economy-design

What this skill does

# Economy Design

**Purpose:** Systematic tools for designing, simulating, and sustaining game economies — the architecture of resource flows, currency systems, and long-term economic health. Economy is a foundational system; most other systems are downstream of resource flow.

**Core philosophy:** An economy is a directed graph. Every resource has sources, sinks, converters, and pools. If you cannot draw the graph, you do not understand the economy. Draw first, implement second.

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## When to Activate

Use this skill when:
- Designing resource systems, currencies, stores, or crafting costs from scratch
- Setting reward magnitudes or drop rates
- Diagnosing inflation (prices spiraling, early items worthless) or deflation (hoarding, new players locked out)
- Adding monetization layers (premium currency, battle passes, cosmetic stores)
- Designing LiveOps events that inject or drain resources
- Veteran players stockpile resources while new players feel unable to participate
- Using resource scarcity as a difficulty lever instead of stat scaling
- Planning a crafting system that intersects with the broader economy
- Building a simulation model to project economic health before implementation

**Relationship to game-balance:** The **game-balance** skill covers balancing *within* an economy — cost curves, dominant strategy detection, tuning existing numbers. This skill covers designing economies *from scratch* — the architecture of flows, the choice of currencies, and the long-term health of the system.

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## Core Framework: The Flow Model

Every economy is a directed graph of resources. Before writing any code, draw the graph.

### Five Components

| Component | Role | Examples |
|-----------|------|----------|
| **Sources** | Where resources enter the system | Enemy drops, quest rewards, crafting yields, purchases, passive generation, event rewards |
| **Sinks** | Where resources leave the system | Crafting costs, repair fees, consumable use, transaction taxes, upgrade costs, cosmetic purchases |
| **Converters** | Transform one resource into another | Crafting (materials → items), trading (gold → gear), upgrading (item + currency → better item) |
| **Pools** | Where resources accumulate | Player inventory, bank, stash, guild vault, escrow |
| **Connections** | Flow between players or systems | Trade, gifting, marketplace, looting, auction house |

### Flow Diagram Construction

1. **List every resource type** in the game (currencies, materials, items, tokens)
2. **For each resource, identify all sources** — where does it come from?
3. **For each resource, identify all sinks** — where does it go?
4. **Draw the directed graph** — nodes are pools, edges are flows with rates
5. **Label each edge** with its flow rate (units per session, per hour, per player)
6. **Check balance** — every source must have a corresponding sink, or the economy will inflate

### The Fundamental Law

```
If total_source_rate > total_sink_rate → inflation (guaranteed)
If total_sink_rate > total_source_rate → deflation (guaranteed)
```

This is not a risk. It is arithmetic. An imbalance does not *risk* inflation — it *causes* it. The only question is how fast.

### Sink Quality Principle

Every sink must feel meaningful to the player. "Taxes" are a terrible sink — they feel like punishment. "Crafting the weapon I want" is a great sink — it feels like progress. If players resent a sink, they will avoid it or quit. If players desire a sink, it regulates the economy while creating engagement.

**Good sinks:** Crafting, upgrading, cosmetic purchases, consumables that feel powerful, meaningful repairs, prestige resets (New Game+ currencies)

**Bad sinks:** Arbitrary fees, death penalties that feel unfair, durability loss on non-combat items, mandatory maintenance costs with no player agency

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## Currency Architecture

The number and structure of currencies is an architectural decision that shapes every downstream system.

### Currency Types

| Type | Structure | Pros | Cons | Best For |
|------|-----------|------|------|----------|
| **Single** | One resource for everything | Simple, easy to understand | Hard to balance across systems | Simple games, prototypes, jam games |
| **Dual (soft/hard)** | Earned currency + premium currency | Separates progression from monetization | Premium currency creates pay-to-win perception if mishandled | F2P with ethical monetization |
| **Multi-currency** | 3+ resources with different functions | Rich decision-making, deep crafting | Complexity overhead, inventory management burden | RPGs, survival games, deep crafting systems |
| **Hybrid** | Mix of above with conversion paths | Flexible, supports multiple progression tracks | Conversion rates are extremely hard to balance | Complex games with multiple progression paths |

### Design Rules

1. **Start with the minimum number of currencies that creates meaningful decisions.** Add more only when a genuinely new decision type requires it.
2. **Each currency should have a clear identity.** Players should immediately understand what a currency is for and how to earn it. If you need a tutorial to explain a currency, you have too many.
3. **Conversion between currencies must be lossy.** If players can convert A → B → A without loss, they will find arbitrage loops. Every conversion should destroy value.
4. **Premium currencies must never buy power directly.** The moment premium currency buys statistical advantage, the economy becomes pay-to-win. Premium currency should buy time savings, cosmetics, or convenience — never combat power or progression skips that affect other players.
5. **Name currencies to signal their source and purpose.** "Gold" (earned from play), "Gems" (purchased or rare), "Iron" (gathered from mining) — names should be self-documenting.

### Currency Decision Framework

```
Q: Does my game need more than one currency?
├─ Are there distinct resource acquisition loops? (combat vs. exploration vs. crafting)
│  └─ Yes → Consider multi-currency, one per loop
├─ Is there a monetization layer?
│  └─ Yes → Add a premium currency, strictly separated from power
├─ Are there time-gated and skill-gated progressions?
│  └─ Yes → Consider separate currencies for each gate
└─ None of the above → Single currency is probably sufficient
```

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## Inflation & Deflation

The core economic health problem. Every live economy trends toward one or the other unless actively managed.

### Inflation

Resources enter faster than they leave. Consequences cascade:
1. Prices rise as currency loses value
2. Early-game items become worthless
3. New players face impossible prices in player-to-player markets
4. Content trivializes as currency becomes abundant
5. Only the newest, most expensive content has any meaning

### Deflation

Resources leave faster than they enter. Consequences cascade:
1. Players hoard resources defensively
2. New players cannot accumulate enough to participate
3. Economic activity stagnates — nobody trades
4. Content gates become impassable walls
5. Player base stratifies into haves and have-nots

### Detection Signals

| Signal | Indicates | Severity |
|--------|-----------|----------|
| Median player holdings doubling faster than designed | Inflation | High — exponential growth is hard to reverse |
| NPC shop prices feeling trivial by mid-game | Inflation | Medium — may be intentional progression |
| Player-to-player trade prices spiraling upward | Inflation | High — emergent market reflects real currency devaluation |
| Players hoarding instead of spending | Deflation | Medium — could also indicate poor sink quality |
| New players unable to afford baseline items in first session | Deflation | Critical — directly causes churn |
| Wealth Gini coefficient rising over time | Stratification | High — rich-poor gap compounds |

### Correction Tools

**Anti-inflation:** Scaling sinks (costs increase with item level), progressive transaction taxes, limited-time cosmetic sinks (voluntary