This is most likely going to be the first of a series of discussions about MMORPGs (Massively Multiplayer Online Roleplaying Games), so allow me to ramble a bit before I get into it. It is, I think, fairly common knowledge that I can't stand the whole MMORPG genre. It is, from where I sit, riddled with basic fundamental flaws preventing me from actually enjoying any game it contains. What isn't common knowledge though is, I study the heck out of the genre, trying to determine just how many of these problems are really inherent to the system, and if they can be fixed. Most of them, I believe, are really just a question of people repeatedly copying ideas that weren't good in the first place. Now, on with the essay.
One of the most common boasts made by MMORPGs is that they contain a "robust, completely player driven economy." What this usually means is, "We don't have NPC weapon/armor shops, and players have skills to make these things." That's very nice, but that's not a decent economy. Everyone kills monsters for money (an infinite resource incidently). Money is given to higher level players for the groovy stuff they can make. Those high level players have nothing better to do with it than buy stuff from high level players with different crafting skills. If these items eventually need replacing, and/or are costly to make, the constant flow of cash into the system is going to eventually cause horrific inflation, which is going to suck for newbies. Meanwhile, if these items are indestructible/free to make, they're going to have no real value, and you hit a point where, upon creating a new character, someone just hands you the best stuff in the game for the heck of it. I've seen both of these happen. The basic problem inherent here is, you can't have money flow into the system, and never flow out. Money in this case it should be stressed doesn't necessarily mean cash in this case. In fact, if cash isn't being spent on anything but player craftables, it's honestly totally valueless, and people are just using it out of habit and convention. When I say money, I mean anything players are trading around.
So, let's try a totally closed system! Uh... good luck with that. For it to truly be closed, players must enter the system with nothing of value. They must obtain items of value from the finite system to enter the economy. OK, we just let the beta test players start with some cash, they can use it to pay newbies to do boring labor for them. Harvesting resources to craft stuff from and such... oh right. It's a closed system. Those harvestable resources eventually run out. We're going to have to recycle old items eventually to make new ones, but the newbies are eventually going to be cut out of the loop.
This leaves the option that actually works. A system that's open on both ends. Players can harvest infinitely replenishible resources (monsters drop gold, maybe equipment, or you can use mining skills in the mountains to get ore to make things with, etc.) but the system also drains resources from players. The first time I saw a system like this that really worked well was in RetroMUD. It's a MUD, one of those free text based RPGs that people forget have been around forever. Specifically, this one's been around since 1994, and at that, is based on older ones, so they've had a heck of a lot of time to work the bugs out.
Here's how Retro's economics work. The only source of equipment (at least, for all intents and purposes) is stuff dropped by monsters. No NPC shops, or craftable items (again, for all intents and purposes, both of these exist for things like arrows and such but don't impact the economy). Killing monsters for gold and equipment is an infinite source of resources. However, resources flow out of the system just as quickly.
First off, every time you gain a level, you get some new skills/spells to train (or at higher levels, the ability to train skills higher). Training these is pretty much mandatory, and costs huge amounts of gold. Higher level players earn more gold, and they also spend more training.
Then there's equipment. The equipment itself is free (unless you assign value to the labor of killing the monster), but upkeep on it is pretty darn severe. Once a day, the server reboots, and all items not properly stored are destroyed. "Proper storage" consists of first getting a castle (certain players can create these with spells that consume huge quantities of gold), then buying a chest for every few items (again with the pricey pricey spell). The more stuff you own, the more this costs. The castle itself decays over time, and must be repaired (you guessed it, pricey spell). On top of that, items stored thusly aren't completely safe. Here and there, special events run were monsters ransack castles, heavily damaging them and/or stealing all the chests within. An acceptable risk if you just own junk, but when you have equipment as a reward from a quest that was some huge month long ordeal, you need some security. Big ol' locked doors, traps, and golems can all be made (do I really need to say it at this point?) to help with this. Basically, the more stuff you own, the more it costs you to maintain it. So while your available spending cash is always going to be proportionate to your level, at any given point, what you can make (with average amounts of monster killing over time at least) maintains a nice stasis with what you have to pay out. There's a few other nickel and dime techniques to regulate cash in there too, but you get the idea.
Retro's system is great, but it still isn't really a functional economy. While it's also flowing in and out, between players, cash still pretty much flows in just the one direction. New players pay gold to old players for high level equipment. The system isn't broken because the high level players actually have USES for that gold (at least, most do), but there's no real give and take. This sort of dynamic is pretty much inherent to the whole RPG concept. Blame experience levels.
This brings me to my second case study, Puzzle Pirates. Puzzle Pirates can be described as a MMORPG without the RPG parts. There's no experience points, there's no monster filled caves (the fact that these are considered vital to the definition of the term ties back into that bit about old ideas people don't realize they can change comment I started with, but that's another rant). All we keep is the shared environment, getting snazzy equipment for our characters, and a good chunk of the interface conventions. What's great about this is that it leaves the designers free to focus on everything else... "everything else" pretty much meaning the economy. In fact, it forces them to do this, because it's all they've got. They could I suppose instead focus on the odd social phenomenon of people hitting on anything remotely female in online games, but they took the high road and made everyone look like lego people.
The first and definitive step in this direction is to stick actual gameplay into every aspect of the economy. Specifically, Puzzle games (as in the genre Tetris defined). Every incidental type of labor in the game (there's a couple exceptions, but only because the dev team hasn't implemented them yet) is performed by playing a little puzzle game. A sword fight breaks out? Play a Puzzle Fighter clone. The bilge needs pumping? Swap blocks around to match up colors. Holes in a ship? Patch'em with Pentaminoes. Heck, there's even a puzzle for drinking contests. Great. Rather than crafting skills being a chore we perform to better our abilities to play the real game, they're fun in and of themselves.
Then, to ensure there's also an actual REASON to perform these tasks in the greater context of the game, we have what is honestly an extremely well implemented and robust economy. Let me explain it from my current position. I have worked my way up through the ranks of my crew (fine, I have an in with some friends backed up by being freaky good at puzzle games), and attained the rank of officer. I can now buy (fine, be given by said generous friends) my own ship to do what I want with. There are however, some basic costs involved in running this ship.
Sailing a ship from point A to point B requires people to perform the tasks of sailing, repairing, bilge pumping, and navigation. I can't do all of these myself, so I need to hire a crew. These are other PCs (or in a real pinch, NPCs) who expect a percentage cut of the profits I rake in while we're out there, so I'd darn well better do profitable things. Also, while we're out there, we're going to be attacked by other ships (PCs or NPCs trying to steal my stuff), and/or do some of that attacking ourselves. I need to hire on someone to load my cannons. The cannonballs they're loading I have to buy from blacksmiths. Eventually, a fight's going to break out between crews, with the winner stealing a bunch of stuff from the loser. Damage from those cannons seriously tilts the odds in someone's favor by yielding better setups for the combat puzzle, but if I don't keep a supply of rum on board (which is consumed like fuel), my side gets a crippling penalty on this puzzle. So crew pay, cannonballs, and rum are my expenses, on top of the cost of things like buying the ship to begin with, getting some cool looking piratey clothes, and picking up a few other items that effect my performance in various puzzles.
Now, how do I make money? I sail out to distant, unexplored lands rife with natural resources, haul them back to the cities, and sell them to people who use them as raw materials to create all these ships, cannonballs, rum, cool clothes, and snazzy toys. I'm also selling off the raw materials which are used to build the cities themselves, so this economy actually effects the shaping of the world. I can of course, also just be a parasite, and make all my money by making trade routes based on supply and demand, or, you know, the whole piracy angle.
Here's what I find really amazing though. Not only do we have this fully functional economy, open at both ends like Retro (albeit not as finely tuned), where all characters are interdependent resource wise (as opposed to high level characters selling equipment to each other/newbies), most people aren't aware of it. If you don't own your own ship, or run your own stall (or city), you can play this game for months and never learn that there's more to the economy than "I help sail ships for a cut of the pirated money we make, I can buy cool clothes and toys with it." Maybe 5% of the player base really gets into the economical side of the game, the rest are just casual players, popping in from time to time to play silly little puzzle games, and who happen to act as a diverse pool of laborers without even necessarily realizing it. Traditional MMORPGs flat out don't support casual players incidently, which is a real shame.
So, to summarize, how do we make a truly robust, completely player driven economy in a MMORPG? We make sure the system is open at both ends (players can harvest stuff, but need to pay upkeep on what they own). We need to make sure that higher level players have higher upkeep costs to deal with. If we really want it to be an economy, we need to structure it so that every player (or at least, every player who wants in on the economic system) has something vital to offer the community.
While we're on the subject of MMORPGs and money, here's a quick breakdown of some of the real life payment plans I've seen for such games: