In-game hyperinflation

Here's a totally amazing and fascinating story about hyperinflation crashing the economy of Blizzard's massively multiplayer online RPG Diablo 3. Blizzard blew its economic strategy for Diablo 3 by making the "sinks" (places where gold is taken out of the economy) unattractive, adding in real-money-for-stuff trades, and then letting a bug run wild. Before you knew it, players were loading up virtual wheelbarrows full of virtual gold to buy virtual bread:

This was demonstrated when, in a message board entry prefaced by stating “Sell Equipment before Patch 1.0.5 Hits!” (a patch is a piece of software added to an operational program or application as bugs are found, changes desired, or ways of improving performance discovered), a player warned that,

Blizzard just announced that the drop rates for [certain] items are going to be doubled … if you haven’t already, you should consider converting your current gear to cash … since real $ [are] the best hedge against gold devaluation[.][11]

If historical cases of hyperinflation — real, and now virtual — have one thing in common, it is the instinct among its victims to blame the symptoms rather than the disease. The Austrian economist Hans Sennholz noted that during the German hyperinflation, “intrigue and artifice” were believed to be at work.[12] Similarly, a handful of Diablo 3 players, frustrated about the decimation of their purchasing power, expressed increasing suspicion of manipulation and conspiracy theories.

[W]hy [are] certain items priced [s]o astronomically high? Many of them are not even that good yet cost 100’s of millions of gold. … I have about 45,000,000 gold saved up [and] check every few days to see if I can get any upgrades that are worth the gold, but … everything is vastly overpriced … clearly controlled by the gold sellers.[13]

In case you missed it, I wrote a book about this.

A Virtual Weimar: Hyperinflation in a Video Game World (Thanks, Tom Keller!)


  1. I love it, an economy where gold is worthless and ‘Dollar Bugs’ roam the streets, encouraging people to embrace the safety and security of good, honest, fiat currency!

    1. I bailed out of Diablo 3 after a mere 180 hours or so of play, long before the hyper-inflation but even then gold farmers and auction bots had destroyed. Literally within months of the game launching. The D3 economy isn’t an economy, it’s a joke. 

      The Guild Wars 2 economy is actually kind of interesting. Someone should go study that. “Gems” became the real world equivalent of “gold”. So you bought Gems with in-game gold or real world dollars with rates of exchange determined by demand and chunky commissions levied by Arenanet when you bought them. The dollars feed into the loop but not out of it because you can’t legitimately sell gold or Gems for dollars.

      i spent half my time in GW2 investing via the Auction house, mainly buying and selling commodities. 

  2. I can only imagine that this is the first time that any article on BoingBoing has ever approvingly linked to an article on the Ludwig von Mises Institute web site :-).

  3. The massive escalation in prices only affects the extremely rich, though.  If you want to put together some reasonable gear to play the game through it costs next to nothing.  I played 250 hours when the game came out and recently found out I could massively upgrade every piece of gear I owned for 15k-20k each.  Weapons that would have been worth a million a month after the game came out (when a million was a lot) are so valueless that no one would even bother posting them.

    The terrible consequence of the D3 economy is not that some guy on the forums can’t afford the amulet he wants, it is that there is no point in playing the end game at all.  By the time you’ve leveled up from 1 to 60 you will have earned enough gold to buy a set of gear that will let you easily clear out the rest of the game.

  4. Interesting, having read the article i’d love to see an analysis of what happened by non-austrian economist. 

    I find it hard to take much seriously from I site where I once read an article that claimed universal education and child labor laws would lead to a population collapse because they removed the economic value of children to their parents.

    1. Yep, the head of which (Lew Rockwell) ghostwrote Ron Paul’s horrible Survivalist Newsletters.

      Is this an ad-hom? I don’t particularly care. They don’t particularly care about evidence very much either-

    2. While the conclusions reached at the end of the article are rather suspect (failure to regulate Diablo gold proves that Keynesian economics can’t be trusted!), the rest of the discussion is surprisingly solid.

  5. I’ve been playing D3 for a bit and I feed the trading system was set up just to create inflation, it’s amazing the crap items that people are now demanding a Billion plus gold for.

  6. “There is no doubt a fear among game designers that a fixed amount of in-game currency would reward the first, most active players, who’d then save (“hoard”) their winnings and leave decidedly fewer opportunities for later or less active players; online gaming is a business, after all. But this is essentially the theoretical underpinning of the Keynesian concept of a “liquidity trap”, which is countered by Austrians who note that in the real world there is always some level of consumption… [P]ersistent deflation in a virtual world would benefit newer players and encourage longer-term players to remain active.”

    The way he describes potential in-game deflation, this makes me think of World of Warcraft. In the beginning, when the level cap of WoW was level 60, it could take a player a moderately long time to reach that cap and start on the endgame material. But as expansions increased the cap to level 70 and then level 80, the length of time to reach 60 was reduced so that new players wouldn’t feel totally left behind and could catch up to friends at the end. So there was basically a form of “experience point deflation.”

    WoW did suffer gold inflation in a way. Say you’re a new player who wants to take up blacksmithing and craft your own swords. You need to craft X number of copper swords before you can start crafting iron swords. In the old days, a stack of 20 copper ore might have cost you 10 silver (the functional equivalent of $10). As expansions went on and new players could earn more gold in later levels, a stack of copper ore could cost anywhere from 5 to 15 gold (functionally $500 to $1500), way out of the reach of new players. 

    But there’s a trade-off here – the new players can sell as well as buy. If copper ore costs 10 gold a stack, why rely on the 50 cents you get from completing early quests? Players used to save every coin they could get to have 50 gold at level 40 and pay for riding skills. Nowadays, a brand new player could mine a few stacks of copper ore, sell them to experienced players on the auction house (who take money off of their high-level characters and use the ore to train their “alts”), and have all the money they need for the early game.

    The Mises guy does the usual Mises thing and shouts, “See, you can never predict an economy! That’s what Keynesian economics always fails!” Except WoW hasn’t been sundered by hyperinflation… because WoW has a lot of goldsinks, like the 50g cost of your level 40 mount. Diablo 3’s economy isn’t failing because it doesn’t adhere to free-market principles – it’s failing because putting a public AH on a non-MMO game was an untested move, and the designers had no exact knowledge of how millions of people would react to it. If they had as many viable goldsinks as WoW did, the whole thing might have worked.

    But having said that… what if you had a game like this with an Auction House where the amount of gold that monsters gave went down over time? I guess that would be, like, a depression of wages, and Keynesian economics predict it would lead to deflation. Deflation is horrible for a real-world economy where people can lose their jobs and wages, but as the author notes, this isn’t an economy where people need to buy food and shelter. If people hoarded money, you wouldn’t have to deal with the effects of low private investment. The whole thing might just work.

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