EVE Online's Self Imposed Economic Collapse - How Money Works

Summary

In this video, the virtual economy of EVE Online is explored, highlighting a spaceship's real-world value and the game's impact on understanding economics. The script discusses the game's self-imposed recession, the unique market for limited-edition ships, and the potential implications of allowing real-money trade. It examines how EVE Online's economic shifts mirror real-world economic concepts like stagflation and the value of rare, high-performance items, suggesting that in-game economies could offer insights into our own.

Takeaways

• 🚀 The virtual spaceship in EVE Online mentioned is as expensive as a second-hand Toyota, highlighting the game's economic complexity.
• 🌌 The game's economy is experiencing a self-imposed recession, with developers making materials scarcer to increase conflict and engagement.
• 📈 The scarcity has led to price inflation, with ships like the Titan costing significantly more ISK, affecting player behavior and reducing active players.
• 🛸 The game's economy faces stagflation, where prices rise while income falls, decreasing the quality of life for players within the game.
• 🏆 Unique, limited-edition ships from the Alliance Tournament have become valuable collector's items, with their value tied to both rarity and in-game performance.
• 💰 The value of these collector's items challenges traditional market understanding, where demand plays a significant role alongside supply.
• 🚨 There's a potential for the game's economy to become more stable if in-game assets could be traded for real money, despite short-term chaos.
• 💵 The introduction of real-money trade could benefit long-term players who have accumulated wealth in the game, but it would require careful management.
• 🔮 The founder and CEO of EVE Online is open to the idea of real-money trade, which could add a new dimension to the game's economy.
• 🎥 The video series explores the economic systems within EVE Online, drawing parallels to real-world economic concepts and scenarios.

Q & A

What is the significance of the virtual spaceship mentioned in the script?

The virtual spaceship is significant because it is as expensive as a second-hand Toyota, symbolizing the complex economic dynamics within the video game EVE Online.

Why did the creator initially plan to make only one video about EVE Online?

The creator initially planned to make only one video about EVE Online but was compelled to make more due to the intriguing economic systems and business deals within the game that players shared.

What is the 'Age of Scarcity' introduced by the developers of EVE Online?

The 'Age of Scarcity' is a game mechanic introduced by the developers to make resources harder to come by, thereby increasing conflict and engagement within the game.

How did the introduction of the 'Age of Scarcity' affect the cost of ships in EVE Online?

The introduction of the 'Age of Scarcity' led to a significant increase in the cost of ships, with the largest and most powerful ship, a Titan, costing 250 billion ISK to build, compared to 40 billion ISK previously.

What economic term is used to describe the situation where prices rise while income falls in EVE Online?

The economic term used to describe the situation where prices rise while income falls is 'stagflation'.

What is the impact of stagflation on the player base of EVE Online?

Stagflation in EVE Online has led to a decrease in the quality of life for players and a significant reduction in active players, as living in an economy with such economic decline is not enjoyable.

What are Alliance Tournament Ships and why are they valuable in EVE Online?

Alliance Tournament Ships are rare, limited-edition ships awarded to winners of the annual Alliance Tournament. They are valuable due to their rarity and superior in-game performance, making them sought-after collector's items.

How does the demand for Alliance Tournament Ships differ from traditional collector's items?

The demand for Alliance Tournament Ships is more influenced by their in-game performance than their rarity, unlike traditional collector's items where prestige and rarity are the primary drivers of value.

What is the current policy on trading in-game assets for real money in EVE Online?

EVE Online does not allow the sale of in-game assets for real money, although there have been instances of charity auctions where in-game currency was used to purchase ships, with the proceeds going to charity.

What potential issues could arise if EVE Online allowed the trade of in-game assets for real money?

If EVE Online allowed trading in-game assets for real money, it could lead to a short-term market crash as players sell off assets, causing in-game asset prices to plummet and the price of PLEX to skyrocket.

What is PLEX and how is it used in EVE Online?

PLEX is an in-game asset in EVE Online that can be used to play the game for free or for various in-game services. It is also used in charity auctions to convert in-game currency to real-world donations.

Outlines

00:00

🚀 Economic Insights from EVE Online's Virtual Economy

This paragraph delves into the virtual economy of the game EVE Online, highlighting the significance of a particular spaceship that is as costly as a second-hand Toyota. The video aims to explore the economic dynamics within the game that mirror real-world economic scenarios. The creator discusses the game's self-imposed recession, the impact on the market for collector's items, and the potential implications of allowing in-game asset trade for real money. The paragraph also touches upon the game's transition from an era of abundance to scarcity, leading to higher costs for in-game assets and a decrease in active players due to stagflation.

05:03

🏆 The Rarity and Value of Alliance Tournament Ships in EVE Online

The second paragraph focuses on the unique and limited ships available in EVE Online, specifically those awarded in the Alliance Tournament. These ships, once given out, are not reproduced, making them rare and valuable collector's items. The value of these ships is influenced more by their in-game performance than their rarity, challenging traditional supply-side economic models. The paragraph also discusses the potential impact of allowing the sale of in-game assets for real money, which could introduce a new level of economic stability but also cause short-term market chaos.

Keywords

💡EVE Online

EVE Online is a massively multiplayer online role-playing game (MMORPG) set in a science fiction space setting. The game is known for its player-driven economy and politics. In the context of the video, EVE Online serves as a virtual laboratory for studying economic principles, as it mirrors real-world economic dynamics such as scarcity, inflation, and market value.

💡Virtual Economy

A virtual economy refers to the economic system within a digital or virtual environment, such as a video game. The video discusses how EVE Online's virtual economy operates, including the trade of in-game assets, the impact of scarcity on prices, and the potential real-world value of virtual goods.

💡Scarcity

Scarcity in economics refers to a situation where the demand for a resource exceeds its supply. In the video, the game developers of EVE Online introduced the 'Age of Scarcity' to make materials harder to come by, thereby increasing their value and creating a more engaging gameplay experience by encouraging conflict over resources.

💡Stagflation

Stagflation is an economic condition characterized by stagnant economic growth, high unemployment, and high inflation. The video uses this term to describe the unintended consequence of the 'Age of Scarcity' in EVE Online, where the increased cost of ships and materials led to a decrease in active players, as the economy became less fun to participate in.

💡Collectible Items

Collectible items are objects that are sought after by enthusiasts for their rarity, condition, or historical significance. In EVE Online, certain ships, like those from the Alliance Tournament, are limited in number and thus become collectible. The video discusses how the value of these items is influenced by both their rarity and their in-game performance.

💡In-Game Assets

In-game assets refer to items, currency, or resources that exist within a video game. The video explores the concept of trading these assets for real-world money, which is currently not allowed in EVE Online, but could have significant implications for the game's economy and player behavior.

💡PLEX

PLEX is an in-game item in EVE Online that can be exchanged for game time or used for other in-game services. It serves as a bridge between the virtual and real economies, as demonstrated in the video by a charity auction where PLEX was used to convert in-game wealth into real-world donations.

💡Real Money Trading (RMT)

Real Money Trading (RMT) is the practice of exchanging virtual goods or currency for real-world money. The video discusses the potential impact of allowing RMT in EVE Online, including the possibility of a short-term market crash and long-term stabilization of the virtual economy.

💡Alliance Tournament (AT)

The Alliance Tournament is an annual competition in EVE Online that tests the skills of top players. Winners are awarded unique, limited-edition ships that cannot be reproduced, making them highly valuable collectibles within the game. The video uses the AT ships as an example of how in-game performance can influence the value of collectible items.

💡Supply and Demand

Supply and demand is a fundamental economic principle that determines the price of goods and services. The video discusses how the supply of certain ships in EVE Online is fixed, creating a limited supply, while demand is influenced by both rarity and in-game performance, challenging traditional supply-side economic models.

Highlights

A virtual spaceship in EVE Online is as costly as a second-hand Toyota, highlighting the game's economic complexity.

EVE Online's virtual economy mirrors real-world economic challenges, providing insights into market dynamics.

The game's self-imposed recession, introduced by developers, has led to a scarcity of resources, affecting gameplay and player engagement.

The increase in material scarcity and the cost of building ships like Titans have made them less frequently used in battles due to high replacement costs.

EVE Online's economy is experiencing stagflation, with rising prices and falling incomes, leading to a decrease in active players.

Alliance Tournament ships in EVE Online are rare, limited-edition collectibles that have both historical significance and gameplay advantages.

The value of Alliance Tournament ships is influenced more by their in-game performance than their rarity, challenging traditional collectibles markets.

The potential for trading in-game assets for real money could introduce stability to the virtual economy but would initially cause market chaos.

The introduction of an age of scarcity in EVE Online has made the game's virtual economy more engaging by reintroducing conflict and competition.

The economic state of EVE Online provides a unique platform for studying virtual economies and their real-world parallels.

The game's developers have used economic tools to manipulate the in-game economy, affecting player behavior and the game's meta.

The rarity and performance of Alliance Tournament ships make them valuable both as collectibles and in-game assets.

The potential for real-money trading in EVE Online could change the dynamics of the game's economy and player interactions.

EVE Online's economic systems offer a case study for understanding the impact of scarcity, inflation, and player behavior on virtual economies.

The game's economy has seen a reduction in active players due to the economic decline introduced by the age of scarcity.

The concept of stagflation within EVE Online's virtual economy has real-world economic implications and parallels.

Transcripts

This is a virtual spaceship in the video game EVE Online…

There are tens of thousands of ships like this floating around the game, but this particular

one is special… that’s because it costs as much as a second hand Toyota.

Why?

Well we will get to that, but the answer can actually tell us a lot about the state of

our economy in the real world.

Now this this is going to be the forth and final instalment in my serious on EVE online.

I only ever planned to do one of these video’s but the more I started to learn about the

game the more the players reached out to me to tell me about some crazy business deal

or economic system taking place within this virtual universe.

But because I promised myself I wouldn’t turn this into a channel were I exclusively

geek out about video games, I am going to look at three smaller topics in this video

so I don’t feel as if I have left anything out.

Now these mini topics are…

A look at the self imposed recession the game is in at the moment,

how this game is breaking our traditional understanding of the market for collectors

items,

and finally what would happen to this video game if it allowed the trade of in game assets

for real money (thanks for the suggestion Saint Michael),

So it’s time to learn How Money Works to see how this video game keeps on surprising,

gamers, economists and wannabee youtubers alike…

… A few years ago the galaxy within EVE Online was facing a problem.

Abundance.

An abundance of materials, an abundance of fuel, an abundance of high paying income sources,

and an abundance of safe space to harvest these materials, fuels and space shekels.

Now while that might sound like a really good problem to have, (and it would be in the real

world) It does cause some problems in a video game.

The biggest problem simply being that is boring.

Try playing GTA 5 with god mode hacks turned on, after punching some fighter jets out of

the sky you are going to get bored pretty fast, and people WERE getting bored.

The largest groups in EVE online were up until recently playing a game of “build as much

as you possibly can so it becomes almost impossible for any smaller group to ever catch up”.

The fact that this is a video game and materials respawn naturally over time accommodated this

mindset perfectly, but abundance does not drive conflict.

If every country in the world had access to raw materials that respawned on a 24 hour

timer, there would be significantly less conflict in the world.

Extrapolate that out to the extreme and consider a world where there are no resource constrains

at all, “theoretically” there would be no “good” reason to fight.

Again in the real world that sounds fantastic, and hopefully in the not to distant future

we really do live in such a post scarcity society, but in a video game, even one as

dynamic as EVE online, it’s the last thing you want and so the age of scarcity was introduced

by the developers.

The people that do play eve know what this is all about, and for those of you who don’t,

, the people who make the game, not to be confused with “that”, basically made materials

far harder to come by.

They did this while simultaneously increasing the materials needed to build things like

spaceships and modules in the game.

A Titan, the largest and most powerful ship in the game used to cost about 40 billion

ISK to build, the equivalent of around $1,000 give or take a bit.

Today to build a titan from scratch would cost around 250 billion ISK, more than 5 thousand

real world American dollars.

These ships were the mainstay of the largest player empires, but suddenly these organisations

are far less keen to take them into battle because once lost, they will be VERY expensive

to replace.

This price inflation also extends down to other more common ships that get used every

day.

Even the most basic combat ships in the game have doubled in price which is ironically

enough actually supressing the conflict that the game developers wanted to encourage with

this change.

Sure, the big empires will need to fight it out to control a diminishing pool of resources

which I am sure will make for plenty of amazing headlines about epic battles involving thousands

of players, But… the average player might just decide that collecting isk has become

too hard, especially when they need twice as much of it to go out there and fly a ship

around.

In economics this whole scenario has a name, it’s called stagflation, and it’s really

bad.

Prices rising while income is falling means that peoples quality of life will decrease

rapidly and that may be what is happening here.

Since the introduction of the age of scarcity, the has seen a significant reduction in active

players, because believe it or not, living in an economy going through such serious economic

decline is not fun, even if it does involve virtual spaceships.

It’s unusual to see an economy “voluntarily” subject itself to staglfation, but for what

it’s worth, some of the largest conflicts in the REAL world have followed periods of

stagflation so maybe the game developers are onto something here….

…Most ships in eve online can theoretically be mass produced.

Even the aforementioned titans were up until recently being constructed on assembly lines

all across the galaxy in huge numbers.

But there are some ships in this game that are a little bit different, Alliance Tournament

Ships…

The game developers used to have an annual in game competition called the Alliance Tournament

or AT.

This was a competition that tested the skill of the top players in the game to see who

was best at shooting their opposition in the face.

The reward for winning or placing in this competition was a selection of ships that

were limited in number (normally to 50 each)

It’s kind of like if the Olympics gave out spaceships instead of gold medals.

Anyway, the thing with these ships is once they are given out, that’s it…

There are no more.

If one gets destroyed, well then only 49 of them will remain in existence.

That one is never coming back and whoever was flying it will either have to buy one

of the remaining ships, or never fly that ship ever again.

Now of course given their rarity and prominent history, these ships become collectors items,

and expensive ones at that.

BUT!

Most of these AT ships are also REALLY good in the game itself.

For people that don’t play the game think of it like being able to use a formula one

at your local go kart track.

But here is the thing, their price actually depends a lot more on how good they rather

than how rare they are.

There are some of these ships where only a dozen or so remain in active circulation,

but they may not have stats in them game to make them that competitive.

Now normally to high end status goods like this, performance doesn’t really matter,

a Rolex objectively keeps worse time than the phone in your pocket, but people pay for

the prestige of the item, because they are rare, and can be used to impress your friends.

Now this is typically thought of as a supply side issue, there is a limited supply of these

collectable items so only the people people who are willing to pay top dollar for them

ever get any, but this dynamic here, shows that the demand side might be a bigger factor

than most people realise when studying these bizarre marketplaces.

Now despite all of that you might still think who the ___ uses something so valuable in

a video game when it could be lost by something as simple as your internet going out?

Surely that takes a special type of person right?

Well anyway this is mine… and I am very proud of it.

Not really, but thankyou to the anonymous viewer who let me borrow it to take this footage.

I don’t know why they did, scams are totally allowed in this game so I could have just

kept this and he would have been out a $10,000 spaceship.

Now anyway this crazy person explained that if they WERE given the opportunity to sell

this ship for real money, they would probably take it.

But unfortunately the game does not allow the sale of in game assets for real money.

In fact the mclosest the game has ever got to allowing this in their charity giveaways,

the most well known of which involved the youtuber Scott Manley, paying the equivalent

of $30,000 for one of these ships in a charity auction using the in game money.

Kelon Darklight, the person that sold it to him the ship then used this in game money

to buy PLEX.

PLEX is an in game asset that can be used to play the game for free, or for a variety

of other in game services, like decorating your ships.

Anyway…

Anyway Kelon then took this massive pile of PLEX and gave it to, (the game developers)

who in turn paid out the equivalent value of that plex to a charity.

A heart warming story for sure…

BUT what would happen if that PLEX could be given to and they would give YOU the money,

rather than handing it off to some charity…

In an interview the founder and CEO of the game said that this was something that they

might one day consider, but the thing is, the game has now been around for close on

20 years, there are some people that have played for a seriously long time, and built

up some seriously huge fortunes.

Opening the floodgates to being able to convert those fortunes into something that could buy

a house or a car rather than just internet spaceships is going to cause some problems

short term.

Mostly everybody will be trying to sell off everything they own which will make the price

of in game assets fall, and the price of PLEX (the item that is required to facilitate this

exchange) skyrocket.

Now this means that most players wouldn’t actually be able to realise the market value

of their internet spaceships and would likely end up only selling them for pennies on the

dollar, but it would be good for those people that actually pay money to enjoy the game

so it really is not as crazy an idea as most people think.

In the short term it would be chaotic, but long term it may genuinely add a level stability

to the virtual economy and make all those headlines about million dollar spaceship battles

all the more relevant.

Now if you’re wondering who pays for those battles these days, go and watch my other

video’s on the financial system of EVE online, and if you have another video game you would

like me to make a video on please comment it down below so that you can keep on learning

how money works.