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Welcome to **The Runescape Economist**

Massive In-Game Inflation or a Natural Increase in Prices?

There has been much debate ever since the Free Trade referedum has been approved by Jagex as to the future fate of rare items such as party hats, christmas crackers and santa hats. Ever since the barrier has been removed, the priceds of certain items seemed to soar beyond anything players had expected and some seemed to take a deep plunge into the trenches. Is this after effect of the reimplementation of free trade in Rnescape on the markets an actual cause for concern? Does there really exist an unstoppable force of hyper inflation that is plaguing the markets?

What is Inflation?

Inflation is defined as an OVERALL rise in a basket of common consumer goods when people in the real world calculate it using the CPI (Consumer Price Index) - one of the most common tools. They take a fixed basket of goods, compute the total price of the basket through different time periods (Quantity remains the same though) and measure these numbers against each other to determine how fast the price has risen overtime (or lack thereof). What we are witnessing in the runescape economy is only a rise in certain items and a severe depression of the prices of others. For instance, the partyhat market has skyrocketed into the billions range (a runescape-wide record for the Grand Exchange) - something that was unfathomable and unthinkable when the GE barred the prices and made it rise very slowly (but steadily and surely) over time. Is this really hyperinflation or simply just the power of the invisible hand at work? Perhaps the prices are finally moving towards where they really should be in order to reflect the realistic supply and demand that exists within the markets. It is predicted that once the Partyhats reach their natural equilibrium price, it will settle down once again and experience natural fluctuations with the general trend of increasing value over time (as there are limited numbers of such rarities remaining in the game).

What about falling prices?

Other items - particularly armour and weapons that have been introduced in the past - have gradually (but surely) fallen. The Godswords and god armours (i.e. armadyl and Bandos) are classic examples of this phenonmenon. Why is this happening? The most common factor is the introduction of new goods. The introduction of new goods actually increase the value of money and purchasing power that a player possess. Over time, the old armours' value will fade off just as its demand slowly dwindles as players are drawn to newer, shinier things.

So my friends, IMHO, the inflation tale is simply a myth. It is not something to fear because in any economy, as long as free trade exists, the invisible hand will always guide the markets to maintain maximum efficiency. Thus, it is better to game with free trade than without. Only this will bring an item's true value into light.

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