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Role Playing (Games) The Almighty Buck

A Chat with EVE's Economist 94

Posted by Zonk
from the all-about-the-isk dept.
Earlier this month Dr. Eyjólfur "Eyjo" Guðmundsson, the newly hired EVE Online economist, released his first market report looking at the mining and trade of minerals within CCP's massively multiplayer online game. I had a chance to speak to Dr. Guðmundsson at GDC Austin, to further understand why it is that an online game needs an econ professor on staff. We discussed his work on the mineral information, future plans, the reality of trust in an inherently hostile world and why that makes for a bad banking environment, and a few words on player communication from CCP CEO Hilmar Petursson. Read on for the full interview.
Slashdot: Just so we can understand a little bit of the background here, how did you get hooked up with the CCP folks, and what is your interest in EVE Online?

Dr. Guðmundsson: Originally I was hooked up with the CCP group through a conference on experimental economics where we were looking at how to use experiments on how to improve natural resource management. What does that have to do with CCP? They showed up at the conference, and introduced the game to researchers as a potential platform for testing and tracking social trend. I fell for the concept. What I fell for was the single server concept. Everyone in the game world is participating in the same experience. As the game grows the complexity and the fun of it grows exponentially. You can actually see shortages of goods, scarcities of goods in the game world. If you want some material, you need to take steps to go out and get it; you can mine it, you can refine it, but there is a time element involved in obtaining it. There's an element of effort involved. You can also lose things, if you make poor decisions, if you go into an area where you can't defend yourself you can actually lose what you've been building. All of these components are build into the world, and when you make decisions in the game you're making many of the same decisions you make in your daily life. It looked to me like a perfect world to do research on.

Slashdot: I know your first blog report was on mineral prices; what other areas of the economy are you finding interesting? What elements of the economy are we likely to see written up in the future?

Dr. Guðmundsson: Well, the whole macroeconomics of EVE are very interesting. Trying to figure out inflation, trying to figure out the monetary supply, trying to figure out the overall trade patterns ... all of these macroeconomic trends are of interest and we'll be working on those over the next few months. I also find it interesting to look at these resources, to think about how corporations and alliances are run. We can see how different corporate cultures have helped in obtaining different goods.

Slashdot: In previous interviews you've spoken of economics as a source of entertainment. I'm wondering why you see people viewing economic information as amusement. Isn't this kind of dry stuff?

Dr. Guðmundsson: I think it's entertainment for people because it helps to put things into context, and it helps to put yourself in a place within that context. You can identify where you are economically. You need the information to make decisions about your own life, but you also want to know things on a broader scale. "Oh, this guy or that guy gained a billion dollars on the stock market, or he lost a billion dollars on the stock market." It's just news, and we can say that it will interest people who are generally curious, and also for personal gain.

Slashdot: Beyond the blog entries, you're going to be doing quarterly reports, correct?

Dr. Guðmundsson: We'll be doing quarterly reports, and we'll have annual synopsis. The first report is due out before fanfest, by late October. Fan Fest is in early November. That one will focus on the macro environment, try to set the stage for future computations. We see it happening that way; in the first one we give sort of general indicators, and in the ones to follow we update the information that we have and we imagine it has the potential to grow quite a bit over time.

Slashdot: Obviously you can't go into details, but are there already any surprising trends that you've found in your research? Anything you weren't expecting?

Dr. Guðmundsson: Well what I've been looking at in terms of the mineral market, what has been really interesting to see, is how efficient the market is at disseminating information. If something happens in the game you see in the market numbers very soon. We do not participate in that market, it's a completely player-driven market. That makes it even more interesting, to see how effective and efficient a market it is. It has all the same laws that any market has in real life. From what I've seen so far, I find it very interesting to see how effective the market is, and I'm looking forward to seeing how other markets compare to this one.

Slashdot: This may be a good question to include Hilmar in. What is it about EVE that makes those communications so efficient, that allows market information to travel as quickly as it does?

Hilmar Petursson: I would say there is a fundamental difference to the EVE economy, something you don't see in the economies of other games. People are making purchase decisions in a matter of life-and-death environment. You are trying to outsmart your competitor by making an informed logistics and market-based decision, and the more data you have the more efficient your decision-making is. Currently we have offered price trends for items, as well as volume and those sorts of statistics, people have been using this to make purchase decisions on items. As the economy has grown larger, though, there is more of a need for macro-level understanding of economic data. Just as when you have a relatively small country, you can get by with having the market provide the microeconomic data, when the scale increases you need to see the macroeconomic data so that people can see the overarching trends. Consumer confidence, interest rates, money supply, these factors become more and more important as EVE Online grows and the market becomes more efficient.

That's really what the game stands on, the whole thing is tied together by the market system. We have various disconnected systems like mining, manufacturing, corporations, and combat, but they all tie in at the bottom with the market system. We initially spent a lot of time when the game was first made, making sure that we had an abstract, efficient, accurate market system. We made many difficult decisions where we sacrificed 'correctness' for simplicity or ease of use. It is a fairly complex thing, but it has allowed us to evolve the game quite rapidly up to this point. That said, we have been seeing more and more of a need to get professional insight into what is happening on the macro level. We've seen immediately how responsive the player base is to it. They've been looking for these kinds of insights for some time now.

Dr. Guðmundsson: I would like to add that the fact that the information is distributed so quickly makes it a great model for other market systems. You have smart players trying to outsmart each other, which sort of means that as soon as information is available someone is using it to try to gain the upper hand. We can say it's also due to the smart play styles of the playerbase.

Slashdot: Has the response been fairly favorable to the first report?

Dr. Guðmundsson: It has been most favorable. Many people have thanked us, and like to see the trend data that we have. I think most of the players would like to see more in-depth analysis, and I think that's going to be the most beneficial work we can do. The only thing is, it will take time before we can provide them with the kind of analysis we'd like to see. Then there are all the people who would like to get advice about what they specifically should do. As with any other economic advice, though, if I knew what a specific player should do I would know everything. This isn't that kind of advice. This is for people to make their own smart decisions about what to do. We can't tell people what they should do, but we can say what happened and why it happened.

Slashdot: I have read that other research groups have an interest in the game along these lines, and I was wondering if you've had any contact with other groups about studying EVE for other subjects. If you have, what areas of study will these groups be looking into?

Dr. Guðmundsson: I think generally there's a number of academic groups interested in research inside of gaming worlds. I think this is a very new phenomenon, but the potential for research in many fields is very great. People have talked on the web about looking into EVE from political, sociological perspectives, science research, looking at the democratic elements of the game ... it all boils down to the point that within the game world, because of its design, people are behaving in a way that is interesting to the world we live in. Research done there could be used to better understand how people behave in the real world, within certain environments.

Slashdot: Earlier you spoke of how PvP is a driving force in the economy because of the requirement to make smart decisions, and the drain on resources from combat. What are some other effects on the game's economy that result from phenomenon?

Dr. Guðmundsson: Well, PvP is essentially the way that resources are consumed in EVE. In order to operate a fleet, to outsmart your opponent, you need a lot of resources. In order to get these resources you get them in the most intelligent, efficient way possible. You need to get people to mine for you, you need people to make the right weapons for you, in as short a period of time in the right quantities. Specialization among the players is almost a requirement in order to get the best use out of time and resources in games. We have whole corporations in game that focus on mining and shipping, and there are individual traders who think they know what demand will be for in the near future; they do arbitrage trading all over Alliance space to the alliances and corporations.

Slashdot: Another element you've spoken on previously is the lack of trust players have with each other, and the problems that presents when trying to form something like a bank. What's your opinion of setting up a trusted bank from the CCP side?

Dr. Guðmundsson: From my perspective a CCP-run bank doesn't really matter; what really matters is what does the playerbase think. What kind of services do they want? We see players trying to fulfill those services, within a limited framework in terms of the trust. Because they're doing it, there's obviously an interest there. If we were to do it we'd have to examine how to go about that the right way. That's really how the banking system was established in our world, and that took a couple hundred years to develop before we had a system people could trust. What we need to do is come up with a system that's supportive of gameplay, that can survive the problems of many users.

Slashdot: Since you began examining the economy, have there been any issues or problems you've discovered in the marketplace?

Dr. Guðmundsson: At this point we haven't come across any issues that are serious problems for the gameplay. As I said before, we want to have hands off on the economy as much as we can. When we look at the issues that are potential problems, any treatment we would do is very very slow, and very very light. Up to this time, since I've been with the company, there have been no issues that really impacted the gameplay. The market is incredibly player-driven. It's an incredible state of affairs to see.

Slashdot: Looking at the different styles of gameplay (trading, mining, PvP), which is most efficient in economic terms?

Dr. Guðmundsson: Well, you can never really say beforehand which type of playstyle is more profitable, because it changes all the time. In order for you to understand which is most profitable you'd have to make your own predictions as to what is going to happen in the future. Profitability of a certain industry is based on expectations of future performance. If you knew that there is an upcoming war between Alliances in a certain area of the galaxy, that would tell you that it would be profitable to become a trader in that sector for the near future. If they are in need of a lot of supplies for a short period of time, that will put a squeeze on resources in that particular area. Then you'd have to follow what's going on and keep track of what's happening on the internet very closely.

Slashdot: Do you have much of an interest in actually playing the game, or is the research side of things mostly what interests you? What is your preferred style of play?

Dr. Guðmundsson: Oh absolutely. By necessity I will always take a low profile, try to just understand the gameplay as much as I can. I greatly enjoy talking to people about the game a lot, listening to peoples experiences about how they perceive the game is quite interesting. We talk a lot about the gameplay at CCP too, of course, long into the night. It's sometimes said that in Iceland there are 300,000 people, and there are 300,001 opinions. From our EVE community of 200,000 people, it certainly seems like there are 200,001 opinions on exactly what is happening. That's really fun to be able to interact with.

Basically I'm just trying to understand all aspects of the game, but of course I find the trade and marketing aspects of the game most interesting. It's also fun to go out there and shoot at somebody, of course.

Slashdot: Is there anything in specific about your research that you'd like to share with EVE players?

Dr. Guðmundsson: Generally speaking I'd like to get the message to our playerbase that I really enjoy all comments that have been put forward. I come from an academic community, and criticism is really the driving energy behind doing something new. So, I'd say just let the comments flow. Let me know what you like and dislike about the research, what you'd like me to do in the future. We are still in the early stages of understanding the economy, though, so over the next couple of months we will be putting forward mostly historical information to set the stage for future projects. I really like them though; please keep them coming.

Dr. Guðmundsson: Thank you sir, very much, for your time.
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A Chat with EVE's Economist

Comments Filter:
  • Any conclusion? (Score:3, Insightful)

    by TheLink (130905) on Thursday September 13, 2007 @12:58PM (#20590381) Journal
    I RTFA'ed and the interview, and looked at the graphs etc.

    Can anyone tell me whether he really said anything? I couldn't spot it.

    "Overall trade quantity and volume has increased dramatically over the last 3 years and the price of minerals has fallen considerably due to increased mining efficiency through better tactics and improved technology"

    I could get a program to pump out that stuff based on the stats. In fact I've seen such auto-generated drivel in some investment sites for stocks that no human is monitoring -profits have gone up due to management actions leading to increase in revenues and reduction in costs blahblahblah.

    Did I miss some insight or analysis of his somewhere?
  • by GroeFaZ (850443) on Thursday September 13, 2007 @01:01PM (#20590431)
    What I fell for was the single server concept. Everyone in the game world is participating in the same experience.

    Uhm, wouldn't a multiple-server environment actually be more useful as far as science was concerned? For things like control groups and stuff? We have a "single server concept" in the real world. IMHO, that's why Economics is regarded by some as little more than fortune-telling, because you can hardly isolate a single variable and experiment on it in the real world. If there are multiple well-populated but otherwise identical servers representing the game, you could trivially and with mathematical precision change a certain variable on one server and actually draw conclusions from the developing differences (or lack thereof) with regard to other, unmodified servers that run in parallel.
  • by Notquitecajun (1073646) on Thursday September 13, 2007 @01:18PM (#20590715)
    Both are useful.

    We can learn something from EVE's single-server system because it started from scratch...something that macroeconomics in the real world can't simulate. It's practically a true free-market economy with pure free-market hindrances (such as goldfarming) without the corruption/influence of past or failed economic styles (such as communism or mercantilism unless they develop in-game somehow).

    You're right about multiple-server systems, though.

    Using MMORPG's as a tool for economic study is near-genius by the allows for some interesting tinkering and study without awful side-effects, and you can correct many problems practically overnight (such as kicking out goldfarmers or re-working accounts to give people more gold or something).
  • by Xonstantine (947614) on Thursday September 13, 2007 @01:20PM (#20590735)
    Huh? Traditional macro-economics has nothing to do with the Federal Reserve. Wave a magic wand and make the Fed disappear, and macro-economics would be just as valid (or invalid if you are a cynic).
  • by porpnorber (851345) on Thursday September 13, 2007 @01:34PM (#20591005)

    "Since he can learn from his model only insofar as it is accurate, and since the Real World has other factors... .. why should we care about this?"

    Yes, of course, this is why laboratory science has long since been abandoned as useless in physics, chemistry and biology. It's just amazing that economics has taken so long to catch up!

  • by jdigriz (676802) on Thursday September 13, 2007 @01:34PM (#20591007)
    Sorry, while your observations may be true for other games, they are invalid for EVE. A point-by-point refutation:

    >MMO: "Game Owners Create Money and distribute it to players at a fixed rate"
    In Eve there are isk (the unit of currency) spigots. Bounties are paid to pilots for killing npc pirates, completing missions and/or selling items to NPCs. This money is create ab initio and is distributed at a rate determined by the players. Killing more pirates creates more money.

    >MMO: "Game Owners tax citizens in Non-MMO Money"
    While players do pay a monthly fee to play, they are also taxed in-game in isk. Every time I sell an item in Eve, I pay sales tax in ISK to the SSC. Players who are members of corporations which choose to tax their members take a percentage of bounties earned, in isk. Smugglers in EVE pay ISK penalties if caught. When your ship is destroyed in Eve, it doesn't respawn, so breaking the law in Eve effectively fines you for the cost of your ship, in Empire-controlled space anyway. People who have effective control over outlying star systems often charge tolls in ISK to pass unmolested.

    >MMO: "No Lending/Credit"
    In Eve there are player-created banks. These are generally viewed as shady/untrustworthy institutions as they are not regulated in-game but some players do patronize them. See []
    > MMO: No banks with fractional reserve lending ability
    This seems to be true, due to the lack of faith in the player banks in eve. From this we can see that the main difference between Eve's synthetic economy and the real one is regulation.

  • by Opportunist (166417) on Thursday September 13, 2007 @01:48PM (#20591279)
    Actually, no. Because people have nowhere to escape if economy goes bonkers.

    If you have multiple servers, and people want to play, they can jump ship if the economy on their server goes bananas, be it because of farmers, because of mob monopolizing or because of guilds undercutting prices to the point where they can easily monopolize the market. Now, while all those problems are hard to achive in EvE due to its size, the problems exist.

    EvE did have a farming problem not too long ago. Prices plummeted and life was pretty hard for miners. What would have happened in a multi server environment? Right. People would have moved. As any statistician can tell you, timeline analysis is very hard to do and rather unreliable if you change a key variable in the middle of your analysis (in this case, the number of players).

    So yes, having a single server is actually a benefit.
  • by Llywelyn (531070) on Thursday September 13, 2007 @01:53PM (#20591365) Homepage
    First: all models are wrong, some are useful.

    Second: About the only item that Eve doesn't have on that list is "natural disaster." Social Upheaval? Alliances falling apart. Technological Breakthrough? Release of new tech (e.g., not that long ago when rigs or thermodynamics came out). War? A fundamental factor in Eve.

    Sure, its not a perfect "true-to-life" model, but I can see why an economist--most economists focusing on theory instead of application or simulation anyways--would be thrilled at the prospect of a testbed that is basically a perfectly efficient economy, even if it is a reduced subset of the "real world."
  • Re:Yes, but no. (Score:5, Insightful)

    by Xonstantine (947614) on Thursday September 13, 2007 @02:04PM (#20591537)

    No, it would not have any relevance to anything other than a fairy tale.
    Some skeptics would say that it's a fairy tale anyway.

    Governments control their economies.
    No, with a few notable exceptions, governments excercise influence over economies. They do this through a whole host of factors, of which monetary policy is only one of many. And governments exercised control before there were central banks based on fiat currencies. The idea that macroeconomics, or it's validity, hinges on a central bank and government debt is absurd. It's not unlike saying the laws of physics depends on the existence of rocket ships (and please, no reference to the Copenhagen school). My point: the validty of macroeconomics doesn't depend on a central bank. Central banks use macroeconomics to plan policy, not the other way around (e.g., rocket ships use physics, physics isn't dependent on rocket ships).

    Otherwise, the government would not have much in the way of revenue.
    Again, this is nonsensical. Governments tax productivity. Income doesn't suddenly appear out of the quantum foam. Manipulation of credit markets and central banks allows them to spend beyond their ability to raise tax revenue, in much the same way that debasing currency did in the past (and why debasing / counterfeiting has been dealt with harshly...only the government is allowed to destroy the value of money or currency), but it does not remove the need for taxation.
  • Re:Any conclusion? (Score:4, Insightful)

    by spedrosa (44674) on Thursday September 13, 2007 @02:08PM (#20591607)
    The thing is that you are looking at the compiled data. Ordinary players have no way to gather all that information by themselves. Now that the graphs are published, most conclusions are obvious indeed.

    As for the rest, the players will have to figure out for themselves.
  • by Etrias (1121031) on Thursday September 13, 2007 @02:23PM (#20591931)
    I don't think you've even played EVE, and that said, you need to play it to understand that this isn't just some regular MMO economy. It's not like the economy on WoW which is different server to server but largely predictable, especially with certain plugins to track some transactions during the day.

    EVE has a very, very different player economy. It is almost entirely player driven. No NPCs to sell to, no standard items that you get for "questing".

    Notice that this first report was on mining only. Mining and the minerals that are bought and sold are the ground base of a player economy. Without those materials, you can't build anything from the simplest frigate to the massive quantities you need for carriers. Not to mention individual components you need to equip on these ships as well.

    Just because he didn't mention any "ISK farmers" (to use the correct terminology) doesn't mean they don't exist, but because EVE's skill system is so radically different from other MMOs, players can't really power-level anyway because all skills take time, not resources to develop. Because he focused on one vital component of the economy and showed a number of trends, showing the supply and demand needs of various areas of space, that was a huge step. You treat this as an "end-all/be-all" economic report. He's just scratching the surface.

    The reason that this is such a focused report is because of the immense complexity of EVE as a single world economy, stretching dozens of systems with tens of thousands of players, all interacting, all selling, all help from an NPC that you can dump unwanted items somewhere.

    Talk about clueless.
  • by cowscows (103644) on Thursday September 13, 2007 @02:39PM (#20592195) Journal
    There's pluses and minuses to both methods. Multiple servers allow you to test in the ways that you mentioned, but having just one game universe makes it more "real" in some ways. Basically the players are stuck with that one model, much like the real world is stuck with the one global economy. Plus you'll get some long term growth data that you wouldn't get otherwise. If another 20k people join, instead of putting them all off on their own server with its own economy, you see the effects they have on an already existing economy, and how it grows and adapts. And also how new players find their way into a well established economy where many players are already far ahead of them.

    There's plenty to be learned from both setups, no doubt.

Someone is unenthusiastic about your work.