Don’t listen to “Austrians” about hyperinflation in Diablo 3. Please.

Sooo…looks like the other shoe dropped on Diablo 3’s economy.

I’d written a while back about deflated prices in Diablo 3; about how the auction house reduces everything to money, and about the volume of items meant that there was rampant deflation of the value of goods. Things just weren’t worth much. There was always a flip side to that, though; as the playerbase dropped, as money from play multiplied, and as the players became savvy about which gear was good, there would be bidding wars on said useful gear that devalued gold vs. the cost of goods. Looks like that happened.

But please, PLEASE, Critical Distance readers: before you go running off to read the Mises institute’s analysis of Diablo 3’s economy, keep three things in mind:

1) These guys rant about how hyperinflation is coming thanks to “fiat currency” Real Soon Now all the time. They call Diablo 3 a Virtual Weimar because EVERYTHING is Weimar; either a Weimar that’s happening or a Weimar that’s soon to come. They’ve been predicting post-crisis American hyperinflation for so long now, and been so consistently wrong, that it’s become a bit of a joke. The proof of the pudding is in the eating.

2) Austrians really have no place in modern economics. They’re seen as cranks due to their resistance of economic modelling and quantitative analysis, and this is coming from someone who used MARXIAN stuff. Pay absolutely no attention when they start pretending that they’re representative of modern economic thought. Their “laws of economics” are nothing of the sort, which the piece tacitly admits in avoiding discussion of any economic school outside their own.

3) In-game economies tell us almost nothing about real-world economies, because you don’t have “money sinks” and “faucets” and the rules of ownership of goods are completely, completely different. The extent to which the Mises guys try to pretend that “fiat” (read: floating) currencies are akin to an in-game economy just shows how screwy the whole enterprise is.

Sure, it can work the OTHER way, which is why I wrote the Diablonomics piece in the first place. But if you want to do economic analysis based on in-game economies, then you want to look at something like EVE Online, not Diablo 3.

Sure, by all means, check it out as a bit of a fun curiosity. But for heaven’s sake, don’t attach any authority to it.  Anything that includes the line “virtual gold had gone the way of all flesh and fiat currencies” really, really doesn’t warrant it. “Fiat currencies” are doing just fine, thanks.

Edit: Hah. When I wrote that, I hadn’t really plumbed that gabble at the end of the piece about “free markets” and the evils of “central planners” and the like. Folks, these guys have been going on about that sort of nonsense ever since Obama dared to try to rescue the “free market” from itself by doing a bit of stimulus spending back in 2008. Nobody with any sense believes that regulated markets are some sort of Evil Thing. The only smart ones who advocate that these days are the ones who stand to profit from deregulation.

Even if real-world economies behaved that way, games aren’t supposed to be completely free and open in the first place. Games are systems of rules and restrictions. The economies of games are about those rules and restrictions and the enjoyment that the player gets from operating within that space. The whole reason why Diablo 3’s economy was a miserable failure, and why the PS3/PS4 version of the game won’t have an auction house at all, is because Blizzard forgot that. The game’s enjoyment and engagement economy clashed with its gold-denominated faux-economy, and was destroyed in the conflict.

Blizzard’s success with World of Warcraft has everything to do with that game’s careful balance of time and skill vs. reward and chance. And, yes, that’s an economy, since it skillfully and carefully balances scarce resources against each other. It’s just not the sort of economy that these Mises guys understand in the slightest.

If they understood game economies at all, this article wouldn’t have devolved into reciting doctrinaire cant at the end.

Edit: There’s a far better analysis of what the AH did to Diablo 3 here at Joystiq. Yes, it mirrors my own, but it’s still from someone who understands how games work, instead of reciting Austrian Scripture, zombie-like, at the invocation of the word “economy”.

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4 thoughts on “Don’t listen to “Austrians” about hyperinflation in Diablo 3. Please.

  1. Kris Ligman says:

    FWIW: A piece doesn’t merit placement on CD because we like its politics. I tend to appreciate outsider looks at games, even if they can be a little… kooky.

    That said, really appreciate the breakdown. It helped put my finger on some of the personal misgivings I was having about its conclusions.

    • craigbamford says:

      Yep, I’d figured as much on the inclusion thing. You certainly don’t STRIKE me like an Austrian!

      I wouldn’t have written that NM piece last year if I didn’t think that economics had things to say about in-game economies. The problem is that the Austrians are a weird, almost cult-like little group that thrives on attention and insists that it knows The Real Truth About Economies in a way that even the Marxists never really approach. Their descriptions and definitions of things like “fiat currencies” (floating currencies), inflation, free markets, and all else are either contested or, well, a wee bit of a joke.

      These problems infested the entire analysis of what was, really, a straightforward situation where a lot of players were chasing the small amount of actually valuable in-game gear whose production was artificially limited by the game’s random number generator. I don’t even know if I’d call it inflation per se, since inflation is a rise in ALL prices across an ENTIRE economy.

      But, yeah, the point is that the auction house in Diablo 3 was only ever a means to an end, rather than the whole point. I still think the happiest, most fulfilled players are the ones who never engaged with it at all. Diablo 3 isn’t a real market, couldn’t have been a real market, and the attempts to make it function like one led to the game’s downfall. The Austrians’ “solution” would only make it worse. The real solution is the one that Blizzard hit on: taking the damned thing out.

  2. emtilt says:

    Oh god, are game critics actually taking Austrian school economics seriously or something? Was their discussion of that piece other than just a mention on Critical Distance?

  3. […] Responding to the Mises Institute article we linked last week, Craig Bamford maintains that often enough, game economies like Diablo 3 aren’t meant to function like real-world economies: […]

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