Splinterlands Economics: Pareto Optimality

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 all about making sure that you are using all of your resources to their fullest potential. It is one of the keys to maximizing your account value in Splitnerlands, and important in optimization in general. Today, we are going to be talking about Pareto Optimality!

---

---

What is Pareto Optimality?

"Pareto Optimal" is a term used to describe a situation in which nothing can be improved without making something else worse. The "something" in this case can be a wide variety of things - different types of goods, different people's happiness, etc. If you are familiar with the term "strictly better" (or strictly worse) then this is a related concept - if something is pareto optimal, then there are no situations which are strictly better than the current one.

This is an hypothetical graph showing the different combinations of 2 types of goods that we could choose to produce (credit: Wikipedia). Note that each good takes some sort of resources to produce (time, energy, money, etc.) and that producing more of 1 good may mean that we aren't able to produce as much of the other. The red dots are what we call the Pareto Frontier - all of those dots are pareto efficient, because in order to produce any more of items 1 or 2 we would have to produce less of the other item. Note that although we may have a preference for certain ones of the red dots over others, all of them are still considered pareto optimal.

Another important part of the above graphic is the points which are inside or under the pareto frontier - for example, the points labeled "K" and "N". These points are considered inefficient because if we are at one of those points, we could be producing more of everything - for example, by moving from point "N" to point "E" then we will be producing more of item 1 AND of item 2. In other words, at points which are not pareto efficient we are not producing as much as we could be, and are leaving something on the table.

---

How do we apply it to Splinterlands?

I have said this many times before in previous columns, but Splinterlands is an economic game. We have sets of assets which we are using to produce some sort of income - be it rental income, income from ranked battles, or something else. We also need to choose to allocate our time between different activities, which may also generate types of income or assets. In Splinterlands there are way more than 2 items we may choose to "produce" - DEC, SPS, SPT, chests, and cards just to name a few. Despite this complexity it is still possible to be at a pareto optimal point, just one that is much harder to represent graphically.

If you have some sort of asset sitting around that isn't being used then that is a huge red flag that you may not be using everything in a pareto optimal manner. Do you have excess collection power that isn't necessary for your current league on the ladder? You probably have cards that aren't being used much or to their full potential, and you could probably be making more crypto by renting those out. Do you have SPT or ONEUP sitting in your wallet unstaked? You could be staking and delegating it to monster-curator to earn a return, or sell it on hive engine in order to purchase something else you would use more instead. Slightly less obvious examples of not being at a pareto optimal point may be if you have mispriced your rental cards, are not playing your cards to their full potential, or are letting your voting power on Hive sit at 100% for extended periods of time - these are all cases in which something is not being used to earn as much as it could be.

---

Why should we care?

Pareto efficiency applies both in Splinterlands and in the real world. Outside of Splinterlands, putting unused or underutilized resources to work will also help to maximize your long term wealth. Though when it comes to your personal time, do remember that your goal should be to maximize your happiness - working all day every day to make a little more income can easily just burn you out and make yourself miserable. Leisure has a value too, and your free time is another "good" which you may also choose to optimize in a pareto efficient manner!

There are two things to be concentrating on while deciding how to spend our time and resources. First, is it pareto optimal? If it isn't, then we are under-utilizing something and could be doing something strictly better. And second, are we at the point on the pareto frontier which we are most happy with? Sure, maybe what we are doing currently is "efficient", but maybe there is a tradeoff that you could make which would result in another efficient situation where you are obtaining a slightly different combination of payouts that you are happier with. Keeping these two ideas in mind can help you a long way towards making sure that you're doing as well as you can be, in-game and otherwise.

---

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:

• Not Doing Much Carry-in' - Using Carrion Shade in Battle! - This week's battle challenge, featuring Chaos Knight!

• Splinterlands Economics: Common Goods - An introduction to common goods, and insights they can give us into Splinterlands.

• Splinterlands Economics: Elasticity - A introduction to compound interest, and how it can help you out in 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!