The Wealth of Alliances

2021-01-14

Art By Redline XIII

The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities… Adam Smith, The Wealth of Nations

EVE Online has a complex economic system because it provides many ways for players to make ISK. But while all ISK creation puts money into player’s wallets, not all ISK creation leads to healthy alliances. The way alliances interact with the economic system can foster a balanced, healthy alliance, or the opposite, an unbalanced alliance.  In times of war, alliances must have a balanced approach to the economy that drives EVE. Also, alliances planning for war (and that includes almost every alliance in nullsec) must also foster a healthy economic state. By economy, we do not mean having vast amounts of ISK, because ISK is only the mechanism by which players interact with the true economy. Rather, EVE’s economy revolves around the resources that have always been vital to playing this game: ore, PI materials, components, blueprints, and ships.

Almost everything in the game is created by the players. Even the most advanced ship was once nothing but a pile of ore that came from asteroids and moons and these ores were gleaned by miners. The ore was then processed and ultimately sent to industrialists who built the various ships, components, and ammo. Ore is the key ingredient in the New Eden economy. Without it, the game would grind to a standstill. We are seeing the effects of ore scarcity currently and that scarcity may grow before it gets better. This scarcity has drawn attention to the New Eden economy on the most fundamental level, as alliances currently at war face difficult prospects ahead as they try to replace the ships they have lost.

Wealth-increasing Activities

For the overall economy in New Eden to thrive, players must engage in resource-increasing activities.

Mining and Production

Mining and production are vital for the game as a whole. They fuel the machine. Without ore, there is no war. Alliances must have ships to fly. They can either purchase those ships on the open market or they can produce those ships within the alliance. A good analogy here would be economic relationships between countries. A country can either purchase goods from another country, or produce those goods within their own country. Buying goods from within the country keeps the money within the borders. “Buy American” was a slogan used not too long ago, as Americans wanted to keep the wealth within their own borders. Keeping money within the borders has also been a major factor in recent American economic policy, as some politicians decry sending jobs abroad. An American purchasing a Korean-made car enriches the Korean economy.

Similarly, an alliance that must always purchase ships and components from third-party, non-alliance sellers ultimately sends their wealth outside the alliance, making that other alliance more fiscally healthy while draining their own economic health. Conversely, an alliance that purchases ships, components, and ammo created by a fellow alliance member is keeping the wealth within the alliance. This latter route creates “jobs” and wealth within the alliance.

Planetary Interaction, Exploration, and Salvaging

Planetary Interaction is another activity that creates true wealth, because the end products of PI, as the Uniwiki notes, are “used in blueprints to create POS Structures and Fuel Blocks, Sovereignty structures, Boosters, Nanite Repair Paste, and T2 components.” Again, if an alliance must purchase PI materials from outside the alliance, it experiences an economic sink. Money drains away. An alliance that has players engaged in PI avoids the economic sink and may even create an economic faucet, whereby they can sell surplus goods on the open market.

Other wealth-producing activities include salvaging and exploration. Salvagers locate and sell components that, sometimes, have already been produced at some point in the past, recycling them for profit. Salvaging isn’t always recycling, though. When pilots rat CCP-generated npc ships, then the salvage from those destroyed ships is freshly minted into the game, even more valuable than the same components created from ore. But  PvP salvage we should consider recycling. So, salvaging can be profitable work  in EVE, which also contributes to the overall health of an alliance.  Like mining, salvaging drains nothing from the game increases true resource wealth.

Exploration functions similarly to salvaging. It can lead to the discovery of CCP-generated items and therefore is similar to salvaging game-generated rats.  It can bring new resources into the game.

Service Activities: Hauling and Market Trading

Service activities can produce wealth without creating resources. Hauling can be a lucrative business. Having many resources in places far away from the means of production is only slightly better than having no resources at all. So, the transport players provide a service – they move the goods as a convenience at a cost. Note that the cost of this service gets passed on to the end consumer. Moving a car from Detroit to California raises the end cost of the car, without actually adding value. Contracting a hauler to move purchased ships from Jita to Delve adds to the cost, but not the value, of those same ships.

Market traders also make ISK, often in vast amounts. To some degree, they provide a service, in that they make it more convenient for people to buy and sell – pilots don’t have to contract their materials and wait for a buyer who needs that exact resource. It’s a bit like purchasing food from a grocery story. Yes, you could go to a farmer’s market and get that corn straight from the grower, but you want a bunch of other stuff, too, and the grocery store has everything you need. But as market traders make money for adding convenience, they also make goods more expensive. They do not create any true wealth. They do not produce resources. The ISK they make comes from others who have, in turn, produced the resources so vitally needed to run EVE.

Parasitic Activities

Some ISK-creating activities do not add resources to the game. Rather, they add ISK. Unlimited wealth means nothing if there is nothing to purchase. Ratting, for the most part, produces wealth without adding resources. Therefore, ratting is vampiric – it feeds on destruction and weakens the game as a whole. If every player in the game were to rat constantly, in short order the game would collapse. True, destroyed rats drop loot which can be salvaged, but those are two different activities. Many ratters never salvage and they just leave the loot behind, finding it more profitable to quickly move on and kill other rats. Ratting ultimately, by generating more money but no new products, will actually inflate the economy: ratters who don’t salvage inflate the prices of goods for others who contribute to the real economy while they themselves are parasites on that economy.

Perhaps the most parasitic, even vampiric, was to make ISK in New Eden is by renting space. While renting can be lucrative, and many alliances have either done it, or are still doing it, renting represents only cash flow. Money flowing into an alliance is not always a good thing for the game as a whole. Renting depletes ISK from the renters, but does not bring any resources into the game. In that sense, renting is more vampiric than ratting, which at least has the benefits of raising ADM and leaving components to salvage.

Finding a Balance

Alliances must understand the complexities of New Eden’s economy. A healthy alliance will always have players engaged in almost all of these ISK-producing activities. Alliances that want strong economies, for war or anything else, should consider to what degree they will allow their pilots to pursue activities that don’t contribute to the real resource-driven economy. True, there are taxes on ratting. But ISK alone means nothing when there isn’t anything to buy from within the alliance. Purchasing goods from outside the alliance enriches those outside the alliance and impoverishes those inside the alliance. The fewer goods there are to buy, the higher the price for those goods, defeating the purpose of having more cash in the first place. A healthy alliance will produce many of the goods needed by their alliance members.

EVE’s history is worth studying. Past healthy and strong alliances always have had a balance between miners, industrialists, and PvP experts. An alliance that relies only on mining, or industry, or fighting, won’t last long in the kind of extended war we are seeing currently in New Eden.

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Comments

  • X Y

    I absolutely disagree about PARASITIC ACTIVITIES paragraph. Without ISK, nothing would work in this game. Whether I get ISK immediately when I rat, or get blue loot like in the wormhole that I sell to the merchant is both identical. Without a new influx of ISK in the game, the game would not work at all. If every player wanted to have just 1 more ISk in their account at the end of the month than the month before, where would it all come from?

    Yes, some activities give too much ISK, but that is not the problem of ISK itself. Ratting is not printing ISK, it is converting game time into game currency, just like any other activity.

    January 14, 2021 at 3:19 PM
    • Nate Hunter X Y

      He’s referring to it as parasitic because the article is focusing on the material economy. Thus any activity that doesn’t produce material goods for use is a parasite to the goods producers. This is where game economy is very different from real life, there is not finite resources and players don’t work to afford to live. ISK in and out is always a discussion because there’s not a finite amount of wealth that just circulates around with the governments help.

      January 14, 2021 at 7:54 PM
    • Simon Chui X Y

      You’re talking about microeconomics at the scale of one person. This article is talking about macroeconomics at the scale of the biggest alliances. You’re both right, individuals are incentivised to print isk as fast as they can, but this is actually bad for the big alliances and for the game as a whole.

      January 14, 2021 at 9:31 PM
    • Alaric Faelen X Y

      Some great points. I feel the biggest thing that throws off any sense of realism or balance in Eve’s economy is the mass use of alts and multiple accounts. If the game is balanced around the notion of a single player, single account- then it is easily exploitable by someone with an army of alts. But if the game is designed around the paradigm of having to run several accounts just to compete- the single account player is left behind. All this resource gathering and manufacturing is subject to economy of scale- and in a video game you can have an army of faceless ‘people’ that exist solely to enrichen one ‘person’, where as in the real world those additional people need housed, fed, paid, etc.
      In the end, the question for me is always- is it worth doing with one account, one character? Sure, it’s worth running PI, salvaging, reprocessing, researching and manufacturing across several accounts all to make one character money– but most of that is not worth it given the limitations of a single character or even three across one account.
      There is a tipping point where doing something like PI is worth it for xxx number of characters, but for someone with one account, even one character– it’s a total waste of time and effort.

      January 15, 2021 at 3:03 AM
      • Garreth Vlox Alaric Faelen

        Given how passive PI is it’s a great way to be always be making a little money while doing other things in game or not even playing. As a result its ALWAYS worth doing PI even if only on 1 character.

        January 16, 2021 at 10:16 PM
    • Gray Doc X Y

      As other replies have pointed out, the article focuses on macroeconomics at the alliance level. On an individual level, making money by any means possible is a good thing. I’ve ratted myself; it’s profitable and is good for the alliance ADM. BUT, alliances that have an imbalance (say, mostly PvP pilots, will end up having problems sooner or later. Right now, in WWB, we have alliances issuing war bonds, or being very aggressive in asking their alliance members to produce stuff in industry. That can happen when an alliance favors one or two modes of ISK creation and forget the importance of mining and industry.

      January 15, 2021 at 7:24 PM
    • “Ratting is not printing ISK, it is converting game time into game currency, just like any other activity.”

      Ratting is printing ISK. Only ratting (and mission / incursion payouts?) allow people to print ISK. Other activities don’t convert game time to in-game currency, they convert game time to in-game items.

      January 18, 2021 at 9:12 PM
  • Simon Chui

    As long as the big alliances are stockpiling their materials and isk in preparation for future use, the problems are not apparent. They only become noticeable when those stockpiles are used at scale, such as during a war like right now. Ore and salvage and other materials convert directly into the tools of war, and you can reliably get what you expect. But if you take multiple trillions of isk to the Jita market to convert into ships, the sudden spike in demand you yourself create will push up prices. The more isk you spend, the more things cost, and the less you can acquire. In time, other players will respond to the price spike and increase production, but in war you don’t always have time to wait. Also the first group to flood the market with isk and take all the ships will make it harder for any other groups to do the same later.

    January 14, 2021 at 9:27 PM
  • Guilford Australis

    Every time I read an article about economic theory, whether in EVE or real life, part of my brain dies trying to understand the concepts, and I become even more stupid than I already was.

    Good article, though. From what I could understand.

    January 14, 2021 at 10:19 PM
  • Voynich

    Great article. A couple of notes on the above comments. Ratting for ISK Bounties can be compared to the real world printing of money. Which can lead to inflation and hence the “parasitic” aspect to the game. This does not include the time aspect that a player must put into the game to do the ratting. There is one thing that is missing from this analysis and that is the destruction or consuming of the resources during war and conflict.

    On a macroeconomic level the ISK printing that would lead to inflation is kept in check with both destruction and player marginal utility of time. Hence the reason for a strong Corp or Alliance to have material AND ISK stockpiles during war.

    January 15, 2021 at 1:13 AM
    • Nate Hunter Voynich

      The only reason ISK gains aren’t leading to massive inflation is because the system is relatively balanced even if CCP says its not. Material gathering is extremely efficient and was too efficient. Excessive destruction will accelerate inflation not keep it in check.
      EVE has the benefit of being able to wage a couple types of war, you can have a short incredibly active war that you burn through all your stockpiles like wormholers often do, or you can pace yourself and never significantly tax your stockpiles like most nullsec/lowsec wars.

      January 15, 2021 at 6:05 PM
  • phuzz

    Economics is the art of explaining why the real world doesn’t work like the economics textbooks say it should.

    January 15, 2021 at 11:03 AM
    • Kyeudo phuzz

      Economics textbooks propose their principles in idealized scenarios, such as a universe where you can’t take someone’s stuff by force. Reality isn’t ideal in a number of ways.

      Every science uses idealized scenarios to explain their equations, which is why there is a margin for error in the real world when trying to use those equations. Objects are uniform in composition, operating in frictionless environments, or point masses impacting in perfectly elastic collisions.

      January 22, 2021 at 10:10 PM
  • Pee Wee

    Yea Legacy burnt up all Imperium territory, destroyed every economical activities and now Imperium strike back and also destroy every economical activities and a great part of nullsec become – became – a wasteland where aren’t inhibitants and economical life. It happens and well seeable. So this war fuck off everything, maybe continoue till anyone kept a ship to fly but finally finish.

    January 18, 2021 at 3:35 PM
  • Kyeudo

    This article does not understand value. A hauler is creating value when they move a thing from somewhere it can’t be used to somewhere it can be. A market trader is creating value when they provide a large array of goods to consumers who want to pick up things in ones and twos instead of in bulk.

    January 22, 2021 at 10:24 PM