Sunday, August 21, 2022

Setting prices for in-game economy

What should an item cost in the game that is not on the equipment table? 

A naive approach is to see what it costs today and apply a conversion factor from modern time prices to gp. It is a pretty common question how much a gp would be worth in today's money. However industrial manufacturing, technology and automation has changed how much it costs to produce some things like clothing, but has little influenced others, like the cost to raise a living animal, so this approach will not work. 

We'll first consider how much a gold piece might be worth on average to settle that, and then look at how to instead usefully determine the price of items in the game.

How much is a gold piece worth?

Thre are at least two ways to determine a conversion factor for the value of a gp: the value of gold, or the value of a basket of goods you could buy with a piece of gold. 

Value of gold as a commodity

Maybe the least biased comparison for measuring the value based on a single good could be made using the price of gold itself? In the game, gold coins are made of gold, and 50 coins weigh one pound, so one pound of gold is worth 50 gp. The original purpose of minted coins was to guarantee purity and weight of material (although that was subsequently undermined by the nobles that could mint coins, to stretch their finances, as nicely detailed in Wealth of Nations).

The price of gold fluctuates in modern time as the gold standard has been given up. Money is not tied to gold at a fixed ratio any more. How much you pay for gold is entirely dependend on people believing how much it might be worth (or, conversely, how much the money might be worth). Typically the price of gold goes up when people distrust the value of money, and are looking for alternatives to store their wealth.  While I am writing this, the value of one pound of gold is about 30,000 US$, which would mean one gp would be worth about 600 US$. In the year 2000, it was only about 4,800 US$, or about 100 US$/gp. 

Value of a basket of goods

You could caluclate purchasing power parity across a basket of goods. For example, determine the current prices for all the items from the equipment list, and for each figure out how much the price ratio it, then average the resulting ratios. This will give you an average conversion factor for the gp across many goods. Unfortunately, because the factor differs so much depending on the nature of each individual item, using the average conversion leads to prices that would not reflect how much any given item should really cost.

For example,  a spyglass costs 1,000 gp in the game and from about $25 in the modern world -- a ratio of 40 gp per US$. A hand-made riding saddle costs 10 gp in the game and can cost thousands of US$ (prices ranging from about $500 to $4,000), so assuming $2,000, a ratio of 1/200th gp per US$. That means there is a 8,000-fold difference in the conversion factor for these two items. Clearly any average value would be meaningless. If we used $100 per gp, based on the lower range from metal conversion value above, a spyglass should cost only 2.5 sp, clearly too cheap, while a saddle would cost 20 gp.  

Estimating the price based on what it costs to manufacture

Instead, if you want to estimate how expensive something would be, base it on how much the raw materials would cost and how much the labor would cost. So essentially you are looking what it costs to craft the item. You can apply any level of profit margin on top of that, if you like. 

Crafting rules

If you look at the crafting rules, which presupose skilled labor (PHB p. 187), you can craft items at a rate of 5 gp per day, and a material cost of half the total value in materials. Under these rules, crafting a riding saddle would only take 2 days, and cost 5 gp for raw materials like leather.

The labor cost in the crafting rules is 2.5 gp per day, not 2 gp, but the rules are directed at the PCs, who are supposed to be individuals out of the ordinary. Skilled PCs can craft a saddle faster than the average craftsman. To determine prices for goods crafted by ordinary folk, we instead should assume a crafting rate of 2 gp per day, the cost of paying for a day's labor. 

Labor costs

Labor is fundamental for economic value, because if a laborer could not afford the necessities of life, you would not have a sustainable economy, and if they could amass riches and would not need to work any more. The idea that all value can be derived from labor is essentially Adam Smith's Labor Theory of Money (This theory since has been supplanted by the subjective theory, that value is measured by how useful something is to someone; you may see that reflected in what characters are willing to spend on a magic weapon.)

In the game, the cost for an unskilled laborer is 2 sp per day (see Services, p. 159 PHB), but most manufactured items will requrie a skilled artisan. A skilled laborer is paid 2 gp per day in the game. 

Material Costs 

In theory, material costs also come down to labor costs, and maybe rent extracted from access to limited resources like land (for pasture), mines (for ore or metal) and so on. But in practical terms, you can get the material prices for many raw materials from the list of trade goods

For those that are not on that list, you could estimate it from exisiting items based on the crafting rules in the PHB (p. 187) that state half of the cost is raw material. For example, leather is not on the list. Leather armor is made of leather, weighs 10 pounds and costs 10 gp, meaning a pound of leather could cost up to half a gp. This is not exact, because in reality, some things require much less material and more labor than others, but it can give you an idea.

If determined in this way, unless an item requires highly unusual components, the material costs will often be much smaller than the labor cost.

The crafting rules instead base the material cost on the cost of labor, which in many cases leads to a higher price than adding raw trade good values to the labor cost. So, instead of adding the material cost explicitly, a simplification of the crafting rule would be to add half the labor cost again, and only add extra cost for unsual or especially costly components on top of that. That will be the final item manufacture cost. 



Market Price

If you want the market price of an item, the cost calculation based on labor and material does not factor in profit margin on top of the labor for the trader (for goods that are imported) and merchant, each of which likely would apply 30% onto the costs if not more. The economy in the game does not really work anyways, with all trade goods costing the same everywhere, so no profit can be made on them, and nobody would trade them. 

If you assume only one trader, or a profit margin of only 30%, you get labor cost x 1,5 (for material) x 1,3 (for margin), ending up with about two times laber cost for the market price of the item that a PC can buy. Some Examples

Riding Saddle. Manufacturing a riding saddle takes about 50 hours of work by a skilled laborer, and that work has not changed much due to modern machinery or automation. At 8 hours and 2 gp per day, we would arrive at a price of 12.5 gp for the labor and a market price of 25 gp for the saddle. So this method would be off by 2.5x vs the saddles list price. If it indeed would only 20 hours to make a saddle, it would end up at exactly the 10 gp from the PHB.

Spyglass. In medieval times lenses were made from gemstones, typically beryllium, which might explain the high material cost. If we did not know the spyglass cost, and would estimate it would take about a month (30 days) to grind and polish the lenses and manufacture the precision housing, we would be at 60 gp labor, or 120 gp total cost. Chrysoberyl according to the DMG p. 134 cost 100 gp per gem. Because they are a special, costly material, we add them on top, which gives us a total of 320 gp. This still would be 3x lower than the PHB, and seems to be a more reasonable in-game price for a spyglass.

Conclusion

There is no generic formula for converting modern day prices of goods into gp costed ones that makes sense for a medieval-magical world. And there is not a lot of support in the rules for it, for good reason. It is a complex subject. 

If you are interested in what the price for an item could or should be, and enjoy research on historical prices, or medieval manufacturing methods, the best way is to do it item by item.

For practical purposes, you probably can spend your prepration time better than doing this, unless you enjoy reading up on how things were done. Either use a price from the internet where sombody has already done the work, or frome a similar game with more comprehensive price lists (Pathfinder comes to mind), or just ballpark the price based on other items on the equipment list.

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