EVE Online Economics – A Q&A with Dr. Gudmundsson

Dr. Eyjolfur  Gudmundsson is CCP's lead economist.
Dr. Eyjolfur  Gudmundsson is CCP's lead economist. Ten Ton Hammer caught up with him at the 2010 Game Developers Conference, where he was on-hand to deliver a great talk about CCP's initiative to rid EVE Online of illicit currency, item, and account sellers. We spoke with Dr. EyjoG about these topics, and though he wasn't able to speak directly about the design and implementation of the Tyrannis expectation, we were able to hear his comments on his vision for EVE's economy during and after the May expansion.

Ten Ton Hammer: First, I think this is the first time we've interviewed a PhD at Ten Ton Hammer. How did you first become involved with EVE?

Gudmundsson: The university that I used to work at had a small seminar on experimental economics in 2004, which was lucky enough to have Dr. Vernon Smith, who had received the Nobel Prize for basically creating experimental economics. We discussed how we could use experimental economics to enhance our research in Iceland.

We also had this guy come from a computer company called CCP. He introduced us to this game that they had just published that had a lot to do with economics, and thought it would be exciting for us to experiment with. When I saw his presentation, I realized EVE Online would be the first online economy that functions on the same basic principles that real life economies do. We can learn a lot about real economics though EVE because we have a lot of data.

Economists never have high quality data, but in this case, we actually do. So that's how I was introduced to the game. When CCP started to look for an economist two and a half years later, I said I'd try it. It's such a unique thing that if I didn't try it, I knew I would always regret it.

TTH: Have you been approached by universities that want to use your data?

Gudmundsson: Absolutely. We have agreements with a Finnish university that we've done research with. We have some cooperation with Icelandic universities, including a philosophy department studying online democracies like the Council of Stellar Management. Here at GDC I've been talking with an American research group, the same group that has been looking at Everquest data. Hopefully, we'll be able to do something with them in the future. There's a lot of academic interest in getting into our world and understanding it.

To be absolutely clear, though, we do not allow direct research on the Tranquility server, or anything like that. This is all old data that we share, though it's anonymized, encrypted, and so forth. It's all about trying to understand behavior, rather than trying to figure out what individuals are doing.

TTH: Tell us what you do during a typical week at CCP.

Gudmundsson: I don't think I've had a typical week since I started. We have ongoing projects. I am the lead economist, but I am also the director of research and statistics. We have a unit of eleven people that is split into four groups. One group deals solely with the in-game economics, they help with the quarterly economic report, and help the development team to gather, interpret and give feedback on information during the development process.

TTH: They keep their findings relatively secret.

Gudmundsson: Yes, that's all internal communication for the company. But then, we also have external communication like this. We want to have as much of that as possible. The information in our quarterly economic newspaper, you won't find that kind of information about any other MMO. Another group deals with subscribers and market research. They look at trends in subscriptions, where players are coming into and leaving the game, and try to match them with in-game behavior. That's interesting and fun research.

Then we have the Council of Stellar Management, they visit twice a year. Their recent visit in February was really productive. It was a good meeting. We changed the format to talk about larger issues. To talk about where EVE should be heading in the future, rather than what we should fix now. Everybody liked the new format. We also talked about little issues, but more was spent on the bigger issues. We are also thinking of changing the format of the quarterly economic newsletter. Our development cycles are getting longer. We plan a year and half into the future. So we're thinking of making the CSM cycles longer, as well.

The last group is the internal affairs unit. They do nothing but monitor CCP and their in-game behavior to make sure that everybody is playing according to the rules. We put a very high standard on our employees. They can play, of course, but they not in the same ways as the regular players. We monitor that quite extensively. As the company is growing and we now have more than 470 people, it becomes more important that everybody is clear on why it is a crucial factor for our community to understand that we take it very seriously that nobody at CCP should have an advantage over anyone else.

TTH: Were you heavily involved with setting up internal affairs?

Gudmundsson: Basically, I was focused on the processes used rather than the unit itself. It works very independently. I am there only as support.

TTH: Let's talk a bit about the game, starting with the PLEX initiative. EVE is one of the first games to allow a form of legalized currency conversion...

Gudmundsson: Well, I wouldn't say legalized currency conversion. Once you decide that you want to spend fifteen dollars on a PLEX, you cannot redeem that and get it back. All you can do is put more time codes into the game.

So it's not legalizing the sale of currency. What we are doing is facilitating the exchange between time and currency, allowing players that otherwise couldn't have played because of their real life situations. Like, a player that doesn't have a credit card but has plenty of time to play, will have lots of in-game currency. If he doesn't have money to pay for the subscription, perhaps because he doesn't have a credit, he would be out of the game. Another guy, who has a lot of money but little time in real life, might not have much ISK. So these guys are actually trading. All we do is facilitate the exchange though the in-game market. That's what I think is so brilliant about all this. It's just like any other item in the game. The players are buying and selling it, and there's a market price for it completely controlled by supply and demand.

TTH: In addition to the obvious benefits to the players from the PLEX system, are there also economic reasons to do it for the game?

Gudmundsson: Not really. This goes a little more deeply into the philosophy of money being used in the system. If people have a lot of money but no stuff to buy, the money just accumulates in the system. You're not earning interest, and the money just sits there. Money doesn't give you anything. It's the stuff you get with money that gives you fun, utility, and happiness. PLEXs help money to flow faster. In economies, it's called the philosophy of money. It increases trade and production because you are buying something that somebody else is producing. In short, it helps the economy.

TTH: Why hasn't CCP gone down the path of opening banks that give out interest and so forth?

Gudmundsson: I think there's a very good reason for that, and we're seeing it in real life. You don't want to have a government-sanctioned banking system because then CCP becomes responsible if something goes wrong. For us to take your money and put interest on it, all that we are doing from an economic standpoint is putting more money into the game. This is because the interest that we would be paying would not be based on economic value within the game.

So, interest in the economy would have to be paid based on other economic activity that is actually profitable. Otherwise you're just printing money. That's basically what governments do: they print money and pay interest by printing money, which is not a good idea. Any economist will tell you that the current stimulus packages [in America] are not a long-term viable solution. It can help in the short term, but not as a long term solution.

TTH: So creating a bank would necessitate having a lending arm and all the complexity associated with that. I take it that if CCP started making those kinds of decisions for corporations it would be way too involved with gameplay.

Gudmundsson: Absolutely. That's one of the core design features of EVE, that it's a player-driven economy. We are just the janitors for the game world. We create the tool chest, clean it up, and try to make it as fun as possible. In terms of content and having an immersive experience, we put that into the hands of the players. Of course, we provide the content like missions, but that is mostly so that players can earn money. That's how money comes into the game. It's activity from the players that we pay for, basically.

TTH: We recently talked with CCP Senior Designer Torfi Frans Olafsson about the upcoming Tyrannis expansion (click here for the interview), and he confirmed the speculation that players would be taking over creating products that right now are being automatically sold by NPCs. How do you view that?

Gudmundsson: When I joined the company in 2007, one of the first things I did was recommend was that we take the shackles off the NPC market. We would much rather have that supply be player driven because it's the core of the economy. The NPC trade goods were always put in there to help low level players understand arbitrage. That they can buy low in one place, go to another place, and sell high. And you actually have to search for the information needed to do that. It's basically a training tool. Without commenting on the design of Tyrannis, as a general comment I'll say that anything that makes EVE more player driven is something that I really like.

TTH: We know you can't talk about the design of Tyrannis in these early stages, but how do you facilitate that change from NPC-seeded products to player-seeded products? You need to always have a certain inventory of skill training books and items like that, so players won't run out.

Gudmundsson: If players really need it, there should be somebody willing to fulfill that demand. When you take an economy of 300,000 people, I am not worried about shortages of production. As soon as somebody offers higher prices for something, somebody else will jump in and start producing. We saw that happening when we abandoned the NPC-seeded shuttles. A lot of people worried that shuttles wouldn't be available. What has happened is that they are available in all the major places. In all the medium-sized places they are still available, but for a little bit higher price.

In some of the less condensed spaces they might or might not be available, and are usually more expensive. That is exactly as it should be. Where there's a less robust marketplace, it's less efficient, and it's expected to have higher prices. But it is generally available when you want it. If it isn't available, you can always buy a cheap blueprint, and build it yourself.

TTH: I guess Jita is the clearest example of an efficient market. But you still get players flying a couple jumps out to buy things like skillbooks, since they cost more, there.

Gudmundsson: That's how markets work. If they're being sold for a higher price in Jita, that means that there are a lot of people coming into Jita and buying them up.

TTH: And players will pay for the convenience of not having to go somewhere else.

Gudmundsson: Exactly. A price signals many things. It signals distance, quality, your preference. At any given time, with 300,000 people, they will all have different reasons for buying stuff. Some will be willing to pay a higher price. Others will be willing to travel to pay a lower price.

TTH: You delivered a talk at GDC based heavily on CCP's "Unholy Rage" campaign against the real money traders in EVE Online. What are CCP's primary motivations for getting rid of these illicit players?

Gudmundsson: If farmers are using a lot of bots, it sends a lot more information to the servers from the clients, meaning a higher CPU load. We saw a 30% drop in the average CPU used by each user, even though we banned less than 2% of the players. If you're using 30% of your computing power to support only 2% of the players, right there it's telling you that you're will save money by stopping the bots, which the system is not designed to handle.

Also, bots are not humans, and MMOs are about human interaction. If there are a lot of people that are farming in your system, it means that you are not experiencing an MMO, you're experiencing something else. Taking these elements out from the game enhances the player experience. Farmers can also have a significant impact on the economy. They are especially good at finding exploits, and of course instead of reporting them they used them to the fullest extent. That can change the relative scarcity of something, overnight which can basically destroy your game.

So whether you have an economist on your developer team or not, be sure that you always monitor the relative scarcity of resources, so that you know what is going into the game. By removing the real money trade elements from the game, you are actually able to minimize the risk of people using these exploits.

The last reason to get rid of farmers is probably the most important: it's very unfortunate, but in our experience and the experience of other companies that we've been talking to, real money traders use illegal methods such as hacking, credit card fraud, and social engineering, in order to get access to peoples' accounts. They break into the accounts, they take the stuff, and they sell it. So there's this illegal activity that is not only damaging your game experience, but is also having a real life impact on customers. You have to keep them at arms' length if you want to have good customer service.

Now, even though we know that they are there, and that we can fight them, we also know that it's going to be difficult to get completely rid of them. You have to constantly assume that they're there in order to minimize the impact that they have on the game.

TTH: The EVE universe is famously unregulated. Some players might ask how you can toss these players out, and where you start to define their actions as exploitive?

Gudmundsson: That is a difficult point. When we're searching for this, we set our criteria high enough so that you are obviously using bots and obviously selling the ISK for real currency. We see how the transactions go back and forth. In many cases we hear from our own players. Things like "We bought ISK from this guy and he didn't deliver." We know what is going on in that regard, and are very careful to have as few false positives as possible. Luckily, we have had very few during this entire campaign.

With regard to the regulations, it's true that within EVE there are only very limited rules. But it's very clear that as soon as you take it into real life -like if you threaten to go to somebody's house- you are banned from the game. Then, of course, there's the simple fact that by having this PLEX system, we get away from the RMT. It allows EVE to become a more enjoyable system. People that aren't as hardcore because they don't have the time can enjoy EVE much more, and in so doing help people that don't have the real life means, such as credit cards, to also play. So both of them enjoy the game more. The entire playerbase also has a better experience because there are more people in the game that are not bots.

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