia:

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other eases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. [emphasis added]. 

Ok, that is a lot of text, and it is written in the old-timey language.  So, let me try to summarize.  In short, people do not work to promote public interest or improve the economy.  They do not really realize that they are doing it.  They are doing it out of their own self-interest.  However, by pursuing their own self interest, they are helping these other things.

So does the person who goes to work construction everyday do it because they want to make a building because he/she wants to contribute to the economic life blood of the city?  Primarily, no.  They want a paycheck so they can feed themselves and their family, or go get drunk, or whatever.  They aren't doing it for the greater good.  They are doing it for themselves.  However, even though that person is acting in their own self-interest, that skyscraper is being built and contributing to the economy.

So, does this function in WoW?  Do WoW players follow this super Invisible Hand?  I would say yes.

Does the WoW Economy have a "Greater Good"?

The WoW Economy is, on the whole, somewhat messy.  So much money is created every day it is insane.  For proof, lets say that you are on a small population server (say, 2000 Horde and 2000 Alliance).  Lets say that 50% of those people do at least 10 daillies and that is the only way they make money.  That is 2000 people doing 10 x 10 gold dailies, or 200,000 gold added to the economy, just from that.  That is a lot of gold being poured in and that isn't even counting loot, sales of items, etc.  With those added in, the numbers get even bigger.

However, on the flip side, how much is the economy affected?  In theory, according to supply and demand, because there is all this money, this money should be making the worth of goods more.  After all, why isn't an Inferno Ruby 1000 gold by now?  If that much money is pumping into the economy, it should mean that the average person is seeing a gold bump of 500 gold per day.  But largely, gold still seems to hold its value in WoW.

I would say that the WoW economy, on most servers (I realize there are some servers where this is broken), still functions and still has a "Greater Good" idea.  The Economy gets more robust, but doesn't make the currency completely worthless.

There are a couple of reasons I would say that this is so.  First, Blizzard has natural gold-sinks, both in player and out of player.  If I go and spend money on the AH, I effectively take 5% out of the Auction House.  That is a huge amount of money.  Sure, spending 100 gold on a stack of Heartblossom only means that 5 gold is taken out, which isn't much, but it does mean that 5 gold is taken out on each stack of heartblossem.  The farmer also took some out of it in the Repair bill they sucked up, which is another 10 gold per farmer.  When I take these Heartblossom, I am also going to use them to make some potion, which is a crystal vial (20 x 50 copper ea).  Again, all of these are really small amounts, but they do amount to a decent amount of money.  Every time you gem your gear, you have given Blizzard a gold sink (because that is an item that is forever out of the game).  Every time you enchant your gear, learn a glyph, buy dust to change glyphs, use a potion, you pull money out.
Another reason I would say the economy doesn't bloat is that we have a huge amount of people hoarding it.  On bad days, I may only make 2000 gold worth of sales in the AH.  But I don't turn around and pour that into the economy.  All of my profit goes into my magical piggy bank where I am trying to work up to 1 Million gold.  Sure, I spent a couple thousand here and there, but not every day, or at least not in the amount I horde it.  And when I spend a couple thousand on stuff on the AH, the economy loses 5% every time.

Finally, the last reason I would say that we don't have horrible economy bloat is that vendors do not really change.  Merchants have set values for everything, and that value rarely changes.  In reality, how many Small Spider Legs does a Barmaid need.  So, assuming you could sell one to her, I doubt you could sell her 12 for the same price.  Or 20.  or 700 Zephyrites, or whatever.  She might take them off your hands, but for less money.  And with the influx of adventurers with these gems and such, it would get even worse.  Merchants in WoW effectively keep the currency relevant.  They will repair your gear for the same amount of gold/damage every time.  They wont double the price because you have done 4 dailies today.

To make a long story short (too late), I don't think the economy is overbloating too fast.  Will it?  Quite possibly, but there are still checks and balances, even unintentional ones, that keep the inflation in check.

OK, so greedy goblins act in their own self interest, but does everyone...?

Ok, here is where I say the Invisible Hand Argument Works.  People play wow for their own self-interest.  It doesn't matter the WoW Player, we all play for our own reasons, but they are our own "selfish" reasons.  And for that, we are participating in the economy.

"But wait," you say, "I don't play for my own reason, all my money goes into my guild for them to raid...."

Well, congratulations, there is some self-interest there.  Maybe not specifically for yourself, but you want to see something for you guild.  Even if you are donating to the guild cause you are required to, there is still the self-interest of your guild.

Are you a raider?  You are playing to down a boss.  Therefore, you have self-interest to do whatever it takes (within your own reason) to down boss XYZ on difficulty whatever.  If that means expensive enchants, you will buy them.  If that means Gems, you will buy them.  2 Poitions of the Tol'vir (1 before combat, 1 during), you might buy them.  By you acting in your own self interest, you are stimulating the "Greater Good" (and being a damn good gold sink while you are at it.

Are you an altoholic?  You play your alts.  You are self-interested in experience the game in fun and interesting ways.  You stimulate the economy by moving currency.  You have likely shopped in the low level AH market to buy your level 10 - 15 Rings (buy from Ohnekase.  He is a great Jewelcrafter).  You have likely jumped in to grab those last 2 stacks of Iron for your Blacksmith alt.  You might even have looked into buying more pets.  In your self-interested way, you are encouraging the economy and the "Greater Good"

Are you a Goblin who plays the Auction House?  You are definintely acting in your own self interest.  Whether it is to own the market, or have more money than Ghostcrawler (not sure if that is possible.  Ghostcrawler is like Chuck Norris, he has not gold cap).  You are a hoarder.  You are also a gold sink in your own way.  I do it myself.  The other day, I spent 20000 gold on Avengers of Hyjal Cloaks for Maelstrom Crystals.  Did I make my money back?  Yeah, but it was off of other people.  So I took money out of the economy by taking 20k from an NPC and hording the profit I got form the other players.

PVPer?  Gems, enchants, Vicious Gear, etc.  Stimulating the Economy.

Do you give away your profession crafting as charity (I have someone on my server who basically does this)/  You are not stimulating, but you are encouraging other to stimulate the economy (I think there is a self-interested argument to be made here, but it is harder).

Ok, Ok, Ok, break it down now.

So, lets go over the pieces of the quote and apply them.

...every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it.

In short, no one in WoW is completely in it for the "public" interest.  They want to do what they want to do.

...he intends only his own gain, and he is in this...

They are doing it for their own gain (or the gain or their guild, etc. which I would argue is very similar)

...led by an invisible hand to promote an end which was no part of his intention...

They help the economy without trying to, so in reality, it is like an invisible force is helping them to promote the economy, even if they weren't trying to do that.

By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

In WoW, this seems to work.  The game works because people work in their own self-interest.  They want to experience content, they want to take down that end boss.  And because everyone is trying to do this, they end up promoting a great game.


In conclusion....

I thought this would be a fun thought exercise.  If you disagree with me and think I am up in the night, great.  Comment and tell me where you think I am completely wrong.  Ask Questions, be curious, spark debate.   That can make this topic more fun.

Just please keep it civil people.  I don't take kinda to trolling or rudeness.

(Final Note:  I realize this is a lot of text, I will try to add pics to make it prettier :P)

See ya next time...