Random Roll: DMG, p. 90

On page 90 of the AD&D Dungeon Masters Guide, there's a brief section that sheds much light on how Gary Gygax viewed the game's economic system. He begins:

There is no question that the prices and costs of the game are based on inflationary economy, one where a sudden influx of silver and gold has driven everything well beyond its normal value.

This is a widespread interpretation of AD&D's equipment prices, so it's fascinating to see that Gygax outright confirms this in this passage. He even gives the rationale behind this approach.

The reasoning behind this is simple. An active campaign will almost certainly bring a steady flow of wealth into the base area, as adventurers come from successful trips into dungeon and wilderness. 

This is an important section, because it suggests that the activities of the player characters are not exceptional. The exploration – and looting – of dungeons is, if not commonplace, not unusual and, therefore, has lasting economic consequences. It also suggests to me that the game's economic assumptions are more akin to, say, 16th or 17th century Spain than the earlier medieval period. Gygax seems to have anticipated criticisms of this approach.

If the economy of the area is one which more accurately reflects that of medieval England, let us say, where coppers and silver coins are usual and a gold piece remarkable, such an influx of new money, even in copper and silver, would cause an inflationary spiral. This would necessitate adjusting costs accordingly and then upping dungeon treasures somewhat to keep pace. If a near-maximum is assumed, then the economics of the area can remain relatively constant, and the DM will have to adjust costs only for things in demand or short supply – weapons, oil, holy water, mean-at-arms, whatever.

In the early days of the Old School Renaissance, a regular subject was the "gold piece economy" of Dungeons & Dragons and how "unrealistic" it was. Many a blog post was written on the subject and a fad of substituting silver pieces for gold pieces in one's campaign arose. Games such as Lamentations of the Flame Princess even incorporated it into their rules. I don't feel strongly about this subject, but, unless my – and Gygax's – understanding of economics is mistaken, the matters he raises in the preceding paragraph strike me as reasons not to abandon gold pieces as the standard coinage in AD&D.

The economic systems of areas beyond the more active campaign areas can be viably based on lesser wealth only until the stream of loot begins to pour outwards into them. While it is possible to reduce treasure in these areas to some extent so as to prolong the period of lower costs, what kind of a dragon hoard, for example, doesn't have gold and gems? It is simply more heroic for players to have their characters swaggering around with pouches full of gems and tossing out gold pieces than it is for them to have coppers.

Gygax here says two notable things. The first is his usage of the adjective "heroic," which he will soon elaborate upon. The second is his assertion that he expects player characters in AD&D to have "pouches full of gems" and lots of gold coins. The latter is especially notable, for it gives us some insight into how he saw the "world" of Dungeons & Dragons.

Heroic fantasy is made of fortunes and king's ransoms in loot gained most cleverly and bravely and lost in a twinkling by various means – thievery, gambling, debauchery, gift-giving, bribes, and so forth. The "reality" AD&D seeks to create through role playing is that of the mythical heroes such as Conan, Fafhrd and the Gray Mouser, Kothar, Elric, and their ilk. When treasure is spoken of, it is more stirring when participants know it to be TREASURE!

We can see here that "heroic" in the previous section was in reference to the genre of "heroic fantasy," what I usually call "pulp fantasy." His references to the protagonists of such tales is telling and a further buttress of my longstanding contention that Dungeons & Dragons is ill suited to epic or high fantasy of the sort exemplified by The Lord of the Rings or even Dragonlance. With one agrees with that thesis or not, one should also take note of the means Gygax enumerates by which loot may be "lost in a twinkling." We see here is that even AD&D's economic assumptions support the idea that player characters are meant to be rascals and rogues.

You may, of course, adjust any prices and costs as you see fit for your own milieu. Be careful to observe the effects of such changes on both play balance and player involvement. If any adverse effects are noted, it is better to return to the true and true. It is fantastic and of heroic proportions so to match its game vehicle.

This is typically Gygaxian in its approach: feel free to change whatever you like but don't surprised if your changes make the game worse. Take note, too, that he reiterates that the game is "fantastic and of heroic proportions." This is another instance where Gygax shows his hand somewhat, revealing his own preferences and vision for the game. Agree or disagree with that vision, there can be little question that it exists and draws strongly on a very particular strain of fantasy literature, one he calls "heroic fantasy" and that I call "pulp fantasy."