The Economic Paradox of LotRO

Ever wondered why a gold ingot is worth a less than a gold piece in LotRO?

Gold Ingot != Gold Piece

A lot less. I get about 5 silver per ingot (0.005 gold, per gold ingot).

Must be really tiny ingots.

If that deep thought doesn’t blow your mind, read on … LotRO’s economy is host to a wonderful anomaly: The Great Value Inversion!

The Great Value Inversion: The logic defying situation of an inverse relationship between the application of work to finish raw materials and the market value of those finished materials. In other words … as you apply effort to transform raw materials into finished goods the market value of those finished goods is less than the original raw materials. See Lord of the Rings Online for an example.

Let’s follow the example of wood, forestry and bows.

On my server, I get about 300 silver for a stack of 50 yew at prime time, or 6 silver per yew.

It takes 2 yew and 1 wax to make a Treated Yew Wood. 2 * 6 silver (value of yew) + .25 silver (value of wax) = 12.25 silver value in. When selling a stack of Treated Yew Wood, I get about 300 silver per 50 = 6 silver per unit (at the high end … it’s often less).

So at the very outset, there’s an immediate 50% reduction in market value for processing raw materials.

What does this tell us?

First, the facts, at least as far as I’m aware of them. Raw Yew Wood is only usable, as far as I know, to make Treated Yew Wood.

The only logical reasons to process it are to:

a:\ Resell it at a higher value.

We’ve already established that this is a good way to lose money.

b:\ Use it as a raw material, after processing, in a higher order crafting activity.

But as we’ve seen, it’s cheaper to buy it preprocessed than to buy it raw, so that can’t be it. You’d be better off to sell your unprocessed wood then buy processed wood in turn.

c:\ Gain experience in the Forester Profession.

By exclusion, this must be the answer.

But, anyone that can process Yew Wood, can also collect it. So either cash is easier to come by than Yew Wood, or the process of collecting cash is far more enjoyable than the process of collecting Yew wood.

So, people are grinding cash with some other activity (presumably quests / grinding) so they can purchase Yew wood to further process it to gain experience to proceed to the next level of Forestry, where they can grind cash so they can purchase Lebethron wood to process it to gain experience, to proceed to the next level … etc …

People are playing to make progress in a profession that is so wholly un-enjoyable it is preferable to not play that profession, but rather, to grind cash and, in effect, purchase the profession.

Very strange.

And yet, the strangeness continues. If the act of advancing in Forestry is so onerous, why do it at all?

Perhaps the reason people are grinding the Forestry profession is as an input into end-product crafting professions. Again, the Great Value Inversions say this would be a money losing proposition.

Let’s examine the crafting of a Carved Yew Bow.

The recipe calls for:
- Treated Yew * 4 … as we’ve established, base value of Treated Yew (in terms of unprocessed Yew wood and wax) is 12.25 silver. Therefore, base value = 49 silver.
- Yew Bowstaff = 3 * Treated Yew + an optional Flawed Huorn Heartwood. Assuming the Flawed Huorn Heartwood is worth about 10 silver, the base value here is 46.75
- Etched Yew Brace = 4 * Treated Yew + an optional Flawed Huorn Heartwood + Steel Ingot. Iron ore is worth about 4 – 5 silver per on the AH, I’ve found (we’ll go with the conservative 4 per). 2 ore make an iron ingot. 2 iron ingot plus a coal (about 2 silver) makes a Steel Ingot. Each Steel ingot is therefore worth about 18 silver. Total base value of the Etched Yew Brace: 77 silver.
- Lastly, there’s the DarkHearts Black Heart. A rare item. I have no idea of the valuation, but for fun, let’s say 20 silver.

The total opportunity cost of making a Carved Yew Bow: 192.75 silver

I bought one at the Auction House for 30 silver.

Chatting with Tachevert and others in the guild, it seems the Great Value Inversion exists for all of LotRO’s crafting professions.

So why do people craft. It certainly isn’t for the ‘profit’ … it’s a net loss activity. And if you’d ever tried LotRO’s crafting system, you’d know it wasn’t for the fun and excitement.

One theory is that the master crafted items will have high value or be essential in the end-game.

Indeed, I saw a very nice critical success Lebethron bow priced between 400 and 700 silver, and that’s still not the final crafting tier. Critical success crafting outcomes are relatively rare … I wonder how many regular Legethron bows (net loss on each) this fellow had to craft to get the critical. I’ll bet, all things considered, there wasn’t much profit in that crafting run, compared to the alternative of simply selling raw resources.

Personally, I think the real reason people craft is … Because it’s there! Why do people attack literally hundreds of wargs to complete a deed with a very minor benefit? Because the deed is there. Why do people grind to get to the next level, when the next challenge up is essentially indistinguishable from the previous? Because the level is there (and we all love that Ding!).

Why do people engage in crafting and suffer the Great Value Inversion? Because crafting is there.

The lesson for game designers is this. Take any old crap mechanic. Add a nice ding and title to reward your pavlovian players. And sure as can bet, your players will engage.

Author’s note: Props to Tachevert for the term Great Value Inversion.

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