I'm An Economist And...

Thanks for your response, Teufel.


Yeah, that's what I thought at first. But then I realized that LL is not the only entity that can initiate the creation of new land. Anyone who pays US$1250 upfront can purchase a private island sim--in essence creating new land. Of course, LL could turn them down for any reason--one being that they do not want to add more land at the time due to the lack of a sufficient population.

However, LL does not do this. They need to add US$ to their cash flow and with every new island sim created, they get the upfront fee plus an additional US$195/month of tier payment. That's too important to turn down.

So, the rate of new land creation is equal to land created by LL to auction + new private islands created. The owner of the new sim can sell any portion of that land, even the entire sim, thereby adding to the land supply.

In fact, Anshe Chung recently reserved 48 new private island sims. Time will show if she follows through and actually takes them live. If she does, you can safely assume that most of that land will be for sale.

If you look at the new economic data page that LL provides, and watch the number of new sim auctions that LL offers each month, it is clear that the rate of new land creation (new square meters produced each month) is currently outpacing the rate of new resident sign up. A noticeable percentage of that is due to private island sims coming online.

Go out to Bar in real life and tell the Bar Tender, I can't have fun because I have to pay for drinks. 1st life, real ecomony 2nd life, no different. I see college students buying drinks all the time..if they didn't, the bars wouldn't exist. Get it in your mind people, this is Secondlife keyword "Life". In either world there are no free handouts unless you find the soup line. In either life, if you want something you find a way to get it. If you are here just to hang out and have fun, do it. I have seen college student playing other MMORPG games and spending money to buy Armor/Weapons, in other words, if you want to be your best, you get what you pay for; it's called "Reality" be it real or virtual.

A college student pays 100k to go to school for what? To make money eventually, be it real or virtual. Maybe lindens need to make a Bank where u borrow money? Nah, just hit up mom and dads credit card for expenses as normal or take money off the top of the student loan to buy a drink/virtual clothes etc. as usual. Some people call this a game, if this is a game then; life is a game, either way; it's "Life".

I'm from the government... I'm here to help.

Ok, time for me to throw my hat in. I am very new to this myself...which makes me someone who is not used to the way that things "used to be" back in the good old glory days of the L$.... Before the rich were getting richer, and the poor were getting poorer...and stipends provided everything...


The fact that they might now be removed....from the *NEW* users joining.... leaving them with nothing to spend, and allowing no way to have fun....sounds a bit strange....

I mean....no one is going to FORCE me to buy anything. For me, part of the fun is trying to figure out a way to actually EARN L$ to spend. Find a way to fit in, learn the economy, and move forward. I do not care if I ever earn a single USD from it. But from what I have seen so far. It will be easy to make tons of USD from here with the right business model...REGARDLESS of the value of the $L. I already see traffic directed to real world web sites where things are sold for both $L or for USD. I see no reason why advertisers can not advertise real world products here and have them directed to their real world stores. One is only limited by ones imagination. That is the whole point.

Indeed, this world IS new....and no one knows where it will lead. The paper is blank, and all the doors are open.

Now...after that...I can say this.....I cheaply got my "first land", and put it up for sale at what I thought was such a high price that no one would touch it....but it sold immediately while I left to get a snack....and I made the = of about 40USD. Now...that covers my SL membership for premium for 3 months, and plenty of LD to "play" with for quite some time.

and if I run out of LD....well...I am not going to starve to death. If I feel that I WANT to have more....I have two choices....I COULD pay US$ and make an economic investment into the system to buy Linden...but no one will FORCE me to do that. On the other hand, I could invest some time, and learn how to make things myself...

I know that I do not HAVE to buy clothes, or lipstick and makeup, or buy anything for that matter in order to have fun. This world will certainly not collapse with stipends being slowly phased out from the newest of users who do not have an existing contractual agreement with Linden Labs that the stipends be provided. Those who already have that agreement with LL will not have them removed.


Also curious about those who are concerned about those that are only money hungry. Why do those who "depend" on the stipends keep spending their L$ to supply those who are money hungry with the L$ to make their money with? Stop giving your money to them, and they will no longer have L$ to sell for USD.

Also, I should add, that I am quite glad to hear from a Real World Economist in here, because every day the real world, and the virtual world are growing closer and closer together. And, Linden Labs has a place open for a Real World Economist....might want to consider applying. There is a way to make real USD off of Linden Labs. <smile>

Now, granted that I am new, but those are just my observations, thoughts, and comments.

All that does is keep the Linden from increasing in value above 250$L/USD.

Hey there,

I actually missed this post as there were so many people responding heh.

Ok, First, yes money sinks = money adds would slow the devaluation of the currency, but it would not bring the value back to what it may have been in the past. The only way for the L to ever get back down to 250-255 would be if at least one of three things happened or a combo of them:
1. Linden Labs made more sinks than adds, thus reducing the money supply. The reduction in the supply of money would increase the value and slow velocity. This is something LL would not do. There simply is no point, and deflation can hurt an economy more than inflation.
2. The second thing which could increase the value of the L$ would be if LL stopped adding more money to the money supply AND the population grew significantly. Not idle accounts, but accounts which are actually active and thus have demand for L$. The increase in population, with the same money supply, would increase demand for the L$ and would increase the L$'s value.
3. If the value of Land went up, there may be more demand for L$ to make land trades and to pay for higher rental prices. This would happen if LL stopped giving out land for a while which would lessen the supply of land and thus move the equilibrium price of land up the Y axis.

Now, the second idea you had of putting unlimited L$ for sale at $250L/1USD would do nothing more than place a large sell order (unlimited) on the exchange which no one would want to buy because they could buy it at a better rate from someone else. Even if someone did buy it at a rate of 250/1 they would only be adding to the money supply and thus further devaluing the L$. In other words, placing unlimited L for sale at 250/1USD, would not do anything at all. There would simply be more sell orders sitting on the exchange which no one would ever buy.

Now, if LL were to say they would BUY unlimited L$ at the rate of $250L/1USD then that would keep the L$ from losing value past that point because they would be creating artificial demand for the L$. The problem is, to do this LL would have to spend hundreds of thousands of dollars to buy the currency and even then, they would have millions and millions of Linden Dollars in their account which they would have to sell again in order to get their money back, which would only bring the market back to the rate it was before they started buying the Linden Dollars. And if they wanted to destroy the Linden Dollars, they would simply be losing their hundreds of thousands of USD$ which they spent to buy it up, which they would never do and if they ever did, they'd probably go bankrupt and thus close SL and thus the Linden Dollar would become worthless due to no backing or need.

Hope this helps,
Cheers!

Teufel Hauptmann, What happened to your bank?

Hiya,

Our "banking" experiment will go live this coming weekend. We'll put an "advertisement" up and add it to the search listings when it goes live. The name of the project is "SL Bank."Our software is in beta testing now and seems to be 100%, but we want to be sure before going live, naturally.

Cheers!

Erm, bank? Did I miss a thread? ^^
Can you tell us more about that?

Hey, Mad Wombat!

It is mentioned within this thread created by Tiger Clinton. Go to post #15 and read on.

/130/81/103335/1.html

Yes, what he said.

Cheers & Happy M-Day!

Ty, I visit the bank weekly waiting for it to open. I'll be there when you open the doors.

Thanks a lot and good to hear that SL is indeed more than a mere entertainment platform. Maybe I should change the university and go to NYU ^^.

nvm, just edited to not start a meaningless discussion.
I want you know only that you are wrong.And good luck with your bank.

1*If you keep money stock constant and increase population, the money in circulation will increase and the sell pressure on lindex will be lower, and this will force L$ to have more value.



Ofcourse if you use only step-2 it would be terrible.
But because of *1, SL will need more L$ in game and will buy it from lindex, if there is any sell order by residents above 250/usd(any open buy request), SL will buy it; if not, SL will buy from LL.

Let me explain by anothre way:
imagine SL has 100 residents with 10000L$. you keep money source= money sinks. assume that they all need to keep 80L$ at their SL accounts, and 2000L$ rest at lindex.
And 300 more people joined, the world L$ stock is still 10000L$. assume that they all need to keep 80L$ at their sl accounts, wait there is no 32000L$, and nothing left to lindex. At this state they will buy from the base rate instead of new money sinks, till world reaches to its balance.
I hope this can explain.

At last total, LL will continue to print L$, but when needed.

Hope this helps if not; you must use a simulator to see.
Couldnt stop myself

Hiya,

The first paragraph of your post was point #2 of my post.

For the rest of your post: SL,does not buy Linden to give to players. They "print" the money and give it out in adds. By making sinks = adds, that would stop the Linden from losing value, but it would not make the value of the Linden increase without added population.

So, more less you are now describing what it is I just said, minus your original ideas. Maybe the language barrier is getting in the way here and I'm not understanding exactly what you are saying, but to sum things up, giving unlimited sells by linden labs at a certain rate, would not do anything for the value of the L$ and LL offering to buy unlimited L$ at a certain rate would put them into the poor house. You can not artificially give a value to something. The value of the Linden must be found through supply and demand dynamics.

Now, if LL offered to buy all Linden which they wished to give out via adds off the exchange that would increase demand of the L and keep the price down, yes, but to do so would cost LL hundreds of thousands of dollars, which would only partially be paid back in the form of monthly account payments from players, so LL would have to increase the price of playing, which would lower the population because there would be less demand to play due to the higher cost, and thus the population would decrease and thus demand for L$ would decrease and the Linden would be right back to where we started at the same value as before if not lower.

If what you are saying and I'm just not understanding, is that if the set sinks = adds AND the population grew significantly over time (active accounts) then the demand for L$ would go up and so the L$ would become more valuable, then yes, you are correct. That would be IF the active population grew and the sinks = adds. But if sinks will ever = adds is fiscal policy and is up to LL. Economists study monetary policy (the money supply), politicians do the fiscal policy (Taxes, budget, governing, etc.) so if they will ever get rid of stipends and other adds or set the adds equal to each sinks, is up for debate.

I see there are now anti-stipend and pro-stipend groups rallying on the boards, lol. Let’s see what happens.

Cheers!

Uhh, what? You can't simply say someone is "wrong" and that is that. You need to support your argument with at least one truth-functionally-true premise and a conclusion in order to have a valid argument or better yet all truth-functionally-true premises and a truth-functionally-true conclusion in order to have an argument which is sound.

Prost!

Also, I should mention, that "menu cost" is an economic term which comes from the fact that when inflation is high, places must update menus and catalogs, prices lists, etc. often which costs money. I was simply explaining where the term came from not saying that changing prices was the number one concern of the people in the society.

Cheers!

OMG you dont read my post, it was an answer to your post read it again.


And this , "SL, does not buy Linden to give to players", while i am saying SL, i mean SL world, residents , not LL. And it was an answer to your post, you said:
"money sink= money supply will make devaluation slower but doesnt help L$ to have more values". And i showed you how it helps.
And i never talked about LL to buy L$ from lindex. Never.
Oh guys, we really have a misunderstanding problem ,or maybe about my english. the rest of your post is worse. My suggestion to you is read my posts more carefully, you are only misunderstanding and making meaningless comments. And the worst thing is you are typing very long on these misunderstandings lol. I am really laughing here sry

Ok i am repeating here again(wont repeat one more time

1-> make money supply = money sinks <- for L$ to have more value(you are wrong to say that->"but it would not bring the value back to what it may have been in the past." If money sinks= money supply, the population is increasing, this means L$ will have more value.
2-> put unlimited L$ at 250/usd to sell <- SL(RESIDENTS) will buy it when it needs. If SL(WORLD, RESIDENTS not LL) doesnt need any L$, simply wont buy it from LL.

and i am repeating here again :::::
SL= RESIDENTS, SL WORLD, SL ECONOMY not LL in my post.

Ok, I think I got what you are saying now. You are saying that if sinks = adds, then over a long period of time, if/when the population grows, the value of the L$ will increase. That is exactly what I said and you said I was "wrong." But ok.

There would be no need to put unlimited L$ for sale on the exchange. I mean, you could do it if you wanted to, but once again you'd be manipulating the currency or "pegging" it, which only hurts an economy in the long run.

When I was saying that having sinks = adds would not bring the value back up, that was correct. I was not assuming there would be a population growth, which you are. That is a totally different variable, and one of which I talked about in my post.

Knowing that SL = residents clears your post up a lot as well. Thanks.

Anyways, glad we got things cleared up.

Cheers!

My calculations were based on long term, and reality. SL population is growing fast, High population growth is a paramater which SL has. So sinks = adds will bring the value back. and yes at the beginning there would be no need to put unlimited L$ at 250/usd. But after a time(long term) when SL needs more L$ LL will change its policy and will create more money source for free<-which is wrong. And putting unlimited L$ at 250/usd(or 200 or whatever) is an alternative to create free L$ for creating counter balance.

I think in regards to currency, if they wanted to peg a selling rate, they should do it right at where we are when they peg it. This would stop the economy from going through a period on L$ increasing in value, which can hurt an economy as well.

I guess anything’s possible I hope the population continues to grow. Lets see what happens and lets see if LL will ever make sinks = adds. Will be interesting indeed...

Cheers!

I'm glad you folks are getting things settled a bit. Can I put another question up to the panel?

Which is better for the quality of life for the average resident:

1. Having lots of adds and sinks, so money is rapidly flowing through the system
2. Having very few adds and sinks, so money stays and keeps circulating through the exchange.

I'm not sure there is a perfect answer to this.

Personally I think a situation where the money flows is better through, but I think that's largely based on the psychology of the situation. If, every week, you get a lump of cash my feeling is (and my experience running a shop supports it, stipend day is always my best trading day by some distance) that you're more likely to go out and spend it. Not necessarily all of course, but spend money. That then means that the content creators of all types and levels look at the situation and decide they will make that new dress, script, house whatever, because even if they have to charge a bit more to cover costs they will expect to see a return on their time and effort. It might, however, mean a decline in freebie content over time.

If there's no regular influx of money then I rather strongly suspect shopping will decline because many people won't have disposable cash to hand. Once your current savings get squeezed you either stop shopping or consider buying on Lindex. The number of people that scream and shout that "Buying on Lindex is a sign of losing" or similar makes me believe that a large enough percentage won't do it so they'll become 'dead' in economic terms. Also people that do buy will buy less because they'll only pump money in through Lindex when they really feel the urge or have cash to splurge. Shopping declining might not worry some of you, but fundamentally the economy of SL is based on money changing hands, as it is IRL. If people stop buying businesses start going bottom up as the providers lose the will to subside their business and so people buy less because there's less there and so on.