"Furthermore, inflation is not simply an increase in the supply of money within an economy; it is the increase in that portion (if any) not backed by a commensurate increase in specie: most common in history, market commodities like gold or silver. "
Either the author of that article is misenterpreting, I am misinterpreting or Austrian school of Economics is tad stupid. I'm hoping that the one at fault here is me.
Basically even with increase of the amount of gold or silver you'd still get inflation, check what happened with Spain at 1500 or so when they got a huge influx of gold from the new world.
You can also imagine what would happen if suddenly we'd get huge influx of new gold. As the amount of stuff in the world does not increase the amount you can buy with that new gold must decrease.
"Austrian economics is tad stupid" is the more correct choice. Austrian economics does not correspond with reality and is rightfully marginalized and ridiculed by the vast majority of economists.
In the 19th century we thought of inflation as the change in ratio of money to goods. Inject more money in the economy without a commensurate increase in the amount of goods and you get inflation. Take money out of an economy and deflation occurs. Now we know this isn't really accurate. Inflation happens not when there is more money in the economy but when more money is competing for the same goods. If money just sits in a bank account (or virtual bank account in the case of Diablo III) it doesn't really affect the economy and no inflation occurs. There is the same economic activity but a few rows in a database somewhere contain larger numbers.
This is also why in the real world the fed can triple the size of the money supply without causing inflation. Of course the austrians predict, over and over again, that runaway inflation is going to happen Any Time Now. But it doesn't and it won't.
Of course in a completely healthy economy you would expect an increase in the money supply to lead to an increase in economic activity and inflation, because in a healthy economy people spend and invest the money they have.
Austrian economics is about digging gold up from the ground, then smelting it into ingots and then burying those ingots again in a vault somewhere. Only through this mystical process can you get Real Money. Otherwise the money is "fiat money". It's so silly.
>> This is also why in the real world the fed can triple the size of the money supply without causing inflation. Of course the austrians predict, over and over again, that runaway inflation is going to happen Any Time Now. But it doesn't and it won't.
What makes you so sure no runaway inflation will occur? Just because you haven't seen it yourself yet, it's unimaginable?
You're right about two things: inflation happens when more money is competing for the same goods, and increasing the money supply does not by definition cause inflation. The conclusion you are drawing ('the fed can triple the money supply without triggering inflation, and runaway inflation will never happen') doesn't follow from that though. Yes, all the money pumped in the economy is sitting on bank accounts right now, interest rate is near-zero and nobody is investing (throwing easy money at Wall Street for short time profits, jacking up the DJIA doesn't count as 'investing'). That's the sentiment right now. What do you think will happen when the economy picks up some steam, people get more confidence, and investments and consumption goes up?
The tricky bit about 'runaway inflation' is the 'runaway' part. You can only control inflation by very careful monetary policy, because economies are like oil tankers: they change direction very slowly, but if they start moving you can't stop them anymore. Runaway inflation doesn't occur when you increase the money supply, because when you are increasing the money supply, it's because the oil tanker has almost stopped, and you want to get it going. The question is what happens if it picks up too much speed further down the line.
Maybe you don't believe in dollar hyperinflation, but the observation that 'austrians predict runaway inflation over and over and it never happens' is simply wrong. It didn't happen for dollar, euro or yen, but it happened in Weimar, Zimbabwe, Urugay, Argentina, all within 100 years time.
> What makes you so sure no runaway inflation will occur?
Because when the economy picks up the Fed will decrease the size of the monetary base by selling treasury bills. The economy isn't going to pick up overnight (high unemployment, low demand, etc) so the Fed will have enough time to reduce the monetary base as needed.
Hyperinflation can happen, of course. But not through expansion of the monetary base in a liquidity trap. Austrian economists claim the opposite, and even go as far as saying that there is True Inflation, but that the gov't cheats in the way prices are measured. Again, completely silly.
Mainstream economics explains why inflation occurred in those countries. Those cases have been thoroughly studied and are mostly well understood.
>> Because when the economy picks up the Fed will decrease the size of the monetary base by selling treasury bills.
That's how it has always worked in the past: by extremely careful control of the money supply, through selling or buying treasuries. That's not what's happening right now. The FED is not just buying treasuries, but also RMBS, derivates, even shares, all at unprecedented scale, and all while keeping interest rates at near-zero. And let's not forget the billions of dollars used to 'save' banks: ultimately, the US government has to finance these by either raising taxes (not happening) or borrowing more from the FED, which means that effectively the 'bad loans' and their derivates that almost brought down these banks are also financed by an increase of the money supply.
Your assumption the FED can cool down the economy without completely killing it by huge interest rate hikes and sellof of US treasuries -throwing millions of people in unsurmountable debt and completely devastating all confidence in US treasuries as solid investments- as soon as the money velocity goes up and inflation starts to rise, is naive at best. Central banks around the world are very aware of the monster they are creating and the risk that it will lead to a world-wide currency devaluation war. Just read between the lines of public statements about Japan trying to devaluate the Yen, or China artificially keeping the Yuan as low as possible for years to protect their cheap export strategy.
>> Mainstream economics explains why inflation occurred in those countries. Those cases have been thoroughly studied and are mostly well understood.
While the factors that caused the monetary collapse in the countries I mentioned were different, the ultimate effects are comparable: an unmaintainable monetary status-quo leading in a loss of confidence in government-controlled currency. I'm not sure why you think 'This time is different (tm)' for the US, Europe, or Japan.
As an engineer with no background in economics, do you have any sources that discuss the pitfalls of Austrian economics from a layman’s perspective?
It seems nowadays that the internet is so rife with neo-Libertarians that it’s very difficult to find content discussing Austrian economics that is not biased towards it. I’d like to see a more balanced perspective, or at least a rundown of reasons why Austrian economics has failed to correspond with reality.
I have a Master's in Applied Math, and a Master's in Economics (educated by neo-Classicals).
Keep in mind the Austrians are not a monolithic movement, this article was published on the Von Mises Institute site, which has more to do with the Rothbardian strain of Austrians. Core to Austrian-Rothbardian theory is a system of a priori axioms and a repulsion to mathematic formulations and empirical validation, so the argumentation can end up being along the lines of "because I said so!"
The objection to mathematization comes from the belief that preference relations lead to a discontinuous utility curve, which the tools of differential calculus cannot crack (this is wrong, as a graduate-level mathematical analysis covering Lebesgue integration shows).
There is a difference between inflation and hyperinflation. Hyperinflation is not too much money or not enough money to spend. Hyperinflation is a loss of confidence in the currency (ie, people immediately exchange the currency for something real). Money’s component as a store of value is what prevents inflationary episodes from happening. Imagine, if everyone believed that whatever cash that they hold would lose 50% of purchasing power by the end of the year, they would more than likely go ahead and spend it now instead of when 50% of the value is lost. That's the nature of hyperinflation.
The other component necessary for hyperinflation is a competing currency. In Zimbabwe the locals switched to dollars when their native gov’t currency failed.
From the article: Most of the gold generated by the ruthlessly productive, rapidly adapting bots found its way to third party vendors in a black market which undercut the prices in the sanctioned, in-game auction houses.
You do not really need a competing currency as anything can be a store of value eg cigarettes or cars that is not the currency. But dollars are widely available globally and plenty fit in a planeload of $100 bills. I was in Brazil when they had around 40% a month inflation and you could buy dollars on any street corner and the black market rate was broadcast every day on the TV news.
Actually, a huge influx of gold probably would not affect our economy today that much, because the total amount of gold is quite small relative to the size of the world economy, and gold is not used as a currency anyway. It would obviously destroy the price of gold, though.
That's really one of the two main problem with inflation scare mongers: they don't usually talk about the scale of things. A gigantic influx of new money would certainly cause inflation. However, when the Austrians come out of their holes, one is usually talking about low single-digit percentages of GDP in spending, which is really not that much.
The second main problem of Austrian inflationistas is that they deny the possibility that economic production can increase in response to an increase in spending.
I think you're misunderstanding the point because it's badly stated. Basically they say that inflation happens when money increases but the things paid for with money do not. For the lattery they use specie as a proxy - you need the exchange rate between money and something to actually measure inflation, but specie is a somewhat confusing choice because it's often considered (and sometimes defined) to be money.
Bear in mind that inflation of the money supply is not the only possible cause for price bubbles. I used to think so too (because hey, I used to read mises.org religiously). But it's not, as they say, that simple.
Here's are some good pieces on bubbles generally, and how money supply by itself can't explain real-world phenomena:
Also, the focus on "the money supply" is a red herring. What matter for real world prices is supply and demand of real world goods.
When you seriously study hyperinflationary periods, you realize that - unlike the story of this Diablo auction house bug - it's basically never a case of governments going crazy with printing money. There's always an underlying cause that came before the hyperinflation - usually a combination of a collapse of production capacity (in Zimbabwe, caused by drastic and ill thought-out economic reforms) and crushing foreign-curency denominated debt. See this paper, for example: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102
It is true that excessive spending by anyone can lead to inflation (not just by government, since most money is actually "created" by private banks). However, what Austrian-types like the Mises people blind themselves to is the fact that the economy has two possible reactions to an increase in demand: There can be price increases, and there can be increases in production.
To end up at their stated position, Austrians have to completely deny the possibility of production increases. It's no wonder they got basically all of their inflation-related predictions wrong for many years. They are unfortunately closer to religious dogma than serious economic analysis.
> the economy has two possible reactions to an increase in demand: There can be price increases, and there can be increases in production.
armchair economist here, but i woudl say that when the increase in money supply outstrip the increase in production (becase there is a limit to the rate of increase of production, but there is no real limit to the rate of increase of printing more money - just put an extra zero at the end, you don't even need more paper/plastic!).
Absolutely. It is a matter of quantity, and it would be nice to understand how much and how fast production can increase. But since Austrians usually outright deny the possibility that production increases at all, the path to a fruitful discussion is usually closed.
In practice, even the more ambitious types of policies that are debated do not actually increase spending that much.
Rothbard-school Austrians make the same error as classical Keynsians. They freeze the structure of production, treat it as a homogenous gas, and then modify some exogenous variable.
The Austrians modify money supply; the Keynsians modify the aggregate demand.
It's the same error of over-simplification. Economies are not smooth curves, they are lumpy and have heterogeneous networks of heterogeneous agents.
Good to see the Austrian School weirdos at the Ludwig von Mises Institute have given up real-world economics and now just play video games. Hopefully in the virtual world their incredible track record of dead-wrong predictions will cause less harm.
> incredible track record of dead-wrong predictions
The Austrian School economics methodology does not allow for making predictions. See e.g. the note at the beginning of http://wiki.mises.org/wiki/Austrian_predictions It provides certain tools and models that one can use for explaining events and reasoning about policy options. These reasoning can be used as a basis of predictions (along with the other, non-economics-theoretic assumptions), but the predictions themselves will fall outside of the economics science in the Austrian School sense.
Basically, if your analysis manages to reason away uncertainty of the future, you're not following Austrian methodology. And no, the Austrian methodology won't even let you quantify that future uncertainty in probabilistic terms: that would only be possible if it used causal explanations of human action; instead, it relies on teleological, goal-oriented explanations.
Now, questioning and disputing the value, coherence and real-world applicability of the Austrian methodology is perfectly OK. (Personally, I find the Austrian economists' disregard for formal notations very unfortunate, as I've mentioned in another discussion: https://news.ycombinator.com/item?id=1647747) Your comment, however, seems to be simply misguided, based on a flawed understanding of the issue, and the sarcastic tone is unlikely to facilitate a constructive discussion.
You probably know more about economics than me (I'm just a mathematician), so I won't argue against you, but if I understand your two posts correctly, it seems like what you're describing is completely useless. If a model doesn't have predictive power then what is it good for?
I understand from your other post that the justification of Austrian "models"/"explanations" comes from their simplicity. Which I guess is some application of Occam's razor? But that makes no sense - the simplicity of a model on it's own is no indication of correctness. You always need some notion of the likelihood of the observed evidence under that given model. Otherwise, you can just say "all people make all decisions completely randomly" and that's the simplest model of all.
A completely non-predictive model has no real-world meaning, because it can't be used to effect reality. I suspect that Austrian models do effectively have some small predictive power - there is an implicit causal analysis that comes from the small element of qualitative evaluation of uncertainty, no doubt used instinctively by practitioners to decide whether an argument sounds plausible.
Anyway, it all sounds completely ridiculous. How is their method of choosing explanations any better than a witchdoctor deciding that thunder is a sign of the gods being angry?
Austrians argue that predictions can't, as a matter of epistemology, be made.
Of course, humans do that all the time. What's missing from the original Austrian concept in Mises is allowing for imprecision -- making accurate predictions with error bars for variability below the threshold of detection.
What von Mises didn't like about this and what Rothbard hated about it is that such predictions are statistical and probablistic in nature. They aren't deontological, they can't be nutted out a priori from first principles.
They have a real bee in their bonnet about it. It's a shadow (ha!) of Platonist/Aristotelian bunfights.
Out here in that's-nice-but-I-have-shit-to-do land, grownups accept that models are wrong. But even if the map is not the territory, most of the time it's still good to have a map.
Non-predictive analysis can't be used to make decisions, and therefore can't have any effect on the real world unless it is being used incorrectly. By their own argument, Austrian economics is a waste of time.
A dislike of stochastic models (however understandable in historical context) should not be taken seriously in the modern world. Complex chaotic systems are modelled through intensive probabilistic simulation all the time.
For me, the major idea that the Austrians bring to the table is that the study of economics is not a science and never can be. Attempts to create and support models by quantitive analysis of data are flawed because human economies are so astronomically complex that it's impossible to isolate variables, and therefore impossible to design valid economic experiments or draw sound conclusions from economic data.
There are many parallels to algorithms analysis. If we want to know how fast an algorithm runs, our approach isn't to try to run it on every processor in existence and compare the results. Instead we break down the algorithm logically to deduce its theoretical running time.
Austrian economics--in its good parts anyway--is an attempt to build a framework for economics that is more like the asymptotic analysis of algorithms. But this very compelling goal is frequently derailed by politics and polemics.
Algorithmic analysis is absolutely scientific. Asymptotic analysis is based on models of computer behaviour that are testable (and people do test them and do improve on them). Moreover, the asymptotic models make predictions and those predictions are testable (and people do test them and do improve on them).
The asymptotic analysis of algorithms would not be useful if it didn't make accurate predictions about real world phenomenon. I've written peer reviewed computer science papers where I have devised an algorithm, predicted its asymptotic behaviour and then validated through empirical testing.
What you're describing sounds completely different. If the major idea is that human economies cannot be scientifically analysed, then surely all analysis is a waste of time? An analysis that isn't based on the scientific method isn't more likely to be correct.
Well, pure mathematic models also don't have any real-world meaning, and no predictive power with regard to the real world events. Still, nobody thinks that the analytical proof of the Pythagorean theorem is somehow inferior to the empirical one (involving multiple reproducible experiments that measure sides of the actual triangles drawn on a piece of paper with a ruler). We are content with mathematics being consistent within itself.
However, if we (1) add certain assumptions about, say, physical laws, the structure of the reality, the way we can observe it, (2) propose a reasonable way to map some aspects of the world to our mathematical models, (3) calibrate the result according to the future experiments/observations -- we might get a quite useful natural science like physics or astronomy. The pure math will serve only as a low-level tool. That's how the Austrian economists see the place of the pure economics theory: just an analytical tool to be used along with the other disciplines/sciences for solving real-world problems.
For example: Austrian economists believe that it can be deduced from the first principles/axioms that enforcing minimal wage above existing market wages results in involuntary unemployment (most of the non-Austrian economists also believe this is the case, although their methodological basis is different). Assume there was a policy act that included, among other things, raising the minimal wage. A year passed, and it so happened that there have been changes in the economy indicators, including lower unemployment rate. The act was not the only thing that happened in that time; lots of factors may have contributed to the outcome. An Austrian researcher will definitely not count raise-the-minimal-wage factor as contributing in favor of the lower unemployment rate; the factor will be counted against the lower-unemployment-rate outcome, and will require further explanations, what other factors have outweighed its effect.
Using math (well, formal systems/notations) does not guarantee your whole research about the real world is correct, but it establishes a baseline for consistency and rigorous reasoning. It's the same with basic economics.
(My formal education was in mathematics / CS. I study economics, epistemology etc. only as a hobby.)
Unfortunately for the Austrian school, prediction is the heart and soul of science. You cannot claim to be doing science in any sense if you do not make predictions based on falsifiable hypotheses.
As you imply, this is why teleology is not a science, though large-scale statistical studies in fields like politics and sociology have made plenty of scientific headway by ignoring the core Austrian belief system and conducting empirical studies about human actions and preferences anyway.
Austrian School economists don't make predictions, but when they do they're right 100% of the time, except when they're wrong in which case I will remind you that Austrian School economists don't make predictions.
If you think I'm exaggerating, check out this unintentionally hilarious excerpt from the Ludwig von Mises Institute wiki. See if you can count how many times they flip-flop on whether they make predictions.
Austrian predictions
This page attempts to list various predictions made by
Austrian economists about important economic and other
developments.
Important note: Austrian economists, as Austrian
economists, or praxeologists, do not predict. They can
predict not as formal economists, or praxeologists, but,
rather, in their role as thymologists, or economic
historians. In praxeology, A causes B, other things
remaining the same. But, in the real world, other things
cannot be relied upon to always remain constant. Therefore,
predictions of the "A will necessarily lead to B" type are
strictly prohibited. Instead, praxeologists, but not
thymologists, must limit themselves to statements of the
if-A then-B variety.
With this in mind, it is interesting that Austrian
economists have been quite successful at predicting major
events.[1]
Exhibit A for why a lot of economics articles are poisonous and should be flagged for removal. Comments on this thread include lots of name calling and other inflammatory rhetoric that does not make for very good discussion. Also, people have pretty much already made up their minds about this stuff... Austrian True Believer types are not going to be swayed by being called weirdos, and the rest of us aren't going to be convinced by 'praxeology'.
Well, I've certainly learned a lot from this discussion. Although, I find myself agreeing with the guy who called them weirdos, the Austrian school, as it has been explained, does seem really weird to me.
(Okay, I'll bite). Von Mises was the mentor of Hayek. You know, the one who won the Nobel Price?
F.A. Hayek... he has also led the way in attacking the mathematical models and the planning pretensions of the would-be "scientists," and in integrating economics into a wider libertarian social philosophy.
Perhaps one reason is the evident and galloping breakdown of orthodox Keynesian "macroeconomics," which leads even the most hidebound economists to at least consider alternative theories and solutions.
Everybody is drowning in debt, but hey let's just print more and we'll all get wealthy.
Wrong. The economy was fueled by unsustainable private debt before the economic crisis. Part of the recession was shifting this private debt somewhere else, so that it has largely become sustainable public debt.
Your claim that "everybody is drowning in debt" is clearly a mischaracterization of what is happening in the real world.
Regarding your off-the-cuff comment about "printing more": I find it incredible that Austrian types still cling to their delusions so much that they outright deny the possibility that an increase of demand can lead (and does lead, in a slow economy) to an increase of production.
The problem is that in order to make the experience fun for new players, the faucets have to be relatively open and the sinks not too punitive. I'm not sure how you can successfully balance a truly working virtual economy with making it fun for any but the most hardcore trader types, especially once real money comes officially into the equation.
You allow players to add an after market effect to an item to greatly increase its value. However, doing so makes it bound to your account, and you can't sell it on the auction house anymore.
This can serve as both a tremendous sink of resources that players can work towards and a removal of valuable items from the market. (Because when the player eventually upgrades the item, the original item cannot be resold.)
Eve Online is the MMO that has got this closest to right. The economy has been running for 10 years now and inflation, whilst existing, has not been rampant.
Interestingly, there is not a RMAH, but there is a system to exchange ISK (gold) for subscription time that someone else bought. In other words the conversion of cash to ISK is facillitated - but not ISK to cash.
You could try to balance faucets with omnipresent unavoidable sinks aka. taxes. But how fun would it be to pay taxes in a game? "You loot 100 gold. Minus 30% gold drop tax. 10% dungeon upkeep tax and 15% financial transaction tax." :)
So the thing is: As soon as you try to model a "real" economy (possibly with real money exchanges) you can't have artificial faucets and sinks. Even Eve Online - which has the most advanced game economy - struggles with inflation as there are too many faucets. For such an economy to work you need to have a steady amount of money circulating the economy. And the only source (and destination) for money for players has to be other players.
But then you get a lot of other problems. Like what if a player hoards all the gold? Or if players just deactivate their accounts with significant gold sums on them? How do new players get their first gold? etc.
At least one problem with gold in games is that the management of large sums of gold is unrealistic. If you really had a huge portion of gold available in the game the storage and transportation of said gold would be both costly and risky. These concepts work mostly for fantasy themed MMOs though, not as much in something like Eve Online.
Heh, yeah ... I remember Ultima Online where gold had weight and you had to carry it in your back pack. If you wanted to move large sums you had to get a pack horse. :)
But most MMOs nowadays treat gold as something ethereal that you even can't lose when you get killed.
I don't even understand why there are in-game economies. It's not as if the goods are scarce, so just distribute them as dropped items from random encounters and such.
To the players, the goods are scarce, so as long as they have some way of exchanging items, they'll create an in-game economy whether the developer planned for it or not. To us who are used to markets, it's only natural to trade items we have in excess for items we lack.
And to us who are used to video games, it's kind of dumb to pay money to some other player for an item when I could go out, find the right dungeon or whatever, and earn a fresh one myself. That, or just deliberately cheat/hack the game to fix the reward of my next random drop.
And to us who are used to video games, it's kind of dumb to pay money to some other player for an item when I could go out, find the right dungeon or whatever, and earn a fresh one myself.
Just to point out that we're talking about game money here, not legal tender.
But in any case, I don't see why would it be dumb, as long as you value the time more than the money. After all, the same situation occurs often in real life, and nobody is considered dumb to pay for fish that he could've fished himself or tomatoes that he could have grown himself. Why would it be different in games?
(Personally, I just don't play games with grinding or farming activities, so there's nothing to earn or buy)
Right, well that's the thing right there: if I value game-time less than game-money, I should not be playing that game. I play the game because I enjoy the time spent playing it, not to accumulate achievement badges.
Hence, farming for game money to trade for an item rather than just winning the item myself means the game is ill-designed for me.
Nicely written article, but it doesn't seem to factor in the fact that the item supply is also increasing over time. Since players are only equiping stuff only once in a while, the items have nowhere to go, thus decreasing in value.
While players (or bots) farm for gold, they're also farming for items. It would be interesting to see how item prices evolved over time...it might be that only prices for high end items have skyrocketed, while decent low end items are almost free.
The experience of a friend and myself when we returned to D3 about three months ago was that for a relatively small amount of money (250k gold perhaps) you could get gear good enough to play on some of the lower monster power levels of Inferno. Inferno is the hardest difficulty level, and there's 10 settings of monster power to tailor the difficulty to your preference / gear. I think that he played on MP3 or 4, but I usually stuck around at MP 1-2.
However, I stopped playing because I couldn't even begin to afford the gear to go higher. I figure if I wait a few more months then the gear that I'd need for MP5 shouldn't be so expensive anymore. As such, even though my gold is technically becoming worth less in terms of top tier items, it's becoming worth more in terms of decent low-mid level items. As such, I think that the D3 situation is more complex than just hyperinflation.
There's a delicious irony to dollars being the hedge against virtual gold hyperinflation while real gold is the canonical hedge against dollar (hyper-) inflation...
This makes me wonder to what extent online games could be used to model/explore/study economic and social theories. Here we have an example of hyperinflation happening. Could you reliably reproduce the results? Could you reliably adjust conditions to lead to expected results? If so how accurately?
I think you could get results much better analyzing surveys because of the seriousness people put into games.
While it's true there was a significant upset in the Diablo 3 economy after the 1.0.8 patch came out, things are settling down again, and we're certainly not seeing the kind of delta that would make me call out a hyperinflation. If anything, the prices remind of me a bubble forming and consequently popping.
Worse, the article is not just inaccurate, it's dishonest: it hides the data that contradicts it, despite being publicly available on a day-by-day basis. [1] is a wonderful resource.
The eye-catching table near the end stops at peak prices. The prices since that peak are more-or-less hidden in the second half of an otherwise fairly unremarkable paragraph. We've seen a downward tendency, with prices moving back to pre-patch prices. We can illustrate that by looking up more recent data for the same examples as listed in the article:
Radiant star amethyst: 20m before patch (april 29), high of 60m, 22m now.
Radiant square ruby: 200k before patch, high of 528k, 266k now.
Star emerald: 760k before patch, high of 1.6m, 770k now.
Flawless square topaz: 3k before patch, high of 16k, 4.5k now.
Tome of jewelcrafting: 1.2k before patch, high of 6.5k, 1.5k now.[1]
All these items have a downward price trend, with the exception of the (relatively inconsequential) tome of jewelcrafting, which is stable. I would not be surprised to see these and other (harder to track) items reach month's end at roughly pre-patch prices.
It's also worth mentioning at this point that the prices of each rank of gem is linked directly to the price of the rank below it. For example, a star gem costs 80k gold plus 3 radiant square gems of the same type to craft. This is an ingame feature. All gem prices are therefore functions of the price of flawless square gems, the highest rank that monsters can drop. The article mixes the prices of different gem ranks, which is either ignorance of the way the game's economy and mechanics works, or an intentionally and artificially pretense of diversity. It's a bad sign either way.
Finally, and most important of all: the European market has been fairly stable throughout this whole debacle. The only difference between the European and the North American markets is that the latter suffered the (disastrous) bug described by the article, while the European market did not: Europe gets its patches 6-9 hours after North America does and the bug that it introduced was fixed before the patch hit Europe.
This lends credit to the idea that all we're seeing here is the aftershocks of massive destabilization due to a simple bug. To me, the fact that prices seem to be returning to normal testifies to the relative stability of the Diablo 3 market, and long term price trends show the same. Huzzah, Blizzard!
All in all, while interesting in a general sense, the article is flawed when it comes to the specific case it uses to promote its message, the turbulence of Diablo 3's economy over the last few weeks. This is not hyperinflation.
>> Worse, the article is not just inaccurate, it's dishonest: it hides the data that contradicts it, despite being publicly available on a day-by-day basis. [1] is a wonderful resource.
What do you expect from mises.org?
It has an agenda to push, and is relentless in doing so.
Either the author of that article is misenterpreting, I am misinterpreting or Austrian school of Economics is tad stupid. I'm hoping that the one at fault here is me.
Basically even with increase of the amount of gold or silver you'd still get inflation, check what happened with Spain at 1500 or so when they got a huge influx of gold from the new world.
You can also imagine what would happen if suddenly we'd get huge influx of new gold. As the amount of stuff in the world does not increase the amount you can buy with that new gold must decrease.