The possibility of turning lead or other base metals into gold never ceased to enchant people in medieval times. RuneScape adopted this concept quite literally longer ago than anyone could care to remember, and for better or worse, it has stuck around ever since. The idea in RuneScape is that you can turn virtually any non-coin item into a certain number of gold pieces. Initially, this was probably meant (by the developers) to allow a sufficiently experienced mage to turn items into a small number of coins. Although this amount would probably be lower than its true value, it was still something, at least for finished products. While we can only speculate on Jagex's original intent, I am well aware of the situation now. For most raw materials, alching is still a raw deal. The alch value may be even lower than the price of the nature rune itself. The issue comes in more with certain finished products, in particular all or most of the lower level armor. Were it not for the GP value established by using high alchemy on them, their prices would probably sink even further.
High alchemy is perhaps the most famous and widely utilized coin source in RuneScape. You don't have to be omniscient to figure out the profound economic implications of a spell that can generate hundreds (or thousands, or even millions) of coins, but that didn't stop Saradomin himself from commenting on it:
"Forgery is a serious crime, and only those coins minted by the respective Fief are legal tender. If forgery were not a serious crime here on RuneScape the economy would surely have been destroyed by a certain spell known as high level alchemy by now..." - (Source - God Letters Issue 14).
I've called alchemy a coin source - why? The simple fact is that there are many items whose market price is below the amount they alch for. Indeed, they're not simply below but well below, so much so that one can purchase a nature rune, alch the item, and end up with more coins than before both purchases were made. I'm sure that you can see where this is going - buy a stack of the item and alch them off for a consistent money maker! That is precisely what many people do and why you see them lounging around in the G.E. or other bank somewhere occasionally casting away at alchemy spells. There are a couple reasons as to why this process is so lucrative.
Artificial price constraints. For the longest while, while restricted trade was in place, the prices of items were not completely determined by the laws of supply and demand. Jagex put a firm price floor on items, meaning that the "minimum" price could not drop more than a few hundred gp below their alch value. So even if one purchased said items on the Grand Exchange for the minimum price (remember, one could not adjust prices more than +/-5% in those days), there was a very limited amount of profit to be made. But, you may argue, those days are long gone and prices can shift freely. The problem is that this is not quite the case, due to the limits of quantities that one can purchase.
As an example, you can purchase a total of 100 rune armor pieces per 4 hours. That is, you can buy 50 rune full helms and 50 rune kiteshields, but then that would be it for the next four hours. How long does it take to alch those items? Only six minutes if you time your clicks perfectly, maybe ten if not. It's not difficult either since you can queue up one alch spell. Yet still, it's apparently tedious enough to prevent enough people with the ability to do it from doing so. With typical resources, the amount you can buy at one time far outstrips the amount you could possibly use. As much of an oxymoron as it seems, it is both too little and too much work: in the sense of too much work for the profit and too little to provide any consistent training experience. Compare 20k of most raw fish at cooking 1200 per hour. So even though the price is technically free to move, restricted quantities keep a chokehold and force a whole different equilibrium after all.
Other methods of magic training taking over. Once upon a time alching was not a bad way to generate magic XP. However, these days there are quite a few viable alternatives. In the skilling department alone, superheating is easily comparable in terms of xp rates and has the additional benefit of Smithing xp, but has a small loss for most bars, aside from rune. The main adversary is, of course, combat training. Prior to the Evolution of Combat update, magic training was expensive, but now most of the offensive spells in the regular spellbook are practically free. In addition, one does not sacrifice runes when using an ability. So by turning on Revolution you mostly circumvent the cost of magic spells, and you can even make a handy profit simultaneously while massacring monsters.
For these reasons, many alchemy items have large profit margins. I'm not sure how Jagex feels about this, as they haven't exactly said much, but it seems something could be done to close the gap a little. The one notable time that they took some action against alching being too easy came a couple of years ago. Before I tell you this story, remember: virtually every bulk item has some finite, nonzero alch price, even if it is usually a rip off. You would have to be crazy to do it (and hey, I knew people who alched fire runes), but it could be done.
At any rate, the botting/RWT epidemic had become so bad that massive numbers of nature rune bots were flooding the Grand Exchange with their supplies and pushing prices down. As a matter of fact, nature rune prices were so low that players could cannibalize them by actually alching the nature runes themselves! That is, the cost of two nature runes was less than the alch value of one. Jagex responded by decreasing the alch value of nature runes substantially, stating that being able to alch them, buy a little more, and repeat was "too easy" in terms of xp. Subsequently, nature runes have recovered enough in price for them to be worth well more than the previous breakeven point, but the change has remained.
Other items can take a real pummeling in terms of GP value under the right circumstances. Sometimes, for example during a bonus xp weekend, finished items will instant sell for only a couple of GP as the oversupply is that horrible! I have no problem admitting that a week subsequent to this article being published, I'll probably be guilty of raking in millions from underpriced alch items. I'm not suggesting a silver bullet, but I think one thing should be done to improve alchemy and some of the disproportionate margins that make it both difficult to sell and buy. Specifically, bring back an optional mechanic for the way that it worked in Classic: the ability to alch a whole (noted) stack of an item. I know what you're probably thinking: potential for massive inflation. And at first it does seem a frightening prospect: throwing millions of coins into existence with a single shake of a magic stick?
But think about it more carefully. Where do you think all those black chainbodies go? To the undercover legion of 25 defense PK'ers? No, they get alched somewhere along the line anyway. This would only serve to exacerbate the process from item creation or drop to coins.
Sure, it might cause a slight economic shock as an immediate effect as a large number of items get bought up and alched quickly in batches for profits, but the long term effect should be more stability. If people still want to hang around and alch for old times' sake, nothing would stop them - it just wouldn't be obscene profit. In fact, with market prices closer to to alch values, it might even be easier to gather a larger number of items, i.e. buying them from another player training Smithing. Perhaps it's just me trying to be progressive, but it seems that alching has remained almost constant over all these years, and perhaps it could be time to take another look.