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Against the IFP

Centralizing control over a currency’s infrastructure is a seemingly obvious mistake.

One would think any Austro-libertarian worth their salt would be able to see thru such a charade. Yet here we are, again. Face to face with economic illiteracy. Not garden variety lefist economic illiteracy, but one far more stinging and painful - one which comes from within our own community, rather than from without. 

First, Bitcoiners faced the economic illiteracy of maximalism and small blockers. Attempts to masquerade money’s primary function as value storage (Ammous) or rejecting Menger’s Regression Theorem altogether (Szabo) are luckily demonstrably false. Nevertheless, the shock of our fellow Bitcoiners illiteracy was like an unexpected slap in the face. Suddenly, we were forced to confront the fact that the ignorance of our allies in the fight for sound money, had led them astray. Yet, thru BCH we were thankfully able to keep Satoshi’s dream of peer to peer cash intact. 
Well, crypto anarch…

Minecraft Economics: How the Nether Update uses the Subjective Theory of Value

What is an emerald worth in Minecraft?

An emerald is the currency used in the popular game Minecraft for trading with NPCs called villagers and wandering traders. Emerald ore is an extremely rare resource in the sandbox world, yet every employed villager has quite a few to trade with the player. However, players have wondered how the emerald compares with real world currency. One YouTube Video by GameTheory tried to find this answer. First, they tried to convert it by comparing the USD cost of bread with the cost of bread in the game, but found that conversion does not translate to other goods. Next they used the labor theory of value to try to determine the USD to emerald conversion, but again came up with a nonsensical conversion. Finally, they tried to assume emeralds have an inherent value in real life and work backwards to determine the in-game USD cost. After using all of these methods, they come to the accurate conclusion that it's not really possible to convert emeralds into USD because the demand for each currency is so different. They also say that currency "is worth whatever society needs it to be."

The GameTheory channel comes to some excellent conclusions about the price of currency. Both the video and official Minecraft websites say that the trades offered by the villagers are dependent on a whole host of subjective factors. These factors include demand, supply, specialization, and reputation mechanisms. Minecraft's programmers designed this trading system for a reason: its how currency actually functions. There is no inherent value to any of the items in Minecraft, including the currency. But perhaps this is only true when comparing real world currency to in-game currency. Thankfully, the most recent update (referred to as the Nether Update) of the game allows us to test that theory.

The Nether Update introduces new NPCs to the game: Piglins. They are pig-humanoids that live in a separate dimension (the Nether). The Villagers however live in the dimension the player starts in (the OverWorld). Because of this we can consider the Piglins to operate in a distinct market. In the game, they even have their own currency: gold ingots. So what is the emerald to gold ingot conversion? One could look at the trade offered by the Cleric Villager at level 3 and say, "clearly the conversion rate is 1 gold ingot to .33 emeralds since the Cleric offers one emerald for three gold ingots." But does this conversion hold up when used for other goods. Let's look at one of the most valuable items in the game: an ender pearl. This item is absolutely necessary for the player to beat the game and can also be used to teleport the player over long distances. At level 5, the Cleric will start a trade of five emeralds for one ender pearl. However, the Piglins will trade one gold ingot for 4-8 ender pearls. The Piglins trade is very randomized, discussed more below. This means however, that the OverWorld price for an ender pearl is 15 gold ingots (by trading 15 ingots for 5 emeralds and then 5 emeralds for 1 ender pearl); and the Nether price for an ender pearl is anywhere from .25 to .125 gold ingots. Thus, across the two markets, there is no objective, inherent value of gold, emeralds, or ender pearls. Instead, the value of these items are dependent on a host of subjective factors.

Let's examine some of those factors. First, let's look at the demand for emeralds versus gold ingots. Emeralds really can only be used for trading and decoration whereas gold can be used (and is used by the Piglins) as armor and weapons. Why would one society base their currency one something without much inherent value whereas one bases it on a commonly used resource? This is very similar to the water-diamond paradox: why is one diamond worth incredibly more than one bottle of water, when the latter has much more practical uses? The lore of Minecraft explains this.

The villagers of Minecraft are a settled, advanced society whereas the Piglins are a nomadic society. First, and most obvious, the Villagers live in houses along with possessing private workshops and working blocks. Piglins however roam in the Nether with no permanent structures. This settling--like in the real world--can be attributed to an agricultural revolution. The villagers create farms and have domesticated live stock. But the Piglins are still a hunter-gatherer society. They can even be seen hunting their food, Hoglins, in the game. The villagers therefore can have a more developed system of trading.

For instance, the villagers have a relatively advanced reputation mechanisms, more stable prices, predictable trades, and specialization. Villagers will give the player better trades based on if the player saves them from Pillagers (a hostile mob) or heals them from zombie attacks. In contrast, the Piglins always inspect the ingot that the player gives them. The previous has mechanism that will recognize and reward good actions while the latter has to verify the quality of the currency with every trade. The villagers also have stable pricing and predictable trades. Ceteris paribus, a player can consistently come back to the same villager and get the exact same price on certain goods. For Piglins, though, one gold ingot will randomly get the player anything from eight-sixteen pieces of gravel to four-eight ender pearls. The Piglins can drop any of eighteen different items, most with a random amount. The villagers, though, allow the player to select the item that they desire before purchase. Further, villagers have a division of labor and specialization. There is a farmer villager, a cleric, a butcher; all offering and desiring different items for varied prices. Villagers also can become more skilled at their specialization, allowing for more valuable items to be traded. Piglins highest level of specialization is either being an archer or a swordsman.

Obviously, Minecraft's trading system is not a free market. In fact, it is centrally planned by the game's programmers. However, it tries--and wonderfully succeeds--at imitating a decentralized, subjective value. It uses demand, supply, specialization, and reputation mechanisms. Despite its clear central planning, there is no objective value to any item. Instead it uses complex economic calculations to simulate a realistic economy. In many ways, that is what Minecraft is all about. It creates parameters, but the players are the ones who determine what will be mined and crafted, what will be created and destroyed, what options will be chosen from functionally infinite possibilities.

Note: all trades are using bedrock edition

Derrell McIver @benjaminDmyles1


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