Sorry, my mistake on Faerun. For some reason i was thinking it was Oerth, or whatever it was Gygax called his...
Voss: um, no. Suits of armor would be worth much more as suits of armor than melted down: same thing goes for weaponry. But there really wasn't that much of it around, sure the knights of solamnia had plate armor, and that was mostly because they were wealthy anyways. I'll admit that it has some holes in it (more along the lines that if steel were that rare, people would be taking it out of circulation to use, particularly given it's qualities), and you'd expect other metals to fill out the void (think bronze age) so that actually finding steel 'on the field' would be pretty rare. Maybe i'm just more interested in it because someone dared jump from the 'gold standard'.
As it is, very few designers actually sit out and think through a reasonable economy. I think you'd really have to start off with what 'common' people earn (how much does a farmer make? And remember most people in the world would be farmers: all those wonderfull city people need to eat, and have a regular supply of food without refridgeration). After that, you'd start pricing out those things farmers would need to afford (draft animals, equipment). Say a farmer earns 10 gp/yr. It might be reasonable to assume that a cheap horse would cost 20, a cow would cost 25 gp, a good meal would cost 1 sp etc, etc. By doing this you start to draw a framework within the world works, and what the PCs can expect to find. A goblin village has been subsisting by raiding farmers, they've been successful of late and the king wants someone to stop them. After raiding over a dozen outlying farms, the village now holds the princely sum of 48 gp, 6 cows, 4 horses and a sheep distributed between it's citizens. Now our party of adventures wins, and divies it up, getting 8 gp each. Sounds pitiful, but then again, in the course of a week's work, they've made about as much as a farmer does in a year! And if the party is smart enough to take the livestock and horses back...but of course, the crown doesn't want to allow the pc's to profiteer off the farmers plight, and so...
hmmm....didn't really mean to get into that. What was my point again?