Monday, June 25, 2012


Rundle Allnighter, of Against All Authority and one of the hosts of  the Lost in Eve podcast has recently brought to light his economic strategy.  For simplicity, we will call it Rundlenomics.  The philosophy is that by buying market items at a high price and reselling them at a lower price he is somehow helping the Eve Online economy.  Rundle claims that for every isk he spends, he is in some way increasing the amount of isk in the economy 4 fold or more.   In addition Rundle hopes that by buying high priced items he is giving isk to hard working industrialists and that by selling low, he is putting the ship in the hands of a mission runner, faction warfare pilot, a  pvp-er  or someone who will put the ship to use in game to earn themselves isk.

Unfortunately he is horribly horribly wrong.

Lucky for Rundle he is merely misinformed and not stupid.  His well intentions with the use of his iskseems to be based on a basic misunderstanding of economics. 

In the real world economy, banks generate money and boost the economy through the loaning of money.  A simple example of how this works is as follows:  Rundle buys a new gaming desktop from Joe’s Desktops for $2,000 USD.  Joe, owner of Joe’s Desktops now takes that money to his bank, First National Bank.  First National must retain a certain amount of that money in reserve according to the federal reserve rate (no eve parallel).  First bank lends $1,800 USD to Bob of Bob’s Kitchenware to purchase inventory.  The cycle repeats with banks lending a portion  of their savings  to customers, thus increasing the initial amount of $2,000 USD to an amount equal to 1/Fed reserve rate.  So if banks are required to keep 10% of deposits on reserve than the $2,000 USD would be inflated to $20,000 USD.  This is what Rundle is thinking will happen in eve when he buys high and sells low.  But that is not what happens in Eve.

Eve’s economy is well renowned for its complexity and similarity to real world economics.  However, there is no mechanic supported banking system that allows the above mentioned system to occur. 

Other issues occur with this buy high sell low concept.  One is that mostly market manipulators put up higher than average sell orders, and also put up much lower than average buy orders.  So Rundlenomics most likely only helps the market manipulators.  In addition, depending on how high and how low one bus and sells respectively one could actually  hurt non-marketeering characters by lowering the market average and forcing industrialists to sell there goods at ever decreasing prices.  Certainly even if these actions are not changing the average price themselves, the average becomes more easily manipulated by significant reduction of the sample size, in this case removal of buy and sell orders.

On the other hand, what will help the eve economy is pvp.  Isk efficiency ratios are used to determine how good a pvp-er is, but, they can also be used to calculate a players effect on the economy.  Lets say a pilot has 80% efficiency.  So for every 20,000,000.00 isk spent, they will, on average, destroy 80,000,000.00 before losing their 20,000,000.00.  This means that having spent and lost 20,000,000.00 they now have caused other  pilots to go replace 80,000,000.00 isk worth of items in the form of ships and modules.  This does increase market activity and put isk in the hands of everyone.

Buy High sell low won’t help the eve economy, PVP will.  And apparently I’m the flavor of the month, hope it tastes good…

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