Understanding Inflation!: A FAQ
When I first joined this site, people would talk about the Neopian economy. They'd throw around terms like 'supply and demand', 'inflation', and 'price mechanism', and as a newbie, I had absolutely no idea what they were talking about. My eyes would glaze over, and I never really made the effort to understand what these users were saying. Even worse—there was no guide out there to help me understand what users were talking about, so I remained clueless.
Now that I'm older, though, I realise that Neo-economics doesn't have to be anything scary or complicated. It's actually a really interesting thing that can help you understand what's going on in the world of Neopia and helps you understand why TNT does a lot of the things they do.
So here I am today to give the guide I wish I had as a new player. Now let me begin by saying Neo-Economics is a huge area; something that I could (and hopefully do!) get to write plenty of articles about. So for this article, we'll mainly be taking a look at inflation; perhaps the biggest issue facing Neopia at the moment.
Hold Up a Sec—What the heck is Neo-economics?
For the purpose of this article, I'm going to define Neo-economics as the study of the neopoint. That might sound pretty boring—but when you get into it, there's a lot to it! I mean, you can look at what people do with their neopoints, how they spend neopoints,, why certain items are more expensive than others. As you can see, it's an enormous area!
OK... So what's inflation, then?
If you've read the editorial, from time to time you'll hear TNT talk about 'inflation', and that term is really just mumbo-jumbo to describe the persistent increase of the price of an item over time. For example, ever spoken to an old user on the neoboards? Like, one from near the very beginning? You'll often hear them describe how way back then they could buy a faerie paintbrush for only 50 000 neopoints. Now, this item costs well over 1 million neopoints! As a result, we would say the faerie paint brush has inflated because its price has permanently increased over time.
Speaking more generally, we use the term inflation to describe the lessening value of the neopoint. Put simply, 10 years ago, 10 000 neopoints was worth a lot more than it is now; you could buy a lot more with it. But now, items are much more expensive. This is the type of inflation we'll be talking about in this article.
Why is inflation bad?
For some us, inflation wouldn't be such a huge deal. I'm a restocker, so if there was massive inflation, I'd still be able to buy the same sort of stuff (as it makes sense that if everything's increasing in price, then so would my sales.)
But there are plenty of users out there who rely on games to earn their neopoints, and for these users, items become impossible to get if inflation becomes too high, and that's when things start to become a problem.
Let's think back to around Y12. Blue Draik Eggs reached the highest price they'd ever gotten to; selling for 15 million neopoints. Even restockers look at that price tag and think it's a little bit daunting, but imagine if you were a gamer who earned 50,000 neopoints a day max. It would take you a year of intense gaming to reach this item, and more likely than not, you'd get bored with your goal and give up. The thing is, when mass inflation occurs—it's not only the Draik egg that increases the price. It's every single item on the site; imagine being unable to buy anything!
In other words, huge inflation basically makes it impossible for some players to enjoy the game; they just would be unable to buy anything!
So what causes inflation?
Technical definition: when more neopoints enter the Neopian market, than those which are destroyed, inflation occurs.
Every day, new neopoints get added to the market; and the main place this occurs is through games. As users play games, their Neopian wealth increases. When they buy an item, they normally buy from another user—the neopoints aren't destroyed, they just start to recirculate.
The result of this? The average user has more neopoints, and as a result, sellers realise they can charge more for their items because most players have these neopoints to spend.
It's awesome that TNT adds more games to the site, but the fact that they produce neopoints comes at a cost. It means there are more points circulating the market, and unless these extra points are destroyed, then prices will begin to hike.
So... How do we stop inflation?
TNT manages to reduce inflation through sinks. No, not kitchen sinks in your Neohomes—in Neo-Economics, a sink is basically a place where neopoints get destroyed. Now that sounds sad, I know, but as I mentioned before, we need these excess neopoints to leave the market; otherwise each neopoint is worth less, and prices drop.
Now TNT could do something drastic, like halve every users Neopoints or double the price of items in shops, but that would cause a bit of an uproar, so luckily for us, they've used strategies which allow users to destroy neopoints if they want to—for a reward.
For example, look at the Lever of Doom. Every time you pull it, it steals a bunch of NP from you, but you go there in the hope that you might be rewarded with an avatar. On a larger scale, The Wheel of Extravagance is another sink. Risk 100 000 neopoints, and you might be rewarded with an avatar or rare item.
If you look around, you'll find plenty of sinks out there. Buying from the Neopian shops, the book avatars at the hidden tower, The Wheel Restoration event—TNT have definitely done a good job at keeping inflation down.
You talked about specific items inflating—what's done to reduce that?
Some items need to be expensive. I mean, look at Dark Faerie Eraser—a weapon which can permanently delete a random weapon of your opponent. Do we really want that item deflating, so that we have to be worried about our precious weapons? In this case, nothing is done to stop the items from deflating, and that's good—it keeps items out of reach.
Other items, like the Draik egg I mentioned, become frightfully expensive for no real reason. Having a Draik isn't an unfair advantage! When TNT thinks n item is becoming unfairly expensive, they often give it away through dailies or events in small amounts. For example, the Forgotten Shore now rarely gives out Draik eggs—they're still valuable, but they're not out of reach.
What can I do to fight inflation?
Normally you won't have to consciously do anything. Pulling the lever of doom or spinning the Wheel of Extravagance is a nice way to let money leave the economy, whilst still having fun yourself. You also have the chance of a great reward this way.
Additionally, restocking from the main shops, donating to the wishing well, playing luck games which cost neopoints and buying hidden tower items are all excellent ways to help fight inflation.
So how does this affect me/ TL;DR/Give me a Summary Please!
1. Inflation is the increase in the cost of items; meaning your neopoints become worth less.
2. As inflation occurs, you'll need more and more neopoints, and some items become so expensive that they're not ever attainable
3. Things that cause neopoints to exit the economy fight inflation—so if you have the NP, Spin the Wheel of Extravagance!
Thank you for reading! I sincerely hope you now have an understanding of inflation!