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I, the author of this guide, am a graduate student of mathematics. Naturally my field often overlaps with economics. Now, the world of macro- and micro-economics is a busy and complicated place. (The math side of me says that it is over complicated.) However FFXI economics aren't quite as complex. In this guide it is my intention to educate you about the basics of FFXI economics and hopefully teach you ways that you can put some money in your pocket while helping the game economy as a whole.
Let us quickly look at the basics of the economy in FFXI and note how it is similar to reality. First and foremost we can break all objects in FFXI into 5 groups: Durables, Perishables, Raws, Materials, Quests. I mention the durables first because that is what we are most used to dealing with in the game. A durable item is any item that you can resell after using. Armor, weapons and accessories are all durable items. Perishable items we are second most familiar with. Perishable items get 'used up' over time. Examples include food, spell scrolls, fishing bait, charged items, ninja tools and arrows. Next we have the Raws. Raw items are the regular everyday items that drop off of mobs or most items that we harvest. These items are useless by themselves but can often be sold to crafters or NPCs. Fourth we find Materials. Materials are anything that crafters make from the raws but do not have an express purpose beyond that. Finally we have Quest items. These are items that exist for the sole purpose of being turned into NPCs for rewards. Notice that some items fall into multiple categories, this fact doesn't really hinder our discussion.
Next lets look at the currency: gil. Gil is this mysterious little item that seems to take up no room in our inventory yet a whole slot in our delivery boxes. We use gil to buy and sell items to other players and NPCs alike. However, gil is not a benign as it seems. We will see later that, unlike real money, gil can be created or destroyed by the common person (That's you). In reality money is monitored by the federal government and they decide to change the money supply. SE decided to leave that to us in this game. Much like in real life, gil obeys many laws that other currencies do. The primary behavior of gil that effects us is inflation or deflation. Inflation occurs whenever gil is created faster than item value, deflation occurs whenever gil is created slower than item value.
It is probably easiest to describe this in terms of a durable item. Since one of my all time favorite jobs was/is Monk, we will look at the Brown Belt without loss of generalization. The item Brown Belt gets created every time someone finishes the Brown Belt quest. There are no other ways to create a Brown Belt. The only way to lose a Brown Belt is to drop it or use it to finish the Black Belt quest. These rarely happen so we find that the total number of Brown Belts in existence is increasing. Each Brown Belt has a value to the players in the game, so each additional Brown Belt introduced adds to the total item value in the game. If the amount of gil in the system were to remain the same the addition of another Brown Belt would decrease the price in gil of the Brown Belt.
Now, lets suppose that no new items were being created. Fish stopped biting, mobs stopped dropping things and quest rewards simply dried up. New gil would still come into the system from mobs dropping gil. As the total amount of gil climbed, but the total item value remained constant, prices would slowly rise as people would be willing to part with more money (because they have more money on average) to get the same item.
See how that works?
Two years ago I didn't know a single person who fished legitimately. Everyone, and I mean everyone, who had a Lu Shang's and a fishing skill above 15 had used a fishbot at some point. The problem with two years ago was not with the fishbots, but rather with what the bots were doing. Everyone knew about the rusty cap exploit. Fishing up an item and selling it to an NPC would increase the total gil in the system. Later, fishbots started fishing and selling Moat Carps and selling them on the AH. Since most of these Moat Carps were turned in for Lu Shang's each of these fish became 100 gil. These fishbots massively increased the amount of gil in the game, thus raising the prices of everything.
Recent changes have dealt with all these issues. Rusty caps no longer sell for so much, it is harder to use fishbots and Moat Carps are now traded in for 10 gil.
The major issue we face with fishbots nowadays is people who fish 24 hours a day for the sole purpose of selling to NPCs. This increases the total amount of gil and thus raises prices. So, don't think that bots who aren't camping prominent Notorious Monsters aren't hurting you.
The Auction House is basically the eBay of FFXI. Here are the basic functions of it. Players from every level put items up for sale. They then specify a minimum price they are willing to sell their items for. Based on this minimum price they are charged a fee. Other players can see how many of a certain item is available for sale and the last 10 transactions that have occurred for each item. If a player makes a bid that is above the least minimum price, the amount of their bid goes to the seller and they get that seller's item. So, items with lower prices always sell before items with higher prices. As a result, you can lower the price of your item by just a few gil to edge out competition without effecting your bottom line.
Many crafters complain about 'undercutters.' Undercutting is the practice of putting up items for sale that are much cheaper than the average price. If a lot of people do this the price will drop. Complaints about this don't solve anything because undercutting is actually just a reaction to an over abundance of a supply. When there are too many items to sell on the Auction House and not enough demand for those items we say that the market is flooded. If you are a crafter you want to avoid selling in a flooded market. Generally it is a good idea to simply wait out the low prices while others get their items returned to them.
Often there are many deals on the Auction House. If you look carefully you are bound to find items that are being sold below NPC sell back prices or items that can be bought and reposted as a stack for a profit. Do not be afraid to take a profit if you see it. It keeps items flowing through the Auction House which is something that is generally desirable in the game's economy.
Ok, there are all the rules. Now let's get on to the good stuff. We want to have the power to effect the economy as individuals. To do this first we have to decide where we want the economy to go. To get higher prices we want to create gil and lower item value, to get lower prices we want to destroy gil and create item value. Now the easiest way to do this would be to either drop gil or sell expensive items to NPCs. However, no one is asking you to be a hero and save the economy all by yourself. Rather, we want to be able to make some money for ourselves while helping the game as a whole. (This is a more modern economic theory called Game Theory.) So, how do each of our actions effect the game?
The following actions add gil: - killing Beastmen - finishing some quests and missions - selling any item to an NPC
The following actions remove gil: - posting any item for sale on the Auction House - buying any item from an NPC - buying an item from a Bazaar in Jueno
So let's look at common ways to make money in the game and see how they effect the economy: Camping Notorious Monsters and Farming Killing a Notorious Monster and getting a drop increases total item value by adding an item into the system. Likewise with getting a regular drop from a regular mob. Either way, if we sell these items on the Auction House we have removed gil from the system. If we intend to craft with these items we haven't done anything (yet). If we plan to sell the items to NPCs we have created gil. If we killed beastmen, we have created gil. If we plan to use the item to finish a quest it depends on the quest reward.
Finishing Quests Some quests reward money, others reward items. Generally the item reward quests are not repeatable where as the money rewards are. Finishing a quest with a monetary reward increases gil and destroys the items you traded. Generally it is more profitable to sell the items on the Auction House than to finish the quest, so I do not recommend this route for making money.
Crafting This is important. Very important. Whenever you craft you have bought your items from the Auction House. Even if you farmed your items or got them from NPCs, you bought your items from the Auction House. In economics we call this an opportunity cost. Basically, if you could have made more money by selling that item instead of crafting with it, you took a loss on crafting. The key exception to this is for items that require a lot of ingredients. For these your 'losses' are basically an additional fee for selling several items all at once. For example: I mine up 48 Iron Ores. I could sell each one individually, but that would take forever. Instead I synth it into one stack of Iron Ingots. Although 48 Iron Ores probably sell for more than one Iron Ingot stack, I don't want to waste all of my Auction House slots on Iron Ores for over a week. In this case synthing let me sell all my Iron Ores in one shot.
Crafting lowers the total item value of Materials and Raws, but it increases the item value of Durables and Perishables. Since we usually sell our results on the Auction House crafting generally removes gil from the game.
Fishing/Gardening These get their own section because they are unique. It is possible that you get some good stuff to sell on the Auction House, but you might also end up with useless stuff to sell to the NPC. Know what you want to do before you make plans to do either of these activities. Bait and seeds are Materials and Raws, so this will work in the same way crafting did by increasing the total item value of Durables and Perishables, but you will also end up with different Materials and Raws out of this. Truthfully they are both wide open fields. Chocobo Digging and Clamming are also related to these activities.
Reselling This is probably the single best way to remove gil from the game. Basically you find an item that is undervalued at the Auction House, buy it from an NPC and sell it. Buying an item from an NPC increases the total item value while decreasing the total amount of gil. Posting it for sale on the Auction House then decreases the amount of gil further. Generally low level armor sold from NPCs is fair game for this as people leveling subjobs are lazy and have plenty of money to spend on equipment.
Alternatively you could buy something at the Auction House with the hopes that the prices will go up. This is the FFXI equivalent of buying stock. You have two options: you can go long or go short. An example of when I went long and it worked for me was during the inflation of two years ago. Since the buying power of gil was in rapid decline it was unwise to hold onto it in liquid form for any length of time. I decided to buy expensive equipment even if I couldn't use it. As prices went up, so did the value of my items. I do not suggest this now as prices continue to drop as money gets removed from the game by SE. Now you want to try to have as much in the way of gil as opposed to items.
If you decide to go short you will buy and item and then immediately (or almost) repost it on the Auction House. Keep in mind that prices tend to be higher during the weekends when more people are playing and lower during the weekdays when fewer people are playing. A method behind this is to buy up the existing stock and then repost it all at the highest price. Although counter intuitive this drains money from the economy and serves to lower prices overall. If you do employ this method be prepared for some tells from people criticizing your unethical business practice as you will have artificially temporarily increased the price.
If prices are too high for your liking, destroy gil. If prices are too low, create gil. You can effect the economy in meaningful ways and everyone holding onto this concept will see the economy of the game reach a tolerable level for everyone.