The best way to put how no AH affects the economy is like this.
Take the world in the early 1900s, no internet, difficult to spread the word about things across long distances. The price of tea in China wouldn't matter to someone living in Kansas.
Now take the world of today, when you can look at tea prices all over the world to find the best price, you're generally going to get the cheapest tea you can (assuming it's all the same, and in a game environment, it is). Now tea prices in China directly affect tea prices in Kansas, thanks to more information available to the tea consumer.
This means establishing a much better market system. The more information a purchaser has, and the less difference between products, the more likely prices will gravitate to where they should and the full force of free market theory can take effect.
Consider this, right now if we took every item for sale in bazaars in FFXIV and had it instantly searchable/purchasable in-game, prices would FALL. Now you wouldn't just price an item because you think it might sell good at this price, you would price it to be KNOWINGLY competitive with other shops. You also wouldn't be simply hoping you placed you bazaar in a good location and that someone would randomly run into it, the price of your good would be the sole determining factor in whether or not it sold, period.
This enables players to have far more control in saying how valuable each in-game object is, and establishes basic pricing ranges for items much, much quicker. When you don't have easy access to information about your business competitor's pricing, or on the flip-side as a consumer, when you don't have access to data showing the cheapest prices, you're going to find people get ripped off really easily.
In a game that is supposedly "casual" and with an item system/economy almost entirely designed to be driven by players, not having instant market information (i.e. an AH) is a very foolish thing.
Also, there's a huge inflation problem looming with a lack of any gil-sinks, and that may be a bit off topic, but I'll go into it anyhow. When you complete a guild leve/quest, or kill a monster and sell it's loot to an NPC, this creates gil. Think of this as a faucet being turned on, filling a bowl. When you give money to an NPC to pay for a repair, or really for any reason at all, this places a sink in the bowl, allowing the water to drain. However when you give money to another player, that's the equivalent of just stirring the water around in the bowl, the gil is still in the economy in the hands of a player, it's just not you anymore.
As I'm sure you've noticed, assuming you repair your own items, there's far far more gil (water) coming into the economy than is being taken out (sink). This will cause people to falsely value items when they determine their sale prices, as money at the higher levels becomes more and more useless (think gold in Diablo 2). This problem is further exagerrated with the lack of an AH or similar system to disseminate pricing information to the masses, as this in and of itself will generally raise prices as well.
Can't wait till they try to blame all that on RMT bots, lol.
Edited, Nov 2nd 2010 11:35am by iconchrono
Edited, Nov 2nd 2010 11:36am by iconchrono