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D&D Economics, Part One Of Many

I’ll be honest: One large motivation for starting this blog is having a platform to respond to Multiplexer here. I find her work about 60% interesting insight to 40% “No! That is clearly contraindicated by the actual rules of the world you’re working in!”

This article in particular got my teeth up, because not only did it badly miss the actual point it was examining, it did so with cloying smugness. But the point it asks is a good one; in D&D games, there aren’t really appreciable laws of supply and demand. A longsword is 15 gp, now and forever, here in a city and elsewhere in a hamlet. Any place that sells longswords, sells them for 15 gp.

Now, Multiplexer imagines a world in which Primus, God of Law and organized systems, enforces this, instead of it being done by the laws of economics. What happens when you have fixed prices for goods? Shortages! Quality reduction! Poor allocation of goods! The eventual collapse of the market for low-level equipment leading to the destruction of all that is Lawful and Good!

Yeah, no. First, let’s remember that Primus is not a government. He’s a god. He’s enforcing a law of nature here. But OK, let’s play this out. Yea, it is said that a longsword is 15 gp, always and forever. So, what happens when a blacksmith decides to cut corners?

Absolutely nothing. See, Multiplexer missed the difference between absolute prices as enforced by a government and those enforced by a god; externalities. The blacksmith that does cut-rate work will find that it takes him longer to produce a sword that works as a sword, because his labor has been price-fixed too; he performs iron-mongery at a predictable rate based on his skill level. And if he buys cheaper ore to do his smelting, well, that doesn’t matter either, because iron has been price-fixed as well; iron is a trade good, with its own absolute worth. And while a blacksmith can produce a not-a-sword and put it out for display in a country with a mortal agency doing price controls, Nature cannot be fooled; you need to spend the crafting price in raw materials and labor (both of which are fixed) to make a 1d8 19-20/x2 crit range one-handed melee martial slashing weapon.

Now, this is all about what a longsword is, not what a longsword is worth. Let’s say that you have a regime that was just toppled across an empire, and people are overcome with revolutionary fervor. Let’s say that swords made with a stamp of the Evil Empire are disdained and looked on with extreme suspicion, while new Republic swords are the hot item. Let’s say that this evaluates out to every given buyer or seller in an area being willing to buy an Imperial-brand sword for only 5 gp, while paying 30 gp for a Republic-brand sword. What happens when there’s a local-but-persistent mismatch between the raw price code of an item and its value?

Arbitrage. People buy up Imperial swords and sell them elsewhere, to people who don’t care about their brand, and import blacksmiths to work overtime stamping out republic swords, and profit hugely. Generally, it doesn’t take long before everyone who’s willing to have a Republic sword at 30 gp has bought one and they’re selling for a bit less, while people are starting to find that patriotic fervor to get rid of their old Empire-brand goods is fading as their merchant buddies make gold hand over fist buying their swords for cheap and selling them at a huge mark-up elsewhere.

Now, this can’t happen in a price-fixed economy. That first Imperial sword can only be sold for 15 gp, from someone who only values it for a third that much, to someone who values it similarly. Why would you do that?

And here’s the fascinating thing; price controls mean everyone’s in an infinite-arbitrage environment. See, it doesn’t matter if you value the sword at 5 gp or 500 gp; you have to sell it and buy it for its fixed market price. If you buy such a sword, if anyone else chooses to buy it, they will buy it at 15 gp. And they’ll buy it knowing that even if every person they could want to sell it to values it at 5 gp, they’ll pay 15. They know, in short, that the value of the sword is fixed, and won’t go down or up as long as they don’t actually damage the sword. Plus, the few magical effects which work on the absolute gold piece value of an item will tell them it’s worth 15 gp. In short, they can have their irrational preference, but their ability to act on it in an economic way is limited.

Now, this means that people may not always get what they want. It means that some goods just don’t get traded on the open market, because of a mismatch between actual value and perceived value. But this is absolutely nothing new. Plenty of people decline to trade, e.g., every free hour they have doing unskilled labor, because they value their leisure more, even though their leisure produces no economic goods whatsoever.

Now, admittedly, there is one big point which Primus didn’t address, and which would be a really interesting topic to speculate on. What happens if Primus price-fixed adventuring itself?

But that is an exploration for another essay.

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