I just listened to episode #27 of the Auction House Junkies podcast where they discuss at length the concept of inflation and how to deal with it in WoW. It made me think and question some of my assumptions, and while I’m not sure I’ve come to any new, firm conclusions, I feel compelled to share my thoughts.
Different schools of economic thought actually define and measure inflation differently, but they are all trying to determine the buying power of money over time. Some economists view and measure inflation mainly by looking at the price of goods — if the prices go up, your money buys less. Others take a monetary view, defining inflation purely as an increase in the supply of money. I tend to think the most accurate model, especially in WoW, is a mixture of these. There are some things about WoW that make it very different than real life.
Hedging for inflation is the process of trying to protect your total buying power by converting money (that you expect to lose buying power) into some other asset. In real life, inflation hedges are often real assets with intrinsic value like gold or land. These items are expected to rise in price at a rate equal to or greater than the rate of inflation, and in some cases can generate income without being sold. Some commodities are also considered to have intrinsic value, like oil and other fuels, but they are generally subject to more price fluctuation due to supply and demand.
So what item is like land inside WoW? One example I thought might be bank space. The problem is things like bag slots or guild bank tabs in WoW seem to either stay the same price or sometimes even decrease in price. Same with vendor mounts and abilities like duel spec or epic flying. These things all cost less gold than they used to despite overall monetary inflation in the game. So there is no reason to rush out now and buy up all the bank slots for all your alts — you’ll be able to do so for the same amount of gold later. Also, in WoW these assets and a lot of other items cannot be turned back into currency.
Bags are a bit different. It probably makes really good sense to upgrade all the bags on all your alts and in all your banks to the extent you can now. The price of bags does fluctuate and most people think it will go up especially at the beginning of MoP. And if you plan to roll a monk or other new character, tuck some bags for them away now.
In general I don’t think there are many good, traditional monetary inflation hedges in WoW. That said you can proceed to take a more price oriented view (as do the hosts of Auction House Junkies) and identify items that you anticipate will rise in price and stockpile them. Doing this now, before the expansion, is really no different than using these techniques at anytime to earn gold. It’s just that the expansion brings with it an influx of demand on some goods that effects your choices of what to target. If you identify items correctly and stockpile them, you will earn gold. It’s sort of like “extreme couponing”, but there aren’t really coupons in WoW unfortunately.
- From CNN Entertainment’s “Cover story: Extreme TV pushes the limits”
As I’ve stated in “Ugh, a Mission Statement. Really?“, I haven’t and don’t stockpile, so I wouldn’t pretend to give advice about what to target. I may do some experimenting with stockpiling though now after thinking about it. If you want some advise about what to stockpile, perhaps start by reading these posts from April’s Blogging Carnival at Cold’s Gold Factory. (Cold is one of the hosts of the Auction House Junkies podcast.)
Monetary inflation does exist in WoW. New items, mounts and alike, introduced in MoP, will be priced based on what blizzard knows about the overall size of the WoW economy. Repairs will cost more on higher item level items. And on the new black market auction house you’ll be competing with other top gold earners for rare rewards. So do keep all this in mind when setting your goals, and be prepared to reward yourself — that’s why we do this!