Ideas for Stablizing the L$/US$ and Curbing Inflation

This discussion has been going on on the Second Life community roundtable email list; I thought I'd cross post my ideas here. I've brought up some of these ideas before, but never in correlation to a direct money sink.

It is clear that the Second Life economy is out of whack, and the change from GOM to LindeX was only a temporary reprieve to stablize the L$/US$ exchange rate at around L$250/US$1. For months now, the L$/US$ ratio has been steadily rising, whereas at one time it was almost always between L$245 and L$255. Its funny how this has been going on since the L$ for land auctions ceased, because I know that was a miniscule amount of the total number. Perhaps it affected the psyche of buyers and sellers, now that L$ couldn't be used to purchase land directly from LL? I don't know.



But clearly: more sinks are needed! Some ideas:

(1) Vanity services. Things like the ability to change your name once a year for, say, L$1000 per character changed by levenshtein string comparison (in the past, we've been told this is a technical limitation; this is clearly not the case as my name/key database shows that quite a few avatars have changed their names. Most are because they could be considered rude, but others were not). The ability to change the name of a simulator in which you own all the land other than Linden owned land for L$25000. A "profile plus" system for business owners where you get to put in bigger pictures, more description, and so forth for an amount per month that also contains a section for your business policies.

(2) Linden Lab is currently doing everything they can viewer-wise to increase frame rate and provide a better user experience… except giving incentives to people building to do it efficiently! One idea for textures, to give incentive to keep size reasonable, AND create a new L$ sink... pay by the pixel!

256x256 (65536 pixels) texture or smaller = L$10 to upload
512x256 or 1024x128 (131072 pixels) textures = L$20 to upload
512x512 (262144 pixels) = L$40 to upload
...etc... do the math for all in-between texture sizes possible
1024x1024 (1048576 pixels) = L$160 to upload

If the texture includes an alpha channel (32-bit targa), increase the price by 50%; not only do they take more space, they cause the Second Life viewer to have to do a boatload of math to figure out texture ordering which significantly lowers frame rate. Some people upload all their textures as large as possible, 32-bit targa, not knowing these things. This would make people more responsible about using reasonable texture sizes instead of always going for the big ones. I've seen people with 40 object boxes in a mall setting with all 1024x1024 textures - not because they're evil, just because they don't know any better! The boxes were LESS that 1m x 1m. This would force the learning curve.

(3) Advanced scripting tools. Allow a payment of, say, L$1000 per month to limits on scripting like the delays after llGiveInventory(), llInstantMessage(), and llEmail. These hinder a lot of us, or for us to do workarounds which end up taking a lot more cycles from the server than would otherwise be necessary. Require some kind of deposit (say, $100.00) and a signed contract to avoid “any old griefer” from taking part in this program.

What do you guys think?

Regards,

-FlipperPA

I've suggested sizeable snapshots to help solve the big texture on little boxes syndrone. Most retailers seem to use resident snapshots.

I'd go for some of the vanity charges, but scripters should all be equal. If Linden can improve performance, they ought to improve it for everyone.

Another vanity charge might be for textures applied to mainland. Gee, I wish I had grass.

Brilliant!

A system that made anyone uploading a 2048x2048 pay a lot would be a great idea.

I would go for the enhanced profile too. I'd use it to showcase my products if I could. Say, 50 picks instead of the 10 or so we have.

Advanced scripting tools - I'd do that too.


I like the idea of extended services in exchange for $L, in general.

hehehe, that's a great idea - the mainland is kind of annoying with its auto-defined heighmapping textures. If we could at least define what textures appear at what height on our plots.

I disagree on the scripters comment. The delays that are put into the scripts are intentionally put their as "slow downs" to avoid spammers and griefers. There's a 20 second delay after llEmail() is called, for example, to avoid people using LL to send spam. While I see this as necessary for LL, long time community members willing to step up to the plate and put down a security deposit they're willing to lose if they break the rules shouldn't have to be bogged down by these annoyances.

I love the idea of sizable snapshots too; or, even better, once you have uploaded a texture, allow resizing! When I was a n00b, a texture I used was uploaded at 1024x1024 (first one I ever did). I've used it a lot of times, and would love to replace every instance of it I have ever used in SL with a 256x256, as the 1024x1024 really isn't necessary. However, I haven't bothered yet, because if I were to upload the 256x256, I'd have to change every instance of it in my sim to make it worthwhile. If I miss even one side, it doesn't really help, not to mention what a pain in the neck it would be.

Cool ideas though!

Regards,

-Tim

I propose that LL do exactly nothing. Just STOP tinkering with things and let the L$ find it's value. It won't keep going to 0, it will stabalize somewhere. Then you'll know where to set your prices.

Unfortunately, I'm not entirely sure anyone knows for sure where the L$ is headed.

Having measures in place to put the brakes on a rapid descent might be wise. There are a number of different ways to do this.

One simple way, of course, is simply to lock the selling rate, though that could just force sellers en masse to other exchanges. Another approach would be to provide incentives to sell at a more stable rate.

Unfortunately, I'm not entirely sure anyone knows for sure where the L$ is headed.

Having measures in place to put the brakes on a rapid descent might be wise.

There are a number of different ways to do this.

One way, of course, is simply to lock the selling rate, though that could just force sellers en masse to other exchanges.

A softer approach might be to provide incentives to sell at a more stable rate.

i am all for this textures thing, it would also educate peoples to choose the wiser size of texture and spare on alphas

According to Ricky and others a big reason why the linden is sliding towards somewhere in the mid 300s per $1 is the premium stipend.

Right now if you buy an annual account you get:

500L * 52 = 26000L

26000L / $72 = 361L/$

Now, a lot of people have suggested lowering the stipend as a way to decrease the money supply. What about increasing the cost of an annual account? Why is it so much cheaper to pay annually anyway? What if we paid $8 per month or $96 annually?

26000L / $96 = 271L/$

So, the threshold where it would be cheaper to simply buy lindens on Lindex rather than getting a second or third premium account would be much closer to 250L/$. Besides, LL deserves to get paid more for their work so they can provide a better service.

Raise the rates for premium accounts! $10 per month $27 per quarter or $96 per year!

Nope - the L$ needs to find it's true level.
There are numerous examples of governments (which is what LL effectively is) attempting to control inflation and/or exchange rates by tinkering in the 20th century and few, if any, have met with success. Indeed, many have resulted in major long term damage to the economies in question.

LL needs to stop attempting to control the US$/L$ exchange rate - just leave it be. It WILL level out at it's natural rate, and thereafter should settle down. The real danger is that remorseless tinkering with short term 'solutions' will cause ever increasing swings as the L$ exchange rate responds, as it will, to tampering, thus producing the typical 'boom & bust' cycle that has bedeviled many economies through the last century.

Yes, we can let the markets evolve, and unfortunately they may evolve SL right out of existence.

The upside of free markets is that only the fittest survive. The downside, of course, of free markets is that only the fittest survives.

FlipperPA,

I suspect you may be right about more sinks being needed. I think a few springs may be needed as well, but thats a different issue.

Re your suggestions:

1: Sounds good, but I doubt I'd have much use for them personely(Even if they were free).

2: Sounds great. Solves three birds with one stone, its a sink, it could slow the increase in storage required and it could improve the speed of SL.

3: Sounds interesting, but I think it needs further thought. Its the sort of service I would want to use, but the suggested monthly price point would put it out of my reach. One thing is not clear from your post is which is sped up, all the scripts that I create no matter who owns them, or all the scripts that I own no matter who created them?

Resizable snapshots is a good idea too. Why not use the same pay per pixel system as for the textures? Select from 256,512,1024 and full screen.

Tip

On the other hand, one can easily argue that the US (and world) markets would be nowhere near as stable without the tinkering done by the Central Bank and Federal Reserve.

Agreed! $10 an upload is way too cheep! I love the idea of raising the price based on the size of your texture. Also applying this to the sounds upload is a good idea as well.

That is the present value of the monthly cash flow to LL. There will always be a discount and therefor the monthly cost would go up accordingly such that the yearly fee of $96 is a still discounted rate.

The $L must be allowed to stabilize on its own. "Months" is not enough time to evaluate what the stabilized market will bear, particularly given the number of moving parts.

An emerging economy will show fits and starts. To expect a stable $L market at this point is not realistic.

Curiously, I wasn't referring to the recent economy of the United States, rather to the global economic experience of the last century. A period in which the United States has seen it's fair share of economic ups and downs if memory serves me well.

Absolutely. The wave will never be fully smoothed out. The younger the system, the more volatile it will be.

As someone who has uploaded dozens of textures in a single day, I'm a little concerned about raising the prices too much. I think differenitating them is still good, but if it gets raised too much it could really create a big burden on content creators and inhibit the growth of certain product segments.

I would suggest:

5L up to 128 x 128
10L up to 512 x 512
25L greater than 512 x 512

I am not too keen on the rename / retexture sim ideas, nor do I like the ability for avatars to rename themselves (sorry).


I love the charge per pixel and the ability to resize snapshots IW. Great ideas Flip.

As far as the proposed scripting changes, I am a scriptard. I have no idea if I like that idea or not.

Shaun and others,

I'm all for some of the excellent changes you've recommended, in the long run, but given the current toolset, I think maintaining the economy at a L$250 / US$1 level is not a bad idea. Raising the price on premium accounts would be an excellent start, but as for just letting the L$ self determine...

There's a huge problem with this. There's nowhere to centrally "set your prices". This could mean updating everything from web sites to notecards to prims all over the virtual world to maintain the same price you initially determined at the former rate. With the tiny profit margins that some businesses make, its only fair to try to stablize the L$ until much better business pricing controls exist. Making creators work hours and hours every time the L$/US$ rate fluctuates to change their pricing just doesn't seem fair given that those are hours they could be doing what they should be doing: creating.

Regards,

-Flip

I'm going to have to disagree slightly.

The bulk of textures uploaded should be 256x256 - the pricing should encourage this;

5L - 128x128
10L - 256x256
20L - 512x512
.. etc ..

In addition, maybe we can get the resolution of a texture more prominent in the texture finder - I'm not sure a lot of people see it there.

A lot of people have really daft names, ones they want to change.

You can get a new account, and get a new name, but you lose all your stuff. So people stick with "JoeBob57"...

A one-time L$2500 (US$10, minimum cost of a new account) first-name change would bring in revenue for LL *and* clean up the "JoeBob57" names.

Last name changes, same price (so that's L$5000 to change both names), you get to pick any current name. If you're getting partnered, you get another chance, same cost, you get the name of your partner.

PS: I like the idea of charging more for larger textures, as well as less for smaller. L$10 per 64k pixels, flat rate.

A sufficiently nerfed version of the reputation bonus could be designed so that it would be a net linden sink. Since dropping the reputation bonus, people seriously reduced the number of reputation points they handed out... because they don't mean much any more.

If the L$25 for a reputation point meant (say) L$10 for the recipient next stipend time, L$5 for the time after that (or maybe 5 weeks of L$1 per week) and that was all... people would have more incentive to hand out rep points as tips (people don't like handing out cash to people as tips, but rep points *feel* somehow less condescending), but each one would take L$10 out of the economy. And at a net cost of L$10 per point, there's no way to game the system.

Linden Lab has stated they want a stable exchange rate because that would be an a priori good thing. That may be so. Hyperinflation would certainly be irritating for merchants if nothing else.

Most of the posts in this thread imply that there is an imbalance in the money supply which is inducing the drop of L$ relative to US$ and so are proposing ways of tinkering with sources and sinks to attack the presumed cause.

I'd like to suggest that the cause is not the money supply but rather lack of faith in the "government" such as it is. This has certainly been true in certain real world economies in the past. If - to suggest an extreme hypothetical - people believed that SL would not be running in 12 months, the perceived value of the L$ would drop and likely do so more rapidly over time. One could stave off the effects of such fears in the short term by reducing the money supply, but preservation of value in such a circumstance would only be illusory.

I don't even pretend to be an economist, but did want to at least put out an alternative hypothesis for the phenomenon, if only to have it shot down by people who understand these things better than I.

This is the best argument I've heard for creating artificial stability in the $L market. I do worry, however, that as the community grows exponentially this maintenance will do more long run harm than good when the market must be released to find it's own stability.

Introvert, you are not wrong in suggesting that there is too much emphasis here pooling around the money supply theories, while ignoring very real factors such as the "faith in government" issue you have presented.

The Fed is not strictly monetarist, but remains flexible in an understanding that strict monetarist policy is not sufficient for economic reality.

Currently at issue for many theorists for and against monetarism is the failure of pure monetary policy to stimulate the economy in the 2001-2003 period. Greenspan argues that it was due to a "virtuous cycle of productivity and investment" coupled with a certain degree of "irrational exhuberance" in the investment sector. Solow, a more liberal economist from MIT, suggests that the lack of expected economic recovery was due to the break down in productivity growth in crucial sectors of the economy, most particularly retail trade and not as a result of monetarist failure. He noted that five sectors produced all of the productivity gains of the 1990's, and that while the growth of retail and wholesale trade produced the smallest growth, they were by far the largest sectors of the economy experiencing net increase of productivity.

There are also arguments which link monetarism and macroeconomics. The central test case regarding these theories is over the possibility of a liquidity trap, such as experienced by Japan. It has been argued that monetarism could respond to zero interest rate conditions by direct expansion of the money supply. Counter arguments state that this would have a corresponding devaluationary effect, as the sustained low interest rates of 2001-2004 produced against world currencies.

Regardless, monetarist theory remains a core area of study in market economics and I'm not seeing a very balanced look at the SL market trends here.

It is simplistic to shout about the $L supply without a much, much deeper look at the mechanics of the SL economy. Additionally, the low value of the $L as compared with other "currency" adds complexity to understanding the market drivers and the reaction of the comsumers. Irrational behavior is at higher incendence within this market than would be evidenced in a RL market.