The In-game Economics of
Ultima Online
Description and Analysis
Zachary Booth Simpson
www.mine-control.com/zack
CGDC 2000
Who am I?




Previously Director of Technology at Origin,
Titanic Entertainment
I was not a UO team member
I am not an economist
Consultant for Origin in 1998-1999, studied
UO economics
Acknowledgments

Members of the UO team, especially:
–
–
–
–

Raph Koster
Rich Vogel
Starr Long
Damion Schubert
Economic consultants:
– Andrew Stivers (U. Texas)
– Timothy O’Neill Dang (U. Arizona)
• cregtog8@barriodevo.org
– Prof. James Galbraith (U. Texas)
What is this talk?


Brief description of the economy
An analysis of how the economy evolved
– Harp on things that went wrong
– Not enough time to get into solutions, sorry!

An occasional interlude for Economics 101
What this talk is NOT


Not a “how-much-is-it-going-to-cost-me-tobuild-my-UO-clone talk”
Not a debate over how fun UO is
– Although that is ultimately more important

Not about UO characters sold on eBay
– No matter how much Mary Margaret begs! :)
What is “economics”?


Not the study of money; not finance.
A set of tools developed to analyze how people
behave when allowed to trade.
– people behave however that damn well please no
matter what the math says.

“Tools are not bricks”
Right tool?


Be careful: people don’t necessarily behave the
same in a game, some tools may not apply.
I highly encourage you read up!
– Politicized topic = bias & bad science
– I like the economists who still treat the subject as
psychology and not as calculus.
– J.K.Galbraith and P.Krugman are both very readable.
What is an economy?


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Any system that involves people exchanging
goods and services
Does not imply currency or prices
Ideal economy is meeting everyone’s needs
– Even the one’s they didn’t know they had.


Ergo: hard to say if an economic state is
“good”.
Maybe it’s easier to say if it is bad...
Bad Economy Symptoms Part I

Minimal person-to-person interaction &
dependence, especially between advanced
player and newbies.
– Advanced player give newbies high-powered items
because they have more than they need.
– Advanced players discard items that a newbie would
love because it isn’t worth their time to find someone
to give it to.
Bad Economy Symptoms Part II

Supply is unpredictable
– Players hoard items, reducing availability
– They litter the world with unwanted junk
– They lose interest in the game because there’s
nothing left to acquire.
– Prices fluctuate wildly or become inflationary

Demand is unpredictable
– Players can’t find buyers for the items they’ve been
encouraged to produce
– Player manufacturers create unwanted junk
Bad Economy Symptoms Part III

“Tragedy of the commons” rules the public
spaces
– The principle that something that is a lot good for me
and a little bit bad for everyone else will inevitably
be exploited until it is all bad for everyone.
– Classic example: grazing sheep in the town commons
Semantic Nit-picking


A “virtual economy” is the simulation of an
economy.
UO is not a virtual economy; it is a real
economy involving the exchange of virtual
goods and services.
What virtual goods? A sample
Armor
Weapons
Clothing
Food
Reagents
Tools
Provisions
Miscellaneous
50
Bronze Shield, Leather Gloves, Orc Helm, Plate
Mail Leggings, Studded leather Sleeves
44 Bow/Arrow, Battle Axe, Dagger, Halberd, Mace,
Spear
43 Bonnet, Earrings, Fancy Shirt, Feathered Hat,
Kilt, Skirt, Wizard’s Hat
69 Bowl of Peas, Fish Steak Raw, Fish Steak
Cooked, Pitcher of Wine, Wheel of Cheese
8
Black Pearl, Garlic, Nightshade, Spider’s Silk,
Sulphurous Ash
74 Ball of Yarn, Cleaver, Hammer, Iron Ingot, Ore,
Potion, Magical Scroll, Sextant, Tinker’s Tools
49 Backpack, Bedroll, Fishing Pole, Lantern, Map,
Torch
170 Basket, Book, Broken Chair, Chess Piece, Fork,
Horse Dung, Kettle, Painting, Tribal Mask
Where do baby items come from?


Loot on creatures
Raw materials from mines
– Extracted from automatically generated resources
such as ore, wood, or wool from sheep
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Player manufacturing
– Applying skills with tools and raw materials
generates finished goods such as weapons and armor

Non-player manufacturing
– Shopkeepers produce many items that do not have
player-production paths; e.g. reagents
Weaving Skill Rebus
Courtesy of uo.stratics.com
Problem I
Over-Production
The Failure of the
“Improve-through-doing” System
Practice Makes Perfect
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Player skills improve through use
Unused skills degrade
– Hard to become a jack-of-all-trades
Incentives To Produce
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Market demand
– “Hey Mr. Tailor, can you make me a shirt?”
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Making now improves quality and price later
– “Can’t talk, making shirts!”

The sheer fun of it
– “I built a fort out of fur boots!”

Cheating with macros
– “When I wake up tomorrow, my character will be a
rocket-scientist!”
The Result: Oversupply
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UO’s “practice makes perfect” rules create
incentives to over-produce certain goods.
The market in basic items is saturated and thus
prices are extraordinarily low.
Producers get upset at the low price but keep
manufacturing anyway.
– Like Texas Oil Producers and DRAM chip fabs
– Tragedy of the commons
Oversupply: so what?

Unlike the real-world, more stuff is very bad:
– Servers slow down
– Backups get bigger and therefore less frequent
– Black-holes

Shifted Supply Curve
d
an
m
de
Non-market
incentives push
the supply
curve right.
Increasing Price
Econ 101: Shifted Supply Curves
o es
w/ ntiv
y
pl nce
p
su ill i
sk
"correct" price

Demand curve
hasn’t changed
so the price
drops.
deflated price
"correct"
production
overproduction
Increasing Quantity
th es
wi ntiv
y
pl nce
p
su ill i
sk
Problem II
Broke Shopkeepers
The Failure of the NPC Shopkeepers
The Shopkeeper Failure
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Shopkeepers intended to supply the unmanufacturable as well as solve transience
AI was a complicated analysis of market forces
Important: NPCs are part of a “virtual
economy” that is attached to the “real”
economy.
– It’s really weird
To subsidize or not?

NPC shopkeepers subsidize production to
encourage character development
– Like Dad at a lemonade stand
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Shopkeeper cash-flow AI reasonably refused to
buy junk already in over-supply
Players report this as a bug -- expect a free ride
– Used to single player games
– Not everyone wants to be an entrepreneur
But, before we punt NPCs...

The shopkeepers have no cash, therefore give
them something to sell that players want
– Extra advantage of removing gold from hyperinflated economy due to counterfeiting

Difficult to invent lots of new things
– “New improved BLUE armor, a lot like silver armor,
but its blue!”
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Players upset by unfair competition
– “Hey, how come the NPCs get to sell blue armor but
I don’t? This sucks!”
OK, punt.
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Designers gave-in, eliminated shopkeeper
profit-motive AI
Shopkeepers now subsidize up to X units of
junk per hour.
Inflating the gold supply, but at least newbie
characters are developing.
Black Markets
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Reagents most valuable commodity distributed
exclusively by NPC shopkeepers
Speculators with bots and “Mafia” cornered
the market in reagents and inflated the price
Amused a minority, outraged the majority
Eventually fixed itself as everyone got into it
– No barrier to entry
Econ 101. Soviet Retail

Soviet Union had non-market incentives to
produce
– Soviet stores filled with useless items that no one
wanted

Shortages and huge lines formed for the what
people did want because trading was
inefficient / illegal
– Subsidies and rationing common

Black markets
Problem III
Inflationary Gold,
Depleted Resources
The Failure of the Closed Economy.
A Study of Macroeconomics.
UO Resource Flow

All items are
made of
resources
1 Unit Meat
Rabbit =
1 meat, 2 fur
– metal,fur, meat,
gold, magic, etc.

Resources flow
from item to
item and are
conserved
2 Units Fur
Steak =
1 meat
Pelt =
2 fur
Fur Boots =
4 fur
Pelt =
2 fur
Original UO Resource Flow
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Each “world” initialized with X meat, Y fur, Z
gold, etc. in a “bank”
Resources flow into world items from bank
Items decay, break, sold, etc. flowing out of
world back into bank
Resources are conserved and thus no inflation!
Original Economic Flow
Original Flow
1. Virtual Resources
(d) Gold from sales to NPCs
(c) Spawning
2. Natural Resources
(b) Gold harvest
(a) Exchange
3. Gold
(b) NPC suppliers
(b) Purchase from NPCs
(a) Non-gold harvest
4. Raw Mat erials
(b) Botched manufacturing
(a) NPC manufacturing
(a) PC manufacturing
5. Goods
(b) Decay
(a) Cache
6. Invent ory
(c) Selling to NPCs
(a) Barter & Exchange
(b) Degradation
Hoarding Is Rampant
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People hoard items like pack-rats
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“Someday I’ll need this”
Decoration
Laziness
Speculation
Mementos
Status symbols
Achievement
Tragedy of commons making server run slow
– Players don’t even realize it
What’s wrong with this picture?

Drains all suck
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Botched manufacturing is insignificant
Players hate decay especially when not online
Players hate excessive degradation
Selling to NPCs is great, but it involves printing
gold!
All resources eventually end up in inventory
and thus...
No dragons to kill!
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In closed economy: no outputs = no inputs.
I.e. no dragons to kill!
Again: changing the rules midstream (taking
things away) is politically unacceptable.
Give us orcs to kill or we’re going to riot!
Econ 101. Liquidity
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
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Two equally important factors in price
determination: Quantity and Liquidity
Liquidity is the measure of how willing people
are to trade in something.
Even if there’s a lot of something, it doesn’t
mean it will be cheap.
– If no one will give up their Pokemon cards, they will
still be expensive even if there’s millions of them.
Econ 101. Liquidity of Currency

Liquidity of currency matters too
– Currency is just another kind of commodity

Inflation
– If it is created in excess, it becomes worthless and
inflation sets in, i.e. prices rise.

Deflation
– When people hoard currency as savings, they make it
more scarce and prices or production will fall
– (Baby-sitter co-op analogy)
Let it rain!
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The concept of closed economy was
unsustainable without new drains
Lots of drains proposed, none were politically
acceptable/effective in the short term
– Taxes, Real-estate Maintenance Fees, Natural
Disasters, Lotteries, Consumables, Indulgences,
Recycle bins, Capital depreciation

To hell with it: disconnect the drain and pour
in the resources
– abandon the closed-economy; reduce player bitching
Faucet
1. Virtual Resources
New Flow
(d) Gold from sales to NPCs
(c) Spawning
2. Natural Resources
(b) Gold harvest
3. Gold
(a) Exchange
(b) NPC suppliers
(b) Purchase from NPCs
(a) Non-gold harvest
(c) Rent to Vendors
4. Raw Materials
(b) Botched manufacturing
(a) NPC manufacturing
(a) PC manufacturing
5. Goods
(b) Decay
(a) Cache
6. Inventory
(c) Selling to NPCs
(a) Barter & Exchange
(b) Degradation
(d) Distribute
7. Vendors
(a) Vendor Sales
Drain
So Now It’s Inflationary
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The servers are filling up
The backups are getting bigger
Prices are rising
But at least there’s dragons to kill!
Problem IV
Counterfeiting
Counterfeiting

Hacker’s Law:
– Developers are out-manned by hackers; hackers have
more time and great communication
– Therefore, exploits will always be found faster than
fixes can be made.

An obscure server fault allowed cloning of
gold and reagents.
– Fixed after a few days

“Wrecked the experiment”
Effects of Counterfeiting

People didn’t stop playing
– Maybe the economy isn’t so important after all

Anything players wanted from NPCs, they
could have.
– They didn’t really want anything, except reagents
which were also counterfeited.
Effects of Counterfeiting (cont.)

The worlds where there was early
counterfeiting have a higher “standard of
living”
– Players don’t seem to care, they want challenges and
relative wealth

Not like the real world at all!
– People don’t move to Mexico because the US is too
rich!
Lessons Learned
A Massively Abbreviated Summary
Lessons Learned Part I

Hoarding is rampant.
– Failure of closed economy.

The economy must maintain liquidity; tying
input flow rate to the output flow was a bad
idea because hoarding froze the input making
the game uninteresting.
– Failure of closed economy.
Lessons Learned Part II

Over emphasis on the macro-economy and
under emphasis on the micro-economy made
setting prices on NPC goods difficult and
inefficient
– Failure of NPC Shopkeeper economy

Institutions and opportunities for player-toplayer trade need to be thought out and
provided but not overly designed
– Failure of the NPC Shopkeeper economy
Lessons Learned Part III

Some design elements had unintended
economic consequences. Economic
motivations and incentives need to be
considered on all design elements
– E.g. vendors used as storage containers

Incentives to overproduce resulted in
oversupply and devalued prices
– Side-effect of improve-by-doing system
Lessons Learned Part IV

Players expect to make a profit for their labor
if it is encouraged through game mechanics.
– Side effect of the improve-by-doing system

The economy is not the game
– Counterfeiting
Thanks for coming!
Article reprinted in proceedings
(with unreadable graphs)
Original on www.mine-control.com/zack