Limit the game's number of core resources, alloys and alchemy, tools, items (weapons, etc), craft locations and services. Make all items basic items (upon crafting all stats are default) and use missions and challenges to add additional stats to tradables (to make them rare and worth trading). Create a mission builder that allows players to request services in exchange for tradables. For example if a player needs an Ice Sword to slay a fire dragon a smith could trade a special sword to the player(that will become the ice sword) in exchange for completing a frozen blade quest where the player would gain a frozen dragon tooth tool for the smith to turn X amount of swords into ice swords. If the trade post system always has NPCs making offers on player's needs and posting needs as well then the economy won't become stale. The quality of the game will directly correlate to the number of meaningful missions you are able to get into the game. Most importantly is to keep a paper rock scissors structure otherwise you will get trapped by linear leveling and players will quickly find the "end of the game". For example, paper that has all the possible stacked stats the game has to offer should at best draw against scissors but never win against it otherwise player's won't have a reason to go looking for scissors and the economy will go stale.

I would create 3 levels of services. Tactical services (engage target, access location, access item), Operational services (engage team, protect character, produce item) and Strategic services (engage dungeon, protect characters, produce items). The different levels of services enable higher level tradables to align with higher level services.

Let me know if this idea makes sense. It's inspired by the new Star Citizen game in production and its economy structure.

"Would automation (no matter how advanced) still make this a huge pain? I don't see this very often in games. Using gold seems to be the norm since it mimics our real life. However, in a virtual world we don't have all the real world issues like physics... So you would think that some level of automation in virtual trading would make this an attractive option as brings communities together and removes gold farmers and all the other issues related to currency."

I hope you don't think I'm being patronizing, but the idea that money's value has to be derived with reference to a commodity is a common misconception. Even the period where the Gold Standard held sway was very brief and gold comprised only a portion of money being employed in the world economy. Like today a great proportion of economic transactions were facilitated by credit contracts mediated by banks and other financial institutions.

Political economy and video games are both particular interests of mine and your topic provides a great opportunity to contribute to a discussion that relates to both of them. I have a idiosyncratic perspective on political economy that isn't shared by the majority of orthodox economists, but many are beginning to swing in the same general direction due to recent developments in economic history scholarship.

The suggestions of the commentators of on this thread all appear to be premised on the basis of a barter economy. According to the revelations from the hithero mentioned scholarship, after two centuries of investigation by anthropologists and sociologists, no one has been able to find an society where its members conducted economic transactions based on barter.

"The problem, as Caroline Humphrey (an anthropology professor at Cambridge) observed, is that “no example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there never has been such a thing”.

http://www.duej.co.uk/wordpress/op-ed-economic-myth-no-1-before-money-people-bartered/

Its totally understandable why its so hard for people in the modern age to conceive of economic relations that differ to the impersonal, distanced ones that so pervasively define how we relate to one another today.

The nature of money has always been and continues today derives from social relations between people and manifested in a complex array of cultural practices based upon trust, obligation, gifts, debts, credit, and even love. The majority of people prior to the modern age lived in communities where they know each other and could easily assess whether people were trustworthy or duplicitous, reliable or capricious, stingy or generous. It was only when societies reached a scale and level of complexity where former tight social bonds between people loosened that formalized economic relationships such as debt/credit contracts became necessary.

"All people, urban as well as rural, tend to lend each other things. They do this even when the benefits to such helpful behavior are not immediately apparent. In small communities, people lend their tools and their time to each other. While they may expect reciprocity in the future, they do not explicitly write a contract to formalize it. Such co-operation is a form of insurance. You help out when you can afford to do so, and you call upon your neighbors when you find yourself in need.

When people started living in large communities like Uruk, they began to live with strangers as well as friends. It may have been possible to know everyone in a large farming village, but not in a vast city such as Uruk. What were once implicit agreements among neighbors now became explicit, contractual agreements among strangers. When everyone had the same profession and skills, neighborly help could always be repaid in kind. But when people developed different professions it must have been difficult to maintain neighborly reciprocity. Urban societies still needed cooperation, but limits to familiarity with fellow inhabitants, and difficulty with quantifying the units of such cooperation meant that people required more formal ways to insure a return on their helpful efforts."

http://viking.som.yale.edu/will/finciv/chapter1.htm#steps

One of the core features of the nature of money is its use as a unit of measure. Units of measure is a definite magnitude of a physical quantity that is arbitrarily decided upon and standardized with the agreement of a community. Units of measure like the mina and shekel evolved out of counting systems used by Neolithic communities of the Near East and codified by the governments of Mesopotamia. They were both units to measure quantities of physical commodities like grain and livestock and abstract values used in accounting. In ancient times, intermediary materials like silver were only used when trading across vast distances needed to import goods needed by the Sumerian temples, because the materials weren't available in their own territories.

What level of technology is there in your game? Is it a primitiive economy that relies on handcrafted products, one in which artisans employ technology like small scale foundries or spinning wheels to produce their goods, or is there a possibility for players to utilized powered machinery to mass produce them? I'm not a MMO player myself so I'm not aware whether that's even a consideration in MMOs crafting systems. Sorry but I can't help think about virtual economies in real world terms. For me a tradehouse, bourse, or exchange only makes sense to me in terms of an economy that allows large scale production and distribution. To me an economy that is premised on small scale, primitive production and distribution would be better served by relying solely on NPC or player managed market stalls or traveling merchants who the player can conduct trade with. Or even allow players who know each other to lend goods/commodities to each other whether with the expectation of return or not. It should be up to them.

If the transactions must be formalized why not invent your own currency without any reference to Gold? I mean its legally allowed in real life, why not in a game? Various individuals and organizations minted private token currencies in medieval-early modern Europe, which were used by people without access to the scarce commodity moneys issued by the State until very recent times. You could even implement a full fledged player managed finance system where they can run their own banks and issue credit and debt. The MUD Shattered World has successfully done so for going on 10 years and the developers have managed to curtail excessive monetary gyrations by acting as the central financial authority, just like the world's Central Banks.

"Money enters the economy by players loaning money to purchase items, usually property. These loans are typically secured against the property in question and the bank owner determines interest rate and risk; of course the banks themselves are also tradable commodities. An important aspect of the economy is that wizards participate as if they were players if they want to offer coins as a reward or buy items already existing in game (this also restricts unlimited item creation)".

http://www.shattered.org/economy_print.html

I've also heard that CCP's Eve Online features a fully functioning player run financial system.

Hopefully I've managed to provide some valuable food for thought for anyone willing to read my voluminous post.

@BarefootPhilosopher The lack of historical pure-barter societies doesn't necessarily preclude a primarily-barter game economy. Ok, before money society had a gift-obligation or gift-authority system.

No it doesn't, but I think it would be a shame to reduce the full richness of human experience to social relations based purely on acquisitive, profiteering.

A "wealthy" person in a pre-money society who distributed that wealth wouldn't have as many future needs, nor would the gift-receivers have enough future resources, to pay back the gifts with other gifts, so instead it would turn into a situation where the wealthy person or family discouraged or punished disobedience by withholding gifts, the same way a government punishes disobedience to laws by withholding freedoms and protections. So a pre-money wealthy person accrued government-like authority, i.e. became nobility. BUT, the thing is that this kind of gift-debt system can't happen in a game where players have no way to force each other to pay their debts in any form. In a tribe or small village the wealthy person was the center of a clique and the clique members were often willing to beat up or kill anyone who displease the wealthy person, because this kind of violent demonstration of loyalty might earn the clique member more favor and gifts from the wealthy person. In a game it is usually impossible for people to bully each other into doing something. Also, there often isn't much in the way of service or obedience a debtor could give to a person who is wealthy within a game. So, this historical system, while fascinating, isn't something we're going to see in games, unless and until they get a heck of a lot more real.

I think you'd find that the reality of pre-industrial societies is a bit more nuanced than what you state above. No society would be able to function without the constant risk of upheaval and collapse and no leader would survive long if his rule was based purely on fear, threats, and violence.

On the other hand, bartering does exist as a thing people do in the absence of money. Children who don't carry wallets trade things with each other all the time. Co-workers too, in a situation where it would be socially inappropriate for one to give the other money, trade favors. It's interesting to people who are used to a money-based economy because the strategy of making a profit by a series of barters is different from the strategy of making a profit by a series of purchases and sales. Perfectly good material for creating a different-from-modern-life atmosphere within a game.

That's partly because people in our society find it difficult to relate to one another on any other basis after 200 or more years of social conditioning. The conception of homo economicus has become so deeply embedded in the fabric of our culture. In saying that people still lend each other tools and other goods when their close friends have need of them and offer assistance when they need an extra helping hand. It just isn't practiced quite so often as it used to. In fact people feel guilty expecting a return for doing a "good" deed for their neighbour. Reciprocity has become an almost dirty word. Much to the detriment of our communities social fabric.

I just think that trade and wealthy building for its own sake to be incredibly boring and pointless in games and that incorporating pre-industrial forms of exchange and associated webs of social relations into a virtual economic system would open up tremendous new novel gameplay possibilities.

That's an interesting idea, but I can also propose that money evolved from finding ways to get other people to help you:

So little Joey comes over to Gramma Hilary and says "I'm hungry, give me one of your many chickens."

Gramma Hilary says to Joey "Take these buckets to the river and bring me some fresh water, then you can have a chicken."

Joey replies "There's too many buckets, I'll be going back and forth to the river for a long time, but I'm hungry now."

Gramma Hilary says "Tell ya what, you make two trips to the river, and I'll have a chicken all cooked up and ready by the time you're done."

.

This is barter and trade, a direct exchange without an intermediate currency. And it seems likely to me that these trades existed before money

Well I base my understanding of economic relations on real world practice by my people, the New Zealand Maori, not on some hypothetical scenario. Perhaps it may at times transpired as you speculate, but many studies by both historical and contemporary anthropologists found that it in pre-industrial societies it was often poor manners to demand reciprocation immediately and instead pretend that providing for other's needs is a gift, though it was implicitly acknowledge that the return would be in excess of that provided by the giver at some later date. It was a way to build relationships and bring people together.

There's lots of reasons why money is preferred by people. Many have been addressed by previous people, and the tidbit about people utilizing the cheapest and most numerous item as a currency is true.

That actually may be a cool little design about the game. Let the people choose the "currency" such as the wastelanders in Fallout used caps as a store of value.

Let the people choose the "currency" such as the wastelanders in Fallout used caps as a store of value.

This actually reminds me of what happened in Guild Wars. Guild Wars had gold (only, no silver/copper), and you were limited to carrying 100k gold on any one character (bank stored way more I think).

The thing is, some items that were being traded started becoming more valuable than the 100k gold limit on a character. Since no one wants to do a trade in multiple parts, because of how insecure that is, people started using a very rare crafting item that was dropped in a specific area as currency replacement - the item was Glob of Ectoplasm.

Globs had variable price, even at NPC traders (the prices varied there based on supply/demand), but even so, people took to using them as substitute for large transactions of currency, since the supply of ectoplasm was always strictly limited (it was hard to farm), and also since it was a consumable, valuable item - so that the market wouldn't be overrun with it as a supply.

I'm pretty sure that mmo economics is a field of its own, since it can become incredibly complex.. but having a rare, limited in supply item could just lead to people using it as currency naturally (kind of what happened with gold in real life I suppose)