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The RuneScape Market Crash of 2007 - What’s Going On? Is it Really a Crash? The RuneScape Market Crash of 2007 - Triggering and Accelerating the Crash

Any time a problem like an economic decline occurs, there are those who want to assign blame for it. That’s certainly happening now, as thousands of RuneScape players and pundits come out of the woodwork to point fingers at what they perceive to be the culprits for the current market crash. Sometimes these criticisms are legitimate, honest efforts to identify problems that need to be fixed, while other times they are just intended to designate a scapegoat. In all cases, though, the simplistic attempts to pin the guilt on a single factor that “caused the crash” are wrong.

The truth is that all economies are complicated systems that function based on a myriad of factors, including fluctuating resource supplies, changing demand for items, economic trends, trading systems, and mass psychology. There are also synergistic and feedback loop issues, where a change in two aspects of the market might by themselves not create a problem, but when taken together, they do.

It is because of this complexity that one can never easily determine exactly what causes a particular decline. Consider that even now, more than 70 years after the Great Depression, economists still do not entirely agree on what caused it.

While it may be difficult to get things exactly right, I do feel it is important to take a look the market and identify the factors that have contributed to the market downturn. We must remember, though, that it is a mistake to analyze the current market situation based on only what has happened since prices started to decline. The truth is that the price drops we are seeing now were triggered recently, but have their source in problems that have been accumulating for quite some time—just as the seeds of a forest fire lie in the accumulation of dry brush ready to burn at the first careless match. I’ll start off here by looking at the factors that set the stage for the crash.

In the real world, gold ore is worth a few dollars per ton; gold bars are worth over $20,000,000 per ton. In RuneScape, gold ore is worth around 500 gp and gold bars less than 200 gp. Why? Because unlike the real world, where the goal is to get the finished product in usable form, in RuneScape most players are interested in the XP they get from using skills.

In other words, it is the process that matters, not the end product. In many cases the end product isn’t needed or wanted, because it’s not why the activity is being undertaken. In other cases the product is desired, but not in nearly the quantities that are produced by players who are looking to raise levels. In effect, the finished goods are often really byproducts.

Consider how many gold ores one has to smelt or bars one must forge to raise Smithing from level 90 to level 91, for example; or the number of potions to get 500,000 XP in Herblore. The same goes for other transformation skills like Cooking, Fishing and Runecrafting. Thousands of players raising these skills means enormous quantities of gold bars, potions, cooked fish and so forth.

A similar issue occurs with certain extraction skills, like Mining and Woodcutting. The latter has the benefit of being stabilized by its tie to bow alching values, but that’s not the case with Mining. Power-levelers can mine tens of thousands of ores each trying to get to level 99—far more than they are ever likely to need themselves.

It’s not just non-combat skills either—consider how many players spend hours at The Barrows accumulating armor items and tens of thousands of runes, or people who “camp out” at monsters gathering drops. In nearly every case, the supply outstrips demand by a large margin.

Players who are looking to raise their skill levels have grown accustomed to just stockpiling unwanted quantities of items in the bank. These stockpiles, however, really represent astronomical amounts of pent up supply effectively hidden from the market.

The introduction of skill capes to the game has greatly worsened the supply glut problem, by giving far more people an incentive to power-level skills that produce excess quantities of unwanted finished goods. Where before few people would have bothered raising Herblore above level 82—the highest level required to make all potions—now there are many folks trying to get the Herblore cape. The same is true of many other skills.

Consider that it takes over five times as much XP to get to level 99 as level 82, and you can see why this has made the glut worsen. People who are power-leveling skills like Herblore and Cooking will produce enormous quantities of finished products, far in excess of what market demand could absorb.

Why would power-levelers and those interested in getting skill capes stockpile finished goods rather than sell them? The reason is because until recently, there was no easy way to do so. The RuneScape marketplace forums are crude and selling in person is slow and cumbersome. Many folks were afraid of getting scammed, and others just didn’t want to waste time selling goods when their goal was to get a skill cape.

These inefficient markets created imbalances that led to instability when more efficient options were introduced.

Jagex has been ignoring most non-combat skills for a very long time; the majority of them have not received substantive high-level updates since I started playing around two years ago, and some have gone even longer than that. Even in the area of combat, there have been a few updates but not very many; the only really big ones this year have been mithril dragons and God Wars, and they were both months ago.

There are two reasons why this matters. First, high-level activities lead to natural demand that helps offset some of the glut of supply of various goods. Second, higher-level non-combat skills would allow the production of new items that people might find uses for; since they don’t exist, everyone falls back on making lower-level items that are already in large supply.

Compounding the problem is a lack of viable means of leveling many skills other than mass-producing unnecessary goods. Jagex has made some moves in the right direction here with some of its recent minigames, but much more is still needed, especially for skills like Mining, Herblore, Cooking and Smithing.

The RuneScape Market Crash of 2007 - What’s Going On? Is it Really a Crash? The RuneScape Market Crash of 2007 - Triggering and Accelerating the Crash