SL Economics

One of the strange things about SL is seeing so many people thinking things should work in a way that’s just completely wrong and ultimately self-defeating. One nice instance of this is the issue with the stipends.

When I came to SL, stipends for premium accounts were L$500 a week. And that’s what I still get, as when LL adjusts the amount they give out they only change it for new accounts. When they do that, lots of people immediately start complaining on the SL Blog and the various formus about how much this sucks. I think they just don’t get it.

Let’s take my situation for instance. I still have a stipend of L$500. The exchange rate at the time of writing is L$270 to $1. This means that every year I get L$500 * 4 * 12 = L$24000. The value of this in real cash is $24000 / 270 = $88. My premium account costs me $72 a year. This means that by just having a premium account, I get about $16 out of nowhere. And while getting free cash is something that everybody likes, it’s not good for SL.

Consider: To make this balance out, the exchange rate should be L$24000 / $72 = L$333 per $1. Which means, that so long I don’t need to buy more than L$24000 per year, it doesn’t make economical sense to buy it at the LindeX.

Smart people would take a look at the LindeX, then at the costs of a premium account, do the math, and go: “Hmm. $100 at the LindeX gives me $100 * 270 = L$27000, while with a premium account, in a year and 4 months I’d have L$33300”. This means, that with a L$500 stipend and the current exchange rate, it simply doesn’t make sense not to have a premium account. If you need more cash than that, just buy the rest from the LindeX, and you still save money.

So what’s the problem? Well, eventually people wise up and start doing this, and so they don’t buy at LindeX anymore. People trying to sell their L$ will then have to offer it cheaper, and so eventually the exchange rate would end up at L$333, the point where it balances out, that is, the point where premium account with a L$500 stipend gives the same amount of L$ as buying it on LindeX.

This, by the way, is pretty much exactly the same value the L$ had not very long ago.

Of course, when it was at that point, people were screaming about that the sky is falling. Now that LL took the right measures to bring it to saner values, people are complaining they can’t free cash out of SL. Guess you can’t make everybody happy, no matter how hard you try.

I think the way to fix this would be to remove the stipend from the premium account completely. A premium account would just consist of the tier fee, making the premium account cost say, $15 a year. If people like getting L$ at regular intervals for some reason, LL could always add an option to set that up.

This way, the premium account would become what I think it should be: a “license” for land ownership, and it would stop damaging the economy by producing money at a cost below the market price.

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2 Responses to SL Economics

  1. raudf says:

    Ah, some of the math makes sense from that stand point. Thank you for sending me to this:)
    I’m beginning to think they should just do away with the premium accounts completely and go with tier only, if they do remove the stipends without killing the game. At that point, most people will cheerfully play 5 dollars a month to own land, but would scream if they had to pay 9.95 a month for that same bit of land. I’m not too great with numbers, but I know a good portion of those people would put the 4.95 savings right into the Lindex, so they might recoup the loss in that way?

  2. I was considering getting a premium account earlier, so I looked into what the “benefits” were. In short, I saw that I could own land and that I would get a stipend. Seeing that I owned land in the Azure Islands already, and the stipend reduced the net cost of the subscription to 8 USD, I figured that a subscription would be 8 USD for something I already had.

    What LL is doing really makes sense–they want to provide the medium, not be a government. In order to make this transition, they need to provide the tools for landowners to form governments, which I get the impression is their primary focus in development, other than stability.

    Being somewhat new at SL, I really don’t mind this change. In fact, I welcome it–I would love an SL that is as open-ended as the World Wide Web. If $L actually followed a currency model, meaning that land fees would be completely separate from currency exchange, SL would be a lot cheaper for the end user and a much more realistic economy for entrepreneurs.

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