Every week, WoW Insider brings you Gold Capped, in which Fox Van Allen and Basil "Euripides" Berntsen aim to show you how to make money on the Auction House. Feed Fox's ego by emailing him, tweeting him at @foxvanallen, or constructing a multi-million dollar video wall for his benefit.
One of my favorite topics here on Gold Capped is World of Warcraft's problem with inflation. If affects just about everyone in a very negative way, regardless of whether they're an Auction House maven or a casual player. Inflation makes any gold your character is holding worth less and less by the second, making work you do now far less valuable than work you do later. It even affects the way developers approach the economy, from the amount of gold you get for finishing a daily to the creation of new gold sinks.
By most anecdotal measures, in-game inflation is wildly out of control. And that's one of my problems as WoW Insider's other market follower; the only evidence of inflation we have is ancedotal. There's no real solid way for us to measure inflation in the game and understand what's working to control it and what's not.
The question got my mental gears turning. In the real world, inflation is measured using something called the Consumer Price Index. Creating an in-game version of the CPI intrigues me, but to figure out the best way to construct it, we need to first figure out the answer to another difficult question: What do people buy the most of in-game?
What's the Consumer Price Index?
I'll spare you the full economic lesson, but a Consumer Price Index is a pretty simple concept. You take a selection of items that the average American buys -- things like bread, clothes, electricity, cars, gas, and housing -- and keep tabs on the price of each. Then later -- say, in 10 years' time -- you can compare the new prices to the old prices and see how they've changed. The percentage that prices go up (and they almost always go up) is the rate of inflation.
Keeping tabs on price changes is the easy part, though. The harder part about crafting a CPI is taking into account the amount of each item a person buys on average over a year and to adjust the weighting of each item in the market basket of items we selected. If the price of bread increases by 10% and the price of a house decreases by 10%, we can't just average things out to zero, because people tend to buy more loaves of bread over the course of a year than they do houses. Unless they're a real estate investor with a gluten allergy. Hmm.
... and this has to do with WoW ... how?
Hey, don't rush me. I was getting to that part.
If we take the concept behind the real CPI and translate it into Azeroth, we can measure the effect of inflation on the World of Warcraft economy and identify the best places to invest our hard-earned gold. Websites like The Undermine Journal and AHSpy.com make it really easy to track prices. We just need to figure out what the typical player purchases most often in a way that represents what people buy the most. But what do people buy the most?
It's hard to track the number of items sold on the Auction House with the given limitations of the API. We'll have to keep track of the number of items listed, instead -- a far easier number to determine. Obviously, not all items listed will be sold, but economic theory suggests that they'll all sell or be used eventually once the right price is found.
So, enough set-up. Here are the items that are bought and sold the most.
Top seller: Raw materials
By far, raw materials make up the most common purchases on the Auction House. That's because just about everything else being sold on the Auction House (with a few exceptions) are comprised of these raw mats.
Herbs To represent herbalists, alchemists, and scribes, I'm going to include in our inflation-measuring market basket the two most traded herbs. Currently, this is Whiptail (1.89 million units globally) and Cinderbloom (1.68 million). We'll also include Peacebloom (0.19 million) to try and capture the impact of those leveling professions on the market.
Ore To represent miners, blacksmiths, and jewelcrafters, we'll keep tabs on the two most traded ores. Currently, this is Elementium Ore (3.86 million units globally) and Obsidium Ore (1.62 million). We'll also include Copper Ore to capture the leveling market (0.51 million).
Enchanting mats To represent enchanters, we'll have to look at enchanting material prices. We'll keep tabs on the current expansion's dust, Hypnotic Dust (2.21 million), and the current expansion's greater essence, Greater Celestial Essence (0.21 million), the most traded enchanting mats by far. We'll also keep track of the changes in the most basic enchanting mat, Strange Dust (0.36 million).
Cloth To represent tailors and those poor suckers who actually make and use bandages, we'll include the current expansion's common cloth, currently Embersilk Cloth (1.11 million). We'll also look at Linen Cloth (0.91 million).
Leather To represent skinners and leatherworkers, we'll look at the current expansion's leather, currently Savage Leather (0.70 million). It easily sells more than all the other leathers combined. We'll also follow movements in the price of low-level Light Leather (0.43 million).
Elemental And finally, many craftables require elementals. We'll keep track of the two most traded elementals, which are currently Volatile Life (3.05 million) and Volatile Earth (2.16 million).
While your more casual player makes the raw material market go 'round, there's a segment of the market that more casual players are less influential in: the high-end raiding market. Surely, there are far fewer hardcore raiders, but the items they buy tend to be exponentially higher priced.
Gear The best way to track the movement of raid-quality BoE gear will be to keep an eye on valor gear. To try and keep things somewhat consistent, we'll keep an eye on DPS plate (assuming all gear for other spec behaves similarly) because it's the most frequently listed item (846 global listings). In this case, we'll watch Heartcrusher Wristplates until a new class of BoE gear comes out next expansion.
Enchants and gems For the most part, the cost of enchanting and gemming that gear should be covered in the raw materials section. Just to be safe, though, we'll follow the costs of the highest-quality red gem available (currently, Queen's Garnet; 5,058 global listings) and the highest-quality enchanting mat available (currently, Maelstrom Crystal; 62k global listings).
Putting it all together
We'll keep track of the prices of these items over the upcoming months to try and identify some trends and to give us all a better idea of what to expect in the next expansion. And while the data accumulates, I'll keep up pressure on Editor-in-Chief Alex Ziebart to build me a multimillion-dollar, NASDAQ-style video wall.
So, what do I expect the data we're collecting to show? Well, if history is any judge, you should see purchasing power increase until Mists of Pandaria is released. Why? Decreased demand -- fewer and fewer people will need raw materials, gear, and the items used to enchant and gem that gear. As a result, most people will simply stockpile money.
When Mists of Pandaria is released, history tells us the dam will break. Players will finally have something to spend their pent-up money on, and since supply will (initially) be very tight, we'll see inflationary problems worse than ever before. As for fixing that problem -- well, we'll get to that issue very, very soon.
In the meantime, what do you think? Does my selection of items accurately represent the World of Warcraft economy? Is my market basket missing some crucial item? Also, do you have a massive gently used video wall for sale? PST.
Maximize your profits with more advice from Gold Capped. Do you have questions about selling, reselling, and building your financial empire on the auction house? Fox and Basil are taking your questions at firstname.lastname@example.org and email@example.com.