Elephantes and Moehogs: Inflation and Deflation Explained by lindy_guo |  |
Neopia is one of opposites. And indeed there are opposite views, as demonstrated
by the recent inflation vs. deflation buzz. Gameboybluehippo started the debate
with his article "Deflation!",
which stated his view that the NeoPet economy is going through a period of deflation,
and that it must be "stopped". Two weeks later, rainbow_star_baby countered
with her article "Stop
Inflation!", And then Gameboybluehippo answered with another
article, which sought to solve who is right in the debate by comparing
NP-earning techniques.
Am I the only one missing something here? This debate is about inflation/deflation,
so really, making NP through shops has nothing to do with the topic at hand.
So back to the inflation vs. deflation debate, which has probably left you wondering,
Just who exactly is right? Well, it is extraordinarily to make a judgment
without even having the actual facts straight, as none of the articles explained
the concept of inflation. Having taken Economics and having quite an interest
in business, I shall proceed to explain the concept of "inflation", "deflation"
and other things in the wonderful world of Economic that will be of interest
to you, the reader, in order to make your judgment.
First of all, just what exactly is inflation? Inflation, in simple terms,
occurs when people are able to purchase less with a certain amount of money
because income and prices rise. In NeoPet terms, if 2 month ago, the average
Neopian made 300 NP/day and could buy an apple at 10 NP, whereas now they make
500 NP/day and have to spend 17 NP on the same apple, that's inflation.
10 NP for an apple and now they are 17 NP? Alarm bells should be ringing now
and your head may be filled with the thought, Oh my! Inflation is bad! I
don't want that! But wait, just hold on one second there before you get
out your huge "inflation is bad" banners in your shop. In actuality,
inflation is a natural process in any economy. It has both its pros and cons.
Severe inflation will be the ruin of Neopia and make life of Neopians close
to unbearable. But however, a mild inflation rate (1% to 2%) can actually stimulate
the economy and bring good times.
In periods of rising prices of inflation, it's the Neopians who make their
living from playing games that will lose out. There is a limit on most games
as to how much you can earn per day, so while prices rise, the income of those
Neopians may not rise and they may face hard times. Inflation also hits Neopians
who have the majority of their assets in Neopoints and possibly some of the
"oldbies".
Now, what's deflation? Well, it's the exact opposite of inflation. People
have more purchasing power; prices and incomes are lower. With deflation, you
might earn 200 NP/day instead of 300 NP/day, and the apple will cost 7 NP instead
of 10 NP.
Prices are lower! That's a good thing, you might think. Well, it's
also not as clear-cut as that in the real world as demonstrated by the Great
Depression in the 1930s. (In case anyone was wondering, no, I was not alive
back then.) But deflation will have different consequences in the real world
than from Neopia, as rainbow_star_baby correctly pointed out. The things that
make deflation a demon in real life is not really present in Neopia, as there
are no loans, federal reserves, changeable interest rates, employment/unemployment....
Hey, wake up! Okay, I guess going into the details of how real life deflation
differs from NeoPet deflation is very complicated and probably bore everyone
to death, so I just won't go there.
Deflation mostly hurt the percent of Neopians out there who are "speculators"
- meaning they buy out shops with lower prices so that their shops' prices are
the lowest. This may also hurt those who keep most of their assets in items
and perhaps the really serious item collectors.
Hopefully, you should now understand the concepts between deflation and inflation....
No? You don't? Then go back and read the beginning of the article again... now!
You do understand? Good reader! Here, have a biscuit while I go on to pass
my judgement on the articles.
First of all, as rainbow_star_baby pointed out, gameboybluehippo's proof how
deflation is in Neopia is not exactly correct. Codestones had dropped so much
in price not because of deflation, but because of something called "Price of
Subsitute Goods". Codestone prices dropped because Dubloons, a substitute good,
made their debut and surpassed Codestone as the prime training item. To argue
that lowered Codestone prices is a proof of deflation is in Neopia is about
as correct as saying oh... Roca-cola prices dropped because more people like
Repsi is a proof of deflation. (And in case you are wondering - no, I'm not
one of those people who like Repsi.)
Second of all, gameboybluehippo suggests for all Neopians to buy out shops
in a frenzy in order to curb deflation. All that will come to is severely artificially
inflated prices and a economic market out of whack. If that is to happen, prices
will at first shoot through the roof, bring hard times to some, but good times
to others. Then, as people start to realise that their items are way overvalued,
there will be a selling frenzy and prices will *plunge, and plunge, and plunge*.
What's the end result to that? Severe deflation and the pit of the economic
times - kind of like what happened with the historical Black Tuesday and the
Great Depression (once again, I reiterate, I was not alive back then). But it
will probably be on a lesser scale, since we will be looked after by the good
ol' NeoPets Team.
Geez... I'm kind of picking on gameboybluehippo there, aren't I? Okay... I'll
stop now due to the tiny shred of kindness in the dark caverns of my little
black heart... Muahahhaa...
What, you want me to pick on rainbow_star_baby now? Sorry, my dear reader,
but Elephantes are my favourite NeoPet. No, actually, it's because I can't find
anything that needs correcting, try as I did due to the huge clouds of evilness
in the dark caverns of my little black heart... Muahahaha...
You think I'm weird? Okay, I'll stop my evil laughter now and go on to closing
remarks.
Is deflation, or inflation reigning in Neopia? Well, why don't you just go
to any of the main shop in Neopia and take a look-see at what it says under
the shopkeeper's greeting? You are telling me that it says "Neopian Inflation
Neopian Inflation is currently at 2.35%"? Good job, my dear reader! Here, have
another biscuit.
Assuming that the rate given by NeoPets is correct, we are obviously in a
period of inflation, but a very mild one.
But should there be anything that you should be worrying about? Is this inflation
going to ruin us? Absolutely not. 2.35% is mild inflation (CPI growth, if you
want to be all smart sounding), and that is nothing to be losing your hair over.
Codestone prices have indeed dropped along with other Battledome related items
too and I will not deny that some speculators have lost out on quite a bit of
NP. My advice for them is to simply keep the items if you really don't want
to lost NP (a capital loss, if you want to be even more smart sounding) - think
of those items as a long-term investment. I can guarantee you that some time
in the future, Codestone, Faerie prices, etc. will be back up. In the mean time,
try speculating on other items - Dubloons, chocolates, rare plushies, retired
items, etc.
And for those who insist on losing their hair over inflation/deflation, I
suggest for them to put their assets in items, as well as NP. This way, in deflation
times, you have the NP to fall back on and in inflation times, you have your
items. Either way, you are safe and stable.
And oh yes, one more thing... now that we have Elephante and Moehog political
parties, are we going to have elections too? |
