Real Life Economics vs. eRepublik Economics: Inflation and Unemployment
Day 1,846, 02:22
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Published in USA 
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by
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by Trappets
Hello fellow readers. I've been playing this game for less than a week but I've heard about how stagnant the economic features are in this game. Instead of pointing out the lack of features from the eRepublik staff I'm going to delve into an issue that is less in the hands of the development staff but more in the hands of the players: inflation and unemployment.
For those readers who are not well versed in economics, let's start with some good old textbook definitions of inflation and unemployment.
Inflation: a rise in the general level of prices of goods and services in an economy over a period of time.
Unemployment: occurs when people are without work and actively seeking work.
Now that we understand the definitions of inflation and unemployment, let's look at how they're related. One of the key principles in economics is this aforementioned relationship between the two. It is a key principle of economics that society faces a short-run tradeoff between inflation and unemployment. (Mankiw's 10 Principles)
It is also important to know that inflation can be caused by too much money chasing too little goods. Unemployment, however, is a different beast. You can have structural, cyclical and frictional unemployment.
I don't want to ramble on for too long so I'll sum up the types of unemployment pretty quickly: Structural unemployment is unemployment caused by technological advances. Cyclical unemployment is caused by fluctuations in the business cycle. Frictional unemployment is caused by people moving from job to job.
Okay, now that we've covered the real world economy, let's compare the eRepublik one. Let's start by analyzing unemployment.
Pretty sure you don't see anything like this in eRepublik
In eRepublik, you can find a job very easily. You don't need any skills and productivity is not a factor. Also, technological innovations don't exist. Also, the cost of doing business is relatively low so that creates a glut of companies looking for hire. The issue of workers looking for work is not a problem because there's just a huge damn thing called the "job market" right there. Click a job. Boom, you're hired. However, cyclical and frictional unemployment can still potentially exist. But the case stands that unemployment remains much less of an issue in eRepublik than in the real world.
Too much money chasing too little food.
Inflation is a much more interesting issue it seems. Let's revisit to an earlier point of this article where I mentioned "too many dollars chasing too few goods". Now that I've mentioned that, why don't you check the marketplace? In the case of eRepublik, it might be the opposite. Too few dollars chasing too many goods. If this was real life, wouldn't market forces stop companies from oversupplying goods? Probably. In eRepublik, companies don't face the cost of simply maintaining the business. The only case of costs that apply to companies is labor and taxation of sales. Even with those, you're still not forced to use labor, you can even self-produce goods. So the case of having too many goods is not a problem in eRepublik.
So what does this point out about unemployment and inflation in eRepublik? One, unemployment is not much of an issue for workers. Two, there are a lot of goods and not many dollars chasing them. Three, there's no problem with number two. And finally, due to the extreme ease of maintaining business in eRepublik, selling goods is not urgent.
Besides my little tangent, here is a price report:
Erepublik lowest food and weapon prices (updated as of ~12:30 AM PST Sunday):
Foo
😛
1S-.05 USD No change
2S-.09 No change
3S-.12 14% price decrease!
4S-.18 No change
5S-.31 8.8% price decrease!
6S-.41 2.5% price increase!
7S-.94 7.8% price decrease!
Weapons:
1S-.30 USD 25% price decrease!
2S-.61 17% price increase!
3S-1.23 5.4% price decrease!
4S~2.24 1.3% price decrease!
5S~4.15 3.5% price increase!
6S~5.95 9.2% price decrease!
7S~15.50 2.5% price decrease!
Weapons and Food Price Index: +3.64
Starting from today, I will start logging the WFPI to measure how the prices change over time. The WFPI is now at 3.64 based on it being 0 from yesterday. I will explain the mathematics behind the WFPI in my next post. Stay tuned!
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Feel free to correct me if I made any mistakes about how eRepublik works. I'm new. I'm hoping to increase article quality over time.
I like your article.
You will find out that prices can change suddenly, going down, going up. But the trend is that prices are going down slowly.
You can have exogenous shocks modifying prices : national wars (prices going up due to higher demand) / Plato's offers / buying bots (which i am not sure still exist or not) / monetary market
As well, from my observation, you can still see a lot of non rational decision : buyer buying food quality less rewarding in term of energy per dollars / producers not taking in account the opportunity cost.
Now a remark on "selling goods is not urgent" is not completely true, you have to take into consideration a storage cost or at least the cost of opportunity associated to it : storage place is limited and represent an investment.
you for got to tell the people that don't like math which food they should buy to get the best Heath per dollar
Not sure where you got your definition from but inflation is more accurately defined as the reduction in value of a unit of currency. More supply than demand does not cause inflation, as dollars have high demand and goods don't, rather than less supply than demand which will cause inflation because people need goods more than their many dollars. USD have actually deflated, where gold (which is actually a good more than it is capital) was previously worth 1000 USD it is now worth 300-400.
@Jessica I believe they turned off the buying bot, which is why there is overproduction. Overproduction, due to people being able to make more supply then they themselves use by their own work alone without employees, is causing more goods into the market than people buy. This means some people are not selling goods, since people can put massive amounts of goods onto the market and so their offer always shows first until it is bought out or someone sells cheaper, which doesn't happen generally.
People are producing more than they are selling, so they don't need to hire people, so job pay isn't competitive and is very low, so people don't have a real source of income. This has led to the development of communes. People don't want to pay money to make goods they don't want to sell, and they want to get rid of goods, so they offer people those goods in return for their work instead of currency. Production is still too high nevertheless because the buying bot is off, so currency deflated.
Subbed btw
i can agree on overproduction for some goods, some other not as there is still more profitable sectors than other. Some sector are not worthy producing yet people still produce but thats because people dont do maths.
Concerning jobs, the salary is way too high to produce in most type of products, so it is not as low as you believe.
Concerning communes they fall in the same path, some are rational economically, some not and might even follow other purposes, it can even be a way to escape taxes, build a group... But i don't know enough about communes so i would really like you to enlight me with some discussion or example.
concerning value of USD, it is difficult fo me to judge. Should it be compared to the Gold (legal tender for investments and medals) or should it be compared to it purchase power in term of energy and WQ7 ?
Guys, this erep thing can be a really interesting small macro economic case study. i am really looking forward to reading your comments ! 🙂
@zxdex I will include the 12/9/12 HPD and FPPD in my next post very soon. I'll email you the link.
@Jessica Miss Rabbit You're right that some goods are underproduced. It seems like hospitals, bomb shelters and tickets for example. Also, important to note the limited storage playing effect.
@syz2 Thanks for subbing. On inflation, both ways work. Inflation can be seen as a rise in price or a debasement of currency, whichever way you choose.
forget about hospitals, bomb shelters and tickets, they cant be produced anymore. they come from another era 🙂
Problem with using gold to determine value of USD is it fluctuates. I'm not quite sure why. Companies have fixed gold prices, and can result in a fixed ratio with country currency, yet gold has its own fluctuating market. Gold as it is now is closer to USD value company-wise than before when it was over 1000 USD per gold value. This is probably due to gold being in much higher demand than USD, as it alone can be used for upgrades and factory purchases. It was designed to be high in demand
because that is what the admins sell for real money. The fact that its demand raises its price beyond is fixed country currency equivalent makes it more of a good than capital.
The problem with some products being less than their value is very profound when a new quality level is introduced, as seen with q7. As time went on it leveled out, but there is still a large difference in value. For production facilities below q5 or q6, they can make more money off of selling raw materials.
People often view the value of each quality level by the energy restored per currency unit or for the case of weapons the uses per currency unit, rather than the damage. Most notable for tanks (which is why there is greater profit loss for low quality levels) due to the damage difference, there are other factors that are ignored. For example, higher quality food levels allow you to have health refill without using much storage space. This actually makes them more valuable, even with a higher
cost per health restored. Actual consumers simply purchase q7 only, unless they are very tight on funds, but those who are tight on funds generally get all their tanks through aid programs whose tanks come directly from producers rather than the market. People just aren't buying lower quality level items because they take up more storage and aren't as good. Rockets helped fix this a little, by adding a small demand, but it isn't enough to make up for the lack of demand for anything besides q7.
Thanks for the great discussion! I'm going to be posting a new article soon but it will probably just be some numbers.
Trappets: eRepublik used to have a much better economy (no self-producing goods, more products, productivity) but this was removed to instead focus the game on getting people to spend more money on wars in the Balkans.
as for food for dollar the last couple days its been q2 i have never seen it where q5-q7 is ever worth it the only advantage is that it saves storage space