Economy

Yohoho! Puzzle Pirates has a very large and complex economy, which is driven by shoppe and stall owners competing for commodities harvested across an ocean. The products shoppes produce are crucial to a pirate's daily activities, thus the economy is based on the economic theory of supply and demand.

Commodities and labor
All finished goods are produced using commodities. Commodities fall under many different categories, but certain categories of commodities are required to produce certain categories of goods (i.e. all swords (except for the foil) require minerals but many of the products will need many different commodities of different types).

All shoppe products also require labor to be manufactured. On subscriber oceans, this labor is provided by subscribed pirates; on doubloon oceans, a player needs a labor badge to provide work. Labor is provided by playing the appropriate crafting puzzle, though only alchemistry, blacksmithing, distilling, shipwrightery and weaving are currently available to play. Players can still take a job at a tailor or furnisher, but there is currently no puzzle for them; all labor for those shops must happen automatically.

Trading commodities
It is also important for a pirate to be able to trade with their fellow pirates. Buying and selling goods can both help shop owners, stall owners, and sea dogs alike. While stall and shop owners need to buy commodities to make products for their customers, pirates need to have easy access to rum and cannonballs for their pillages. And if a pirate happens to come upon some sugarcane or some wood, they might want to sell them to a shop or stall owner at an island.

Inflation
The monetary unit in Yohoho! Puzzle Pirates is a piece of eight (PoE). Over time, the purchasing power of PoE fluctuates. This behaviour is not determined by any intervention of the Ringers, but rather the game's economy reacting to variances in the money supply.

Fountains and sinks
PoE enters the economy from PoE fountains (e.g., from brigands, skellies, Atlantis, Haunted seas, Cursed Isles and the navy). Goods enter the economy from merchant brigands, market bidding, and in the case of gold nuggets and fruit, foraging. A small amount of money may also enter the game by Ocean Masters sponsoring tournaments or other events, or when players challenge NPPs and win their bets. PoE circulates within the economy from player to player via wages for labor, trade between players, shoppe purchases, wagers, tournaments, special events, and other means.

Eventually, PoE leaves the economy via PoE sinks, which consist of: taxes (which are split between the island's governor and the PoE sink), market bidding, war chests, portrait fees, drinks for the old salts, housing, and lost bets to NPPs. Commodities are removed from the ocean through commodity sinks, such as when items dust or are consumed in the case of rum being drunk on a voyage, cannon balls being fired in combat, or ships sinking as the result of a blockade or war.

Parallels and contrasts with real-world economies
The piece of eight within Puzzle Pirates actually has numerous parallels with gold, when gold was used as money in real life. For there to have been gold to spend, gold had to have been mined. Pirates have to "mine" the various fountains in order for money to enter the economy. If no one "mined" the various fountains, PoE would not exist in the economy, just as gold could not exist within an economy unless it is mined.

The parallel continues with what one must do to participate in the economy. There are numerous ways to earn pieces of eight on an ocean. Some ways require earning it from others, and there is always the option to "mine" the various fountains. This is a perfect parallel to the use of gold as money: one can attempt to lawfully acquire it from someone else, such as through the outpouring of labor, or by mining the gold directly.

Absent from the ocean economies are two important concepts that, in real life economies, heavily influence how inflationary or deflationary a currency is: interest-bearing loans and fractional reserve banking.

Also absent from the ocean economies is a proxy for the piece of eight. In real-life economies, people would use paper notes in place of gold, mostly out of convenience, with each paper note initially backed by a certain value of gold. Eventually notes were issued that were not backed by gold, the start of fractional reserve banking by the note issuers. The ability to create notes without an equivalent value of gold to back it up allows for inflation, or a degradation in the value of the paper notes in relation to gold.

Within Puzzle Pirates there is no authority issuing the piece of eight, and its origination is not through loans. Instead it is originated through actual effort and risk of loss to "mine" the various fountains. The fact that fractional-reserve banking cannot exist in any of the ocean economies severely limits any inflationary potential. But inflation is still possible.

Inflation is generally defined as "a loss of real value in the medium of exchange and unit of account within the economy". If pieces of eight were mined from the fountains endlessly, the purchasing power of the piece of eight would dilute quickly. Three things can stave that off: 1. economic activity on the ocean would need to grow in parallel with the increased money supply, 2. a hard limit on how many pieces of eight can exist on an ocean would need to be instituted, or 3. pieces of eight would need to be circulated out via sinks to balance it out.

The first option would require a steady influx of new players to the game at the same rate as the increase in the money supply. That is not a sustainable option. Placing a hard limit on the piece of eight on an ocean would negatively impact a player's ability to enjoy various activities on the ocean, as no pieces of eight would be earned from pillaging and other activities after a particular, arbitrary limit was reached. This leaves the PoE sinks as the only realistic option to curtail any potential for inflation.

Price increases and inflation
Determining whether the piece of eight on a particular ocean is on an inflationary or deflationary trend is difficult and subject to several factors. And what an individual may interpret as inflation may actually be a price response to an increase in demand or a decrease in supply.

In general the piece of eight has become inflationary when the prices for everything across the ocean have risen. This includes the market bidding prices for the basic commodities, such as iron, wood and sugar cane. As such, the market bidding prices for the basic commodities can act as a barometer as to whether inflation actually exists on an ocean, or whether a perceived price increase is due to other market factors.

Doubloons
Doubloons are unique to the economy on Puzzle Pirates, and their effect on the economy is worth exploring.

Economic flow of doubloons
Doubloons can enter the economy only one way, and that is by purchasing them through the Puzzle Pirates account page. And once purchased, they are linked to a specific account, unlike PoE which is linked to a specific pirate.

As such, doubloons have a few unique characteristics and capabilities over PoE. First, doubloons can be purchased on one doubloon ocean, either through the doubloon exchange or by trading for them, and spent on another. They can also be purchased under one pirate, but spent under another pirate on the same account on the same ocean.

Also unique with doubloons is that once spent, such as with delivery fees or purchasing trinkets or badges at a palace, they are sunk from the economy. No portion of the doubloon delivery fees is retained by the shoppe or shopkeeper.

The measure of the flow of doubloons into and out of the economy can also be a way of measuring economic activity on doubloon oceans. This kind of information, if it is not already being obtained by the Ringers, can be very valuable information that can assist in making economic decisions regarding doubloons and the doubloon oceans, such as with purchase prices through the account page or the introduction of items that can be purchased with doubloons.

Economic impact
Due to the inter-pirate and inter-ocean capabilities of doubloons, their effect on the market economies of the doubloon oceans is difficult to track or measure. However one thing that is clear is that doubloon exchange rates fluctuate based on the economic theory of supply and demand. As a result, doubloon exchange rates can vary, sometimes greatly, between doubloon oceans.

To a person participating in the economy, doubloons can appear to be a kind of tax when purchased through the doubloon exchange. Purchasing doubloons negatively effects a person's ability to participate in the economy by removing PoE from their possession without providing something of lasting value.

On a doubloon ocean it is possible, though difficult, for a pirate to have a successful career, including a lavish lifestyle, without ever paying cash for doubloons. So while doubloons can have a negative impact on a person's ability to participate in the economy, they are not complete "show-stoppers". If the pirate has the pieces of eight to purchase the item plus the additional needed to trade for doubloons on the exchange, there is no need to purchase doubloons with cash.

Contrasting against subscriber oceans, not having an active subscription can severely limit a person's ability to participate in the game, and consequently the economy, by placing limitations on a person's capabilities that cannot be circumvented.

On doubloon oceans prices quoted for items traded between pirates often include an approximation of the doubloon cost, reflecting the need for doubloons to deliver the item at a shoppe. This inclusion can also be seen on the commodities market for items such as paint. Tan paint does not have a doubloon cost, and its sell price on the commodity market is approximate to its order prices. All other paints have a doubloon cost, and so their sell prices per unit on the commodity markets reflect this.

Other links

 * Economy diagram