I'm thinking that wizards may somehow hold the solution to the big vs. small player issue. If spells cost less for small players attacking large players than small players attacking other small players, and significantly less than when large players attack large or small players, then we have incentivized (at least partially) smaller players attacking larger ones. Further, if spell effects decrease at some rate with size increases, and the base level (pre-decrease) is especially high, then smaller players may be inclined to attack larger ones and inflict as much damage as possible.
My argument would be that there is a finite amount of "Magic" in an area, and that such magic decreases as a village grows and becomes more industrialized.
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Edit 1: Besides, who wouldn't love to see cracked earth backfire on a knight/gu'al only hit and run
7 x 13 = 28
Economics today is a race between economists striving to build bigger and better idiot-proof economic or financial models or programs, and the Universe trying to produce bigger and better idiots. So far, the Universe is winning...