How Video Game Economies are Designed

When The Witcher 3 first came out, in 2015, it didn’t take long for CD Projekt Red to realise that there was a big problem with the game’s economy. You see, a few enterprising players figured out that they could go to White Orchard, kill all the cows on the farm, and sell their leather for cash. And then, if Geralt meditated to pass some time… the cows would all come back to life. So, if you’ve got the patience, you could repeat this simple process as many times as you want - and amass infinite wealth before leaving the very first village in the game.

Whoops. Look, video game economies can be very complicated to design, with all sorts of room for imbalance and exploits. But if you get it right, an economy can be a really powerful tool. It can shape player behaviour, change the pace of progression, offer up difficult choices, and create challenging puzzles. So, in this video I want to give you a crash course in video game economy design. I’m going to map out a typical video game economy, by describing the five basic entities in the system and the way they connect.

And as we go, I’ll show you how the design of the economy can change the way we play. Plus, I’ll let you know how CD Projekt Red fixed that nasty cow-killing exploit. I’m Mark Brown, and this is Game Maker’s Toolkit.

So first things first, what is an economy? Well, in games at least, it’s a term that describes the flow of resources around a system. And resources covers just about anything you can collect - coins, crafting materials, swords, experience points, ammo.... ARTHUR: "Money!" So everything from Stardew Valley to Elden Ring to DOOM Eternal to Pokemon has an economy. And they share most of the same basic entities.

Let’s start with this one: the tap. Taps generates new resources into the economy. That could be enemies who drop experience points when they die. A saw mill that harvests wood. A regenerating health bar. Or rocks that spit out iron ore. Some taps generate resources automatically, on a timer - others need to be mined manually, by the player. Now the thing about taps is that can be used to incentivise player behaviour. If you want players to fight monsters, then you can put loot drops on the enemies.

If you want to push players to explore the world, then you might put unique crafting materials in every biome. And if you want players to punch demons in the face, then shower them with health points when they glory kill baddies. Also, just like a real tap… you can change the flow of resources. This will affect how scarce, and valuable, a resource is: from rare ammo drops in a survival horror game, to an abundance of munitions in a fast-paced shooter. But, that can also affect the pace and balance of the game - more on that in a bit. Oh, and, in extreme examples, a broken tap can create economy-busting exploits.

When we get resources from taps, we put them in our next entity - the inventory. Which, could be an actual inventory that you can rummage through. Or it could describe a simple counter like a health bar or coin wallet. Whatever the case, you need to decide if it has an upper limit or not. Giving players a maximum carry weight, or forcing them to stash every gun in a tiny attache case, can create challenging decisions about what items are most essential, right now.

And a limit can also be used to stop players amassing too much wealth - and it forces them to actually use these resources and not just carry a thousand potions until the end of the game because, you know, just in case.

Now here’s the thing about resources. Some of them are inherently useful - like swords and guns. But others, like experience points and money, don’t actually do anything on their own. They need to be exchanged for something more useful. So say hello to our next entity: the converter. Anything that lets us exchange one resource for another. Like spending money on new gear in a shop. Or crafting a better weapon from raw materials. Or cashing in experience points to level up.

Now in some games, the cost of a conversion is going to have an impact on the pace of the game. For example, if we know how much XP we need to level up, and how many experience points drop when an enemy is killed, we’ll know - roughly - how many enemies the player needs to slay before gaining new power. And so that progression can be sped up, or slowed down - by changing the cost of the conversion… or the output of the tap.

Now, converters can be a great way to encourage decision making in the player. Like, whenever you go to a shop you need to carefully decide how to spend your limited pool of cash. But, it’s easy to mess this up. Look at Ghost of Tsushima: it has about 13 different crafting materials, and most are directly linked to a specific upgrade. Yew wood for ranged weapons. Leather for armour. Iron for your sword. This means that you don’t have to make a decision about how to use these materials, because upgrading one bit of gear often doesn’t impact your ability to upgrade another.

That’s very different to Metro: Exodus, which only has two crafting materials: components and chemicals. And pretty much everything you can make - from ammo to mask filters to health packs - requires both. So, because crafting one thing temporarily locks you out from crafting another, it means you have to be smart and intentional about everything you bash together. Having lots of currencies can be great for encouraging exploration. Or making certain conversions much rarer than others. But if you want to create difficult decisions for the player, have fewer currencies… that can be spent on lots of different things.

So what are we actually exchanging these resources for? Well, typically, it’s something to make the player more powerful, more efficient, or more resilient. Bigger swords and better armour, so that they’re ready to face the challenges in the next part of the game. But what about if players can return to the area they just came from, but now with better gear, stronger stats, and more health? Well, for some games, that’s what makes them fun. Idle games like Cookie Clicker, and roguelikes with permanent progression make players repeat the same, or very similar, content - but each time, with more power or efficiency than before.

This creates a positive feedback loop - a system where the output is fed into the input, and then reinforces the output more strongly. And it can be very compelling - and dangerously addictive. But you know what else we might call repeating the same content to slowly amass power? Grinding. And that’s not always what we want. So, maybe you want to get rid of this power-creeping feedback loop, or at least make it less tempting or less tedious.

I mean, you could do what CD Projeckt Red did when it came to fixing that cow-killing exploit. In a patch, released a few months after the game’s launch, there was a rather cryptic new addition to the game: the bovine defence force initiative. And what did the BDFI do? Well, if you killed six cows in White Orchard… the game would spawn a level 27 monster nearby, who would rush in and, well, put a stop to your rampage.

So, that’s certainly one way to fix it. But, here’s three other smart ways to go about it. One method is to make that power creep more interesting, by turning it into a puzzle. Take a look at Factorio: it has the exact loop I just described. You start by digging up a small amount of coal and iron - and then convert those into plates. You can then use those new resources to create more drills and furnaces, that will let you repeat that same process more effectively.

But as you go along - creating conveyer belts and production lines and different energy sources - you realise that it’s not just a simple, obvious loop of gaining power. Instead, it’s a complex problem-solving headache of automation and optimisation. Games like Satisfactory and Stardew Valley are fun, because they challenge players to figure out how to be more efficient. What’s the smartest conversion route for a certain resource? How does the layout of your factory effect its efficiency? Where are backlogs and stoppages happening, and how can you redesign to stamp them out? Can you keep up with repair and maintenance? And how might a change in circumstances - like a sudden drop below minus 100 degrees celsius - change your plans?

Plus, while you can just slowly amass wealth over time, you’re encouraged to optimise with deadlines, rewards, and competing nations. Another way to get rid of grinding is to implement a negative feedback loop. A system that works to balance itself to a status quo. In. Elden Ring, if you graph out the number of runes needed to unlock the next level, then you’ll see that it makes a sharp, upward curve where it costs more and more experience points to jump to the next level.

So while you only need to dispatch about 10 guards in Limgrave to jump from level 9 to level 10, you’d need to kill hundreds of them to go from level 49 to 50. By changing the cost of the conversion in lock step with your level, Elden Ring makes killing the same simple enemies over and over again incredibly ineffective - massively discouraging this tactic. And so players are pushed to explore further afield, fight tougher monsters, and take bigger risks.

The final way to deal with grind is to slow it down, by implementing another economic entity. The drain. Drains are the opposite of taps because they permanently remove resources from the economy. That includes breakable weapons. Losing health or units. Paying taxes or feeding citizens. And when you shoot a gun, you’re draining your ammo count with every bullet fired. So, just like the power-gaining loop from before, drains send players back to the tap - but this time, without getting stronger. Because, they’re just replacing the stuff that was lost. So, this slows the player’s power growth, because they have to spend time and resources to merely patch up their losses.

But that’s not the only reason drains exist. They can also force players to get on and act. A hunger meter that’s constantly going down forces players to look for food. And crops that spoil after a certain time will need to be accounted for in your optimised schedule. Drains can also force you to mix up your strategies - Zelda’s breakable weapons can be a bummer, but they do make you try out new swords, and encourage you to explore the world and find replacements.

Drains can also add risk. Back in Elden Ring, your stash of experience points can be lost when you die - and, as we saw before, you need to carry more and more of them on your person before you can level up. So this adds a real sense of danger when exploring new areas - one which grows and grows the more runes you’re holding. Or, look at Death Stranding. It’s tempting to take a huge number of packages at once for a massive payout, but every extra box on your back increases the risk of taking a tumble. And because boxes can be destroyed - or drained - upon impact, you’re at risk of losing everything. It’s all about weighing up the potential reward.

It’s worth noting, though, that drains can also be positive feedback loops - just for losing power, rather than gaining it. Consider how in Monopoly, every time you lose money you become less and less able to compete with other players, sending you in a painful downward spiral towards bankruptcy. I did a whole video on this conundrum, in the context of losing units in XCOM, a few years back. I’ll put a link to it in this video’s end screen.

So, there’s one more type of economic entity that’s not quite as common, but can lead to some really interesting gameplay. It’s the trader. Traders act like other players: they have their own inventory and resources. And will buy, sell, and trade stuff based on their own desires and rules. Think of the other nations and city states in Civilization. So, previously, I lumped shops into converters. And in a lot of games, that’s exactly how they work: you simply convert money into items. Like a vending machine.

But look at the merchants in The Witcher 3. Each one has their own stash of items and wallet of money - and they will buy and sell items for a different price, based on what type of shop they run and where they’re located. This means that enterprising players can buy items for cheap in one area - and then sell them for a profit elsewhere. With traders, we can create complex puzzles of trade routes and investments - and reward players for being canny with how resources may be valued in different places, or at different times.

Though, just like converters, traders can potentially create a positive feedback loop of the player getting richer and richer with every transaction - so you may need to implement a fix for this. That might involve modelling supply and demand. In Moonlighter, a cute game about raiding dungeons and then selling the loot in your shop - you can flood the market with an item and drive its price down. You can’t just repeat the same sale forever.

Or, you could add an element of risk to the investment. In Animal Crossing you can buy turnips on a Sunday at a certain cost. And then, every day that week, the Nook shop will buy those turnips for a different price. If you’re lucky, you can turn a huge profit on your investment. But if you’re unlucky, you’ll never see a good price before the turnips drain out of your inventory next weekend. It’s basically a miniature stock market, and by adding a sense of risk and reward, we not only go some way towards fixing the exploit, but we add extra decision making. How much am I willing to risk? What’s the right reward?

So this is our final economy. Resources are created in taps. We store them in inventories. We can exchange them for something more useful with converters - though sometimes they’ll be lost into drains and need to be replaced. And some games may even include traders, who want to buy and sell their own stock of resources. As resources flow through the system, the way these entities are designed and balanced is going to change the pace, challenge, and feel of the game.

Of course, this graph is not going to describe every single game. Simple titles may not have every single entity, or every route for resources to flow. And it certainly doesn’t describe massively multiplayer games and those with real-world money transactions. I think I’ll leave that to the in-house economists and future finance ministers. Before I go, though… remember that story about how CD Projekt Red fixed the cow exploit by spawning a massive monster into White Orchard? Well, it was all well and good until higher levels players realised that this monster could be killed and its head sold for a huge profit. And all you needed to do to spawn one was kill a few cows. So the devs had to patch the game again. Now, the monster only spawns once.

Like I said, video game economies can be pretty complicated. Hey, thanks for watching. This video was originally a lecture I gave at Breda University of Applied Sciences in The Netherlands. When I was there, I ended up giving four different lectures on various topics. And so if you’re a GMTK Patron on the video tier, I’ve just released a recording of the first talk - which is about techniques I use to analyse games. Thanks so much for supporting this channel.