The White Rose Conventicle

What is the value of an Aurum? A politically explosive question in these post-Incarna days, when hordes of irate EVE players have already made themselves positively dizzy screaming their heads off -- "ZERO!" -- calling even for boycotts not only of the Noble Exchange but also of every player with the temerity to dress his or her characters in Noble Exchange fashions.

But the Aurum is not "worthless." It is in use and has a value, one that can be determined, day to day, as accurately as that of any other currency, despite the anger of those who refuse to use it and, more to the point, despite CCPs effort to peg its value to its PLEX price. For the value of a currency is not its price -- what one must pay in other currencies to obtain it -- but, ultimately, the value of what it can buy.

Today (2011.12.08), I calculate the average ISK market value of an Aurum to be 13,966 ISK in Jita. Its median ISK market value is even lower: 8,414 ISK. Yet CCP's currency manipulation scheme puts the price of an Aurum today at 131,286 ISK, at Jita PLEX prices.

In the discrepancy between these in-world market-determined values and CCP's currency manipulation scheme lies much of the sorry tale of CCP's misconceived venture into micro-transactions.

[Update: We've added a Market Indexes block to our right column, providing current estimates of the ISK value of an Aurum and the price of PLEX in Jita, as well as tracking two prices of interest with respect to Goonswarm's so-called "Interdiction" -- Oxygen Isotopes and Mackinaws. Expect adjustment of these and other topical indexes in the future.]

When all is said and done, chief among CCP's mistakes in introducing Noble Exchange goods was not poor customer relations -- a mistake in 'spin' -- but in stunningly overlooking the existence of a genuine market, with genuine market forces at work, in the New Eden in which they sought to sell virtual goods via a fixed, manipulated, secondary currency.

Sad, though, that CCP, apparently in the grip of corporate group-think, seems to have so wedded the advent of Incarna -- "ambulation," "walking in stations," avatar bodies -- to feverish dreams of rivers of gold in its immediate monetization via the Aurum and the Noble Exchange.

The consequence seems a thoroughgoing confusion of judgement: the spectacular failure of the Aurum currency fixing scheme to abet an ill-considered micro-transaction model precipitating, in turn, a stumbling retreat from the larger, long-term ambition to make EVE the ultimate Sci-Fi virtual universe, an ambition very much, ineluctably embodied (literally) in Incarna. 

And so we must yet wait and hope, perhaps years more....

Meanwhile, at least the fashions, though few, are fine.

The discussion that follows shows the derivation of these in-world market values for the Aurum.

Approaching the value of a currency in terms of what it can buy, rather than the exchange rates to obtain it, is especially necessary in circumstances, such as is the case with the Aurum, where there is extreme market manipulation and deliberate currency price fixing by forces outside the market.

We all know the price of an Aurum, which at any given moment, may easily be calculated in terms of real world currencies and ISK.

Today (2011.12.08), the price of an Aurum in US Dollars is $0.00476 or $4.76 per 1000 Aurum, which is the lowest amount of Aurum currently spendable on the Noble Exchange. This calculation assumes purchase of six PLEX at the special price of $16.67 each, while the exchange rate of Aurum for PLEX remains 3500.

More critical to determining the value of an Aurum, however, is the current price of an Aurum in ISK, because expressed in the currency of a genuine market -- the in-world ISK market where prices are determined by market actors collectively, dynamically, valuing each available in-world good relative to arrays of other available in-world goods.

Today (2011.12.08), the price of an Aurum is 131,286 ISK, at the current Jita price of 459,500,000 ISK for a PLEX, and the current CCP exchange rate of 3500 Aurum per PLEX.

But what will an Aurum buy? And what are those items worth to EVE players?

We can answer that question by a comparative examination of ISK market prices for Aurum-priced Noble Exchange goods. The following table presents ISK and Aurum prices in Jita (2011.12.08) for goods currently available on both the ISK Market and Noble Exchange, as we cannot compare prices of goods not available in one market or the other.

From these figures, the average ISK market value of an Aurum is 13,966 ISK. Its median ISK Market value is 8,414 ISK.

The lower market valuation of the Aurum does not disappear even if one considers only the two items sold currently on the Jita Noble Exchange that cannot be bought with the 5,500 Aurum CCP has thus far given away to every player account -- the infamous Looking Glass Monocle Interface and the Men's 'Field Marshal' Coat. Taking only these, the average value the in-world market assigns to an Aurum rises to 76375 ISK, only a bit more than half the current 131,286 ISK price per Aurum pushed by CCP's currency manipulation scheme. In other words, even with respect to items for which players were indeed willing to exchange ISK or real world currencies for Aurum, per the CCP scheme, the ISK market valuation of the Aurum remains punitively low.

With differentials of such proportions, ranging from a factor of 1.72 at a narrowly selected best to 15.6 at worst, the arrogance of CCP's diagram of "The Currency Cycle" shouts its most laughable, monstrous absurdity. 

The diagram projects an extended market economy utterly up-side-down from that which exists, with ISK/Aurum price differentials reversed: a purely imaginary virtual economy in which the clamor for Noble Exchange apparel is so great that profiteers rush headlong to buy Plex to convert to Aurum to seize the opportunity to import fresh supplies of clothing to New Eden.

It's not that such a New Eden heavily valuing character vanity items could not possibly exist under any circumstances. Players, being human, are vain creatures almost before all else. And as one who has played every MMORPG primarily as a market trader/speculator, I can attest personally to the general rule of thumb that vanity items are the single most reliable class of items to be crafted, traded, bought and resold for in-game profit in every virtual world that offers a dynamic player market, auction or trading house.

The absurdity is not in CCP imagining a world where players would highly value vanity items, but in absurdly believing that they could set and maintain such values in the face of a vibrant player market economy that would insist inexorably on its values instead.

CCP, of course, is not alone in this error of arrogance in the face of market forces. It's an old story in the real world, of every power that would seek to govern market forces, once unleashed, by rude fiat. Or, equally foolhardy, to imagine "breaking" such a vibrant market as New Eden's with crude force.

Matching bookends of the Incarna debacle, the arrogance of CCP's belief it could dictate the market value of Noble Exchange goods is oddly equaled if not surpassed by the arrogance of EVE players, of Goonswarm declaring with great self-stroking, bombast and braggadocio "We're going to wreck the entire EVE economy."

Whereas, when all is said and done, all Goonswarm will have managed to accomplish, at substantial cost to themselves, is to profit some (mostly Russians) and marginally inconvenience others -- and this, for only so long as Goonswarm is willing and able to bear up under the expense in time, ships and materiel of their "interdiction."

There is almost no one with a Gallente POS to stoke that cannot hold out indefinitely in the face of a mere doubling to tripling of the prior price of oxygen isotopes. As for the economy as a whole, where is it "wrecked"? Changed, shifted, moved? Yes. Wrecked? Hardly.

That Goonswam's exercise in vanity is doomed to embarrassment does not require precise calculation: the higher the interdiction drives the price, the greater the incentive for meeting the demand. The more they succeed, the more they fail.

Real world or virtual world, it hardly matters. Wherever sufficiently sized and resilient, The Market Shrugs.