Hello everyone! We are back again today with another edition of Splinterland Economics - a series in which we introduce a basic economic concept and then apply it to Splinterlands. If this is your first time reading, just to tell you a little bit about myself: my day job is in an unrelated area but I consider myself a little bit of economics nerd - I read a little (or maybe way, way) more news than I should, double majored in econ, and am obsessed with optimization. I love the way Splinterlands is equal parts card game and resource allocation game. My goal with these articles is to share a little bit of what I know with you all.
Our subject today is has a name which you are probably already very familiar with, but in economics it has a definition which may be slightly different from what you have heard before. It has been the subject of a musical, been derided as being "too d@mn high", and if you are playing Splinterlands you are highly likely to have paid or earned it in the past. Today, we are talking about Rent!
What is rent?
Rent is a potentially confusing subject because it can refer to two related, but different, things. We commonly refer to "rent" as the amount you may pay to use something for a certain amount of time without any transfer of ownership. For example, you may rent a card, and automobile, or an apartment. However, there is also the concept of "economic rent", which is any payment received which is greater than the amount which would be required in order to bring an asset that is producing a good into the market. Today, we will mostly be concerned with economic rent. While the term "rent" may be used conversationally to mean either subject, in order to avoid confusion for the rest of our discussion today I will be using the terms "rent" and "economic rent". For example, "rent" paid on land is nearly always equivalent to "economic rent", because regardless of how much (or any) rent is paid, the land is available to be used for some purpose.
Do note that economic rent is not limited to transactions that we would traditionally think of in a "rental" view. For example, if you are working at a job and getting paid $60,000 per year, but would have been willing to work that same job for just $50,000, then you are earning an economic rent of $10,000 per year because that is the additional amount you are receiving which is over the amount that would be required in order to convince you to bring your labor into the market. The rent in this case would be the result of imperfect information (i.e., the employer not knowing that they could get away with paying you less), but rent can also occur when there are barriers to entry such as monopolies or intellectual property protections such as patents. In those cases, producers may be able to earn economic rents (and larger profits!) due to decreased or nonexistent competition.
How do we apply it to Splinterlands?
The most common example of economic rent in Splinterlands that may come to your mind is cards, and the card rental market. You can think of Splinterlands cards as assets which are able to produce DEC and rewards chests in the form of Season and Focus points. All of cards in Splinterlands are digital NFTs without any costs in order to use, so cards can always be considered to be "on" the market - even if they are not being rented out, then they are still available for their owner to utilize in games. This brings up an important point when it comes to managing your Splinterlands cards - you should be doing your best to either use or actively rent out all of your cards as much as possible. If they are just sitting unused in your collection, then you are "paying" for it in potential lost rental income!
A slightly less obvious form of rent comes from the imperfect information and prices related to various forms of labor and services. For example, scholars are paid in order to play games on other players' accounts. Bot or card rental services offer various automated options in order to help people to utilize their in-game assets. Any time that there is a market for services, then there is a chance for someone to be earning rent as the result of a price or salary being higher than "necessary". Do note that economic rent is earned in nearly every transaction, since we don't (at least as far as I know) have a magic machine that can scan your brain and tell you exactly what price you are willing to do a task for.
Whenever there is a factor of production then there is the potential for economic rent to be earned. While I just mentioned cards and services, there are also other factors of production which are arriving now or planned for the near future. Node licenses and land are the two biggest ones that come to mind - node licenses will produce SPS and vouchers for their owner, and Land will (maybe?) produce spell cards or other to-be-revealed tradable game assets. Those are things to keep a close eye out for in the future!
Why should we care?
Whether it is in Splinterlands or in your life outside of it, keeping a close eye out for economic rent is a great way to gain a deeper understanding of different markets, and possibly even alert you to money making opportunities. Understanding the concept of economic rent allows us to more easily identify market inefficiencies. Noticing an example of economic rent being earned can alert you to a case where someone is being paid or valued differently from what they should, and could be a big indicator of profits being left on the table or potential arbitrages to be made. As I briefly mentioned earlier, economic rent will be present in most transactions, so avoiding it completely is not a realistic goal. However, making the most of the economic rent that you collect or can take advantage of and minimizing the economic rent you pay out in return is a great way to try and grow your assets as quickly as possible.
Thank you so much for reading all the way to the end. Interested in seeing some more of my writing in the future? Be sure to give me a follow! In the meantime, if you'd like to see some of my recent posts:
Value at Its Zenith - Using Xenith Archer in Battle! - Last week's battle challenge, featuring Xenith Archer!
Splinterlands Economics: Signaling - An overview of the concept of signaling, and how we can apply it to Splinterlands.
Splinterlands Economics: Inflation - An overview of the concept of inflation, and how we can apply it to Splinterlands.
Thinking about giving Splinterlands a try but haven't signed up yet? Feel free to use my referral link: https://splinterlands.com?ref=bteim, and be sure to reach out to me if you have any questions!
All images used in this article are open source and obtained from Pixabay or Unsplash. Thumbnails borrowed with permission from the Splinterlands team or made in Canva.