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As most active users of this site know, the way the reputation system works is that everyone starts out with 1 reputation and one earns more rep for asking good questions and writing exceptional answers (as well as other methods), and one can lose reputation by writing bad questions and answers. This way, users can make a profit or take a loss without taking/giving currency from/to another user. Can inflation happen with a system like this? As more reputation is gained, does it mean less?

In the Stack Exchange reputation "economy", we can think of the reputation points as "money". And the "goods" are:

• Downvotes — cost 1 point each.


• Various privileges — zero cost, but unlocked only when the user reaches various thresholds.

To my knowledge, these prices (1-point cost of each downvote and privilege thresholds) have never changed. And so, there has never been inflation. What has merely happened is that "wealth" (the total stock of reputation points) has kept increasing.

Response to Pere, who writes:

Newer sites have lower thresholds for several privileges - for practical reasons - and those thresholds rise as the site expands. For example, being able to create tags "costs" 150 reputation in Economics SE, 300 reputation in Cross Validated SE and 1500 reputation in StackOverflow. Therefore, privilege prices are subject to inflation as sites grow.

Each individual SE site is its own individual "economy" that is sealed off from all other SE sites.¹

And so, whether "prices" differ across SE sites does not matter. What matters is whether "prices" have changed over time, within each SE site.

To my knowledge, the privilege threshold "prices" on Economics SE have never changed.

And it also seems that for the original, flagship site (Stack Overflow), "prices" have also not changed for many years. We can, for example, compare today's "prices" with those from 2013:

As you can see, all prices have remain unchanged since 2013. There has therefore been zero inflation since (at least) 2013. The only change is the introduction of a "new good", namely "Access to site analytics", which is priced at 25,000 points.

Response to @kbelder, who writes:

What about bounties? I bet those have historically trended upwards in value

The "prices" of bounties have likewise been fixed. Bounties may be offered at "prices" of 50, 100, 150, ..., and up to 500 points. I believe these prices have been fixed since the inception of Economics SE and at least since 2013 for all SE sites.

Moreover, bounties are pure transfers from one user to another.² It may be true that thanks to increased overall "wealth", the average value of a bounty has risen (i.e. in the past, most bounties were offered at close to the minimum price of 50; whereas today higher prices are offered). However, we do not consider this "inflation". Instead, we consider this to be real wealth effects.

Analogy: Say that in 1919, the New Yorker on the street might on average give $0.20 (in 2019 dollars) to a homeless person. In 2019, this might instead be $1 (in 2019 dollars). The average real transfer from a New Yorker to a homeless person has risen five-fold in real terms. This is not inflation. Instead, it is a consequence of increased overall wealth.

Footnotes.

1. To my knowledge, there is one thing that links reputation points across the various SE sites. This is the automatic +100 points for established user accounts that are "trusted" on the SE network. I'm not sure how this works. But I would say that these +100 points are relatively inconsequential and may be safely ignored. They would perhaps be the real-world equivalent of an immigrations officer giving a "trusted" visitor $1 the first time that visitor arrived in that country.




2. There are actually three things that can happen to a bounty. First, the full bounty is awarded (I believe this is the most common case). Second, half the bounty is awarded to the highest score (provided that answer has a score of at least +2 — see Economics.SE bounty rules here). Third, no bounty is awarded. In the latter two cases, we do not quite have a pure transfer; instead, we have a leaky bucket where either half or all of the points are "lost to society".

No, there is no inflation.

Inflation is caused by a relative increase in the amount of currency, relative to the amount of scarce goods and services available.

As you note, there is a continuous increase in the amount of "currency" here - reputation.

However, reputation is not spent on scarce goods and services. There is no meaningful limit on the number of people who can attain any given rep-based privilege. So the rep-level for a given privilege does not need to increase, when the number of people with high rep increases.

The rep-level barrier for privileges is to ensure that on the whole, the people who attain a specific privilege are familiar enough with the workings of the site, and have shown enough good behaviour, to wield it responsibly. This is not affected by the number of other people who have also reached that specific rep level.

Yes, there is inflation.

StackExchange was created in 2008. Anybody who had 5,000 (arbitrary value) reputation points in 2009 would have been perceived as an outstanding member. Now, having accumulated 5,000 points in ten years of participation on a much expanded site looks less impressive. Thus, achieved respect per reputation point has decreased.

The respect is not related to the absolute number of reputation points but to belonging to some top percentile of active members. As the necessary threshold increases, the value of an individual reputation point diminishes. I would call this inflation.

P.S.:

KennyLJ has commented that he conscientiously ignored consumption externalities and positional goods because they are tricky and generally ignored in Economics. If I interpret his comment correctly, these aspects should not be considered in the context of questions about inflation like this one.

However, I think that this "consumption externality" is the key element for understanding StackExchange. It's not an externality, but the product itself. Badges and privileges are secondary.

Yes, there is some kind of inflation on Stack Exchange.

As pointed in other answers and in comments, reputation can be seen as a currency to buy privileges. Newer sites have lower thresholds for several privileges - for practical reasons - and those thresholds rise as the site expands. For example, being able to create tags "costs" 150 reputation in Economics SE, 300 reputation in Cross Validated SE and 1500 reputation in StackOverflow. Therefore, privilege prices are subject to inflation as sites grow.

However, it should be noted that the economy of privileges is not a free marked one but a planned one, because privilege prices are not related to demand but set by a central authority in order to allocate the desired number of privileges.

Interestingly, bounties economy is indeed a free market one, and it would be interesting to study the evolution of the bounties offered.