In this article I'd like to address some problems with in-game economies, and approaches that can be used to rectify the issues that arise with them.
What's an economy?
First of all, we need to take a moment to clarify what I mean when I say "economy." Game designers tend to use "economy" to discuss all sorts of things, from the number of experience points it takes to level up, to the ability to unlock upgrades throughout the game. Strictly speaking, for the purposes of this discussion, we will be limiting things to economies where players can buy and sell goods for monetary gain.
However, the above point highlights the fact that, strictly speaking, an in-game economy featuring gold, dollars, starbucks, or anything else is actually not so different from any other economy out there - the player is receiving an arbitrary unit of a resource in exchange for performing an in-game task, which can then be used to achieve another effect at the player's convenience.
For example, finding a powerful sword is a task I can complete, but if I decide I don't want to use it, I can go to a shop and exchange it for 500 dollars. Those 500 dollars then go into a pool of resources I possess, and I can later spend 1,500 dollars or more on a much, much better sword. The decision on how and when to use the resource is mine, and not something strictly enforced by the game mechanics. But, if we were to swap in key concepts like "kill enemy" and "experience points", we would have the basis of a sound level-up character progression system.
It's important to understand that an economy in game terms is an abstract thing and the labels that we give it do not fundamentally affect the mechanical purpose, only the presentation and feel to the player, as well as what is possible within the confines of the system (for story or verisimilitude reasons). In fact, it's often in playing to the conventions of currency specifically that games sometimes stumble when trying to come up with interesting economic systems.
The economy is a balloon
The way that progression in most modern games is handled, especially RPGs, is along a vertical axis - that is, the player's core ability set, generally speaking, is pretty much fixed in stone. Throughout the course of the game, the player's main techniques, weaponry, gameplay style, etc. will not change significantly, but the effectiveness will scale up as the player makes progress in the game. Instead of doing 10 damage, at a certain point into the game, the player's attack might now do 15 damage or 20 damage.
However, what tends to happen is that in order to create a feel of consistent progression, those base numbers have to keep going up. Sure, 5 damage extra doesn't seem like a lot now, but when you realize the player may level up 100 times throughout the course of the game, you are looking at a player gaining about 50 times as much power as they had at the beginning. This means that enemies have to have 50 times more health for the game to stay balanced, sometimes even more, as we expect challenge to increase as the game goes on. This is often called bloat, and many, many games can be accused of it - as well as the awkward effects it produces, such as a level 50 ferret being able to overpower a level 2 dragon.
The exact same principle applies to monetary systems in games. When you start out playing, you expect to make an amount of money that is useful and rewarding. Most games are balanced around this. Let's say the player should use about 10 health potions by the time they get from point A to B, and that a health potion costs 10 dollars. Fine so far, that means the economy should try to guarantee the player has at least 100 dollars by the time he gets to point B. But what happens when the player's average income starts to increase? Over the course of most games, you will very often see the player gain 10 times, 20 times or even 100 times as much money as he/she used to for performing the exact same action, which means the relative value of everything in the game world which ties into the economy has to scale accordingly.
Predictably, they very rarely do. Often, this is because developers balance economies around the bare minimum the player needs to do to get through the game. If I stick to the critical path in an RPG, for instance, I may be missing out on over half the available money in the game, especially when you consider the tendency for developers to use money as a generic reward suited to optional activities (side-quests, mini-games). So, while maybe the player who just wants to get through the game and see the ending will wind up having just enough money to get by, the player who puts a bit more time into the game will end up with so much she doesn't even know what to do with it. Thus, problem number one occurs: inflation.
Money is worthless
Another major problem that arises from economic systems in games being poorly balanced is that the currency the player has is basically worthless. That's not to say it doesn't have use, however, the value of the currency itself is questionable. This is almost always the result of the game either not offering compelling things to purchase, but it can also be a shortcoming of the rest of the game's design.
The simple fact is that most games have the player gain equipment and other tiers of progression by performing feats of some kind, usually story-related. If I explore a dank cave and find a treasure chest at the end of it, I expect that chest to contain a reward for my time spent in exploring the cave - I think just about every gamer would agree with this, and just about every developer would do just that. However, the value of the items or powers the player might find in the game world needs to scale with the level of challenge as well as the place the player is in the game's main progression arc.
Furthermore, we have an expectation, mostly from convention from other games, that the best rewards come from optional feats that are often difficult to perform, hidden from plain sight, or require a large time investment. A good example of this is the Magic Armor in a game like The Legend of Zelda: Twilight Princess, or the "ultimate" weapons for the characters in Chrono Trigger. In those games, money has value, but usually it's not worth spending - in the case of Zelda, because most things you can buy with money can easily be found through a few seconds of grass-cutting, and in the case of Chrono Trigger, because opening treasure chests found throughout the game environments, which are usually impossible to miss, gives you all you need.
Developers are often all too eager to play into the expectations of players, usually because they share those expectations. However, the result of this is often that the hardcore players who would most likely be interested in exploring the economic systems of a game in the first place quickly conclude that their effort is wasted, because they can already get the best stuff without even having to participate in that system. The additional trend of giving players everything they need along the critical path, with little or no challenge required, also means that players who don't necessarily care about exploring the game deeply will end up with a less fulfilling experience because they may not even realize the additional systems are there in the first place - after all, if there is no need to participate in a system, many players will opt to simply ignore it.
A common piece of discussion that surely arises during development is "man, the player sure has a ton of money. How do we make him use it?" This gives birth to what I consider to be the sign of a bad in-game economy, the gold sink - literally, a method of draining the player's money, usually for poorly-justified gameplay reasons. If handled well, a gold sink can become a valuable contribution to a game, such as Crossroad Keep in Neverwinter Nights 2 (which ties into the endgame outcome). More commonly, it's just a big, shiny bucket you toss coins into until you've got no more coins less, usually for small rewards.
Gold sinks can take many forms. Houses the player can buy and upgrade, such as in The Elder Scrolls: Skyrim, are a popular option in modern games, as they tend to have zero real gameplay benefit other than some extra storage space, but stroke the player's ego and feel substantive and important at first glance. Sometimes, they're gambling systems, where the player can throw huge amounts of money into a slot machine for the chance of receiving a reward. Often, this reward is completely useless, and it's the temptation that maybe, just maybe, the player will get something valuable that keeps the money flowing in. Diablo II used this a decade ago to pretty good effect, as gambling was almost useless to the average player, but there was nothing else to spend money on in the game.
I don't think a gold sink is ever a fair and sound justification for the economic imbalance in a game. We're not dealing with a real economy where money is circulating throughout society, after all, but a set of arbitrary variables that go up and down. The number of games which actually feature any sort of economic simulation model that might make gold sinks an interesting gameplay mechanic can be counted on less than one hand, so their purpose - getting rid of excess cash so the player feels it's got some worth and scarcity to it - is the only one that can be seriously considered. All this really does is paint over a problem that shouldn't exist at all.
Do's and don'ts
Generally speaking, many of the problems with an in-game economy actually come less from things that developers do wrong outright, and more from additional features that are added which have unintended effects, and which then go unfixed. There are a number of things that developers might implement with the best of intentions, but which ultimately can completely ruin an economy.
- Infinite sources of money. This often seems like a no-brainer, because developers want players to have enough money to get through the game. The problem is that these are often abused, either because they are easy to do or because the rewards are so great that it's worth putting up with some frustration. Mini-games are a very common way of gaining fast cash in games, and most mini-games tend to be fairly easy. Developers aren't likely to pour tons of time and effort making sure a mini-game is expertly balanced, so the result is often a feature which is either worthless (too little reward or too difficult) or far too useful (easy and/or big reward). Without finite resources, the player will never feel pressure to consider their spending options, and as such, money quickly becomes meaningless.
- Giving money for optimal gameplay choices. Some games offer the player bigger monetary rewards for playing the game a certain way. For instance, you might make significantly more money if you pickpocket an enemy before you kill him, because the loot you receive doesn't come from the list he actually carries and drops on death, but is generated the moment you perform the pickpocket action. This sort of mechanic encourages the player to rob everyone in the game environment blind. Although there are some deterrents that can be used, including making those "optimal" tasks very difficult and inconvenient, these are often not foolproof depending on the game. Skyrim, for instance, has generic AI behaviors that make pickpocketing everyone you meet a serious risk (at least until you have leveled up), while Dragon Age has absolutely no repercussions for pickpocketing - the target won't react to a failed attempt, no guards are summoned, etc.
When it comes time to actually balance an economy, there are a few techniques which are helpful when used in conjunction with the above ones.
- Give out monetary rewards that are balanced with game progress. The easiest way to go about this is to simply play through the game as the player might, add up how much money is gained in the process, and then compare it to all the things the player is expected to buy, or can buy, accounting for a deviation of +/-%. This is fairly obvious, but it's quite surprising the number of games I've played where it seems the developers just did not do this.
- Make money a gameplay-critical system. Too many games don't have worthwhile economic systems simply because there is no good reason to participate in the system, as discussed above. Consider eliminating many of the free sources of goods the player has access to and outright force them to buy stuff in order to proceed in the game.
- Avoid giving permanent upgrades to players in exchange for currency. If you've ever played an online game with an economy, you've probably noticed that some items have incredible value while others have very little. One of the main reasons for this comes down to the simple difference between permanent items versus consumables - something that lasts forever is far more valuable than a temporary benefit. Instead of granting the player a +5 Longsword of Slaughter, consider instead giving the player a potion which gives +5 damage for 10 minutes. If the player has to spend money to stay competitive within the rest of the gameplay systems, then money has been given enough meaning to be justified.
Of course, what this article can't account for is the simple fact that often in-game economies are an afterthought designed mostly to give the player an extra step in the gameplay loop, rather than to be meaningful on their own or in conjunction with other systems. Furthermore, if a game's development is pressed for time, it's balance in the secondary gameplay systems, including economy, that is often one of the first things to stop receiving proper attention.
It's also worth noting that, in general, I think games have gotten a lot better about handling economies over the last few years. While I still see many games where money is worthless, too readily available, or otherwise just not at all well balanced or considered, I find many titles actually do a pretty decent job of it, often by following the same suggestions made in this article. This may be because of the rise of massively multiplayer online gaming and the more pressing requirement to come up with economies that are properly balanced not just as a gameplay mechanic, but as a fully interactive, persistent and, for lack of a better term, "real" system.