And yet I hear over and over again that the point of playing a unique race is to have a unique character, based on the argument that Player Characters are unique and unusual already. What is that, if not "letting your freak flag fly"?
But—shock and horror!—not every fantasy game belongs to a genre where it would be appropriate for the main adventuring party to be the medieval equivalent of the Doom Patrol. Sometimes you just want a game where the heroes are kind of ordinary, and Frodo, Garion, Ged, and Taran strike out into the world to go be big damn heroes.
1) So?
So, to begin with, not everyone likes to be called freaks, nor do they take the term freak and use it to describe themselves. That is sort of the thing. And I like how you are trying to turn the idea of "uniqueness" into "freakiness"
But, I included the "So?" here because it ties into the response about Fantasy Genres and the idea of ordinary heroes. Because DnD isn't that sort of Fantasy. It never has been. Someone up thread posted a story about a player for Gary Gygax who played a Balor. There is not a single DnD setting with only four sentient races in it. We don't have those worlds in DnD.
Now, you can try and run a game that way, but sort of like the discussions of Low Magic, you are working against the system put in place.
2) Context. It depends entirely on whether the character option in question has been excluded from the campaign for reasons of lore or mechanics, now, doesn't it? If the DM has banned gnomes because gnomes are extinct in their world but dwarves aren't, using the gnome stats for a reskinned, unusually skinny and magical dwarf certainly seems reasonable. (Provided the DM isn't dead set against at least one unusually skinny and magical dwarf in their game-world. The DM could have a perfectly legitimate reason not to want that.)
If, on the other hand, the DM has banned gnomes because they don't want that particular cluster of modifiers and abilities to be an option available to the players, reskinning is hardly a remedy. But I will say that if, after having learned that gnomes are banned in the campaign, a player's first instinct is to try and play a gnome, and their second instinct is to try and play a reskinned gnome, they're being more than a bit of a tool.
Which raises the question—are you postulating a player who comes to the table with a gnome character already in mind (or even on paper), before the DM has explained the particulars of the campaign? Because that isn't the interaction I've been talking about.
What interaction are you talking about? The player who has no idea what they want to play, until they hear what isn't allowed and then want to play that?
Sure, that person isn't a great person. But I have literally never encountered someone older than 5 who acted that way. Most players I know come to the table with a vague idea of what they want to play. And they generally then would go to the DM with the question, because they have an idea, and they liked there idea and they want to try and make it work.
But, it seems you are either against trying to compromise or have had a lot of experience with people who only decide they want to play something after hearing it is banned, instead of having an idea before hand.
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Edit: I really want to say that I'm agreeing with
@doctorbadwolf a lot in his assessment of the DM being just another person at the table, and any authority they have being given to them by the group.
I know that as a player, I'm bad about "backseat DMing" but a lot of the time, it is because I tend to know the rules as good or better than the DM, or I've been paying attention so when the question comes up, I am fairly certain I know the answer.
And more than a few times I'll tell them "well, that's a DM call, it could work either way."
And I come back again to the idea from Gygax, and the name of "Dungeon Master" that seems to have led some people to see more authority in the position than should really be there.
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I believe in an even more individualistic approach to the game. A person playing D&D makes it unique by the very nature of playing it. Their own approach informs the campaign and makes it unique. One DM can run Lost Mines of Phandelver for twenty different groups of players and each will provide a completely unique and extraordinary experience because the dynamic between those players is unique in its own way.
At least this is the case if the players are empowered and encouraged to come up with their own ideas and wish to do so.
And yes, the DM probably brings more to the table than any two engaged players or any four social gamers who are mostly there to hang out, eat snacks, and sling dice. But the DM isn't the only one bringing things to the table and the game is richer for it.
This doesn't mean that all concepts should be accepted but rejection is very much on a case by case basis unless there's something integral to the setting that it violates. And D&D is, as I have mentioned before, by default a kitchen sink game. It was in Gygax and Arneson's day. The Forgotten Realms are a kitchen sink setting. Eberron is a kitchen sink setting. The Nentir Vale is a kitchen sink setting. Sharn is a kitchen sink setting. The Wildemount is a kitchen sink setting. Golarion is a kitchen sink setting.
And it also doesn't mean that character concepts and races aren't vetoed on a case by case basis by even kitchen sink DMs. I've never had anyone try to play a Kender in one of my games, but if they want to they'd better have a very good justification. But that's not because they look odd (they're basically a subculture of halflings). It's because it's an anti-social archetype.
But this has been illuminating in one way. It's made me see what people claiming 5e was more empowering to DMs than 4e wanted; there's a much greater expectation in 4e of players having choice of and control over their own characters, so thank you.
This actually reminds me of something.
How many people here have run at a Convention? I have. I ran the same module, with a list of pre-generated options (a big list, but most people always took the same characters) and just recently I found some notes from the game I ran last year.
In one game, the players took one of the NPCs (an acolyte who had survived the invasion so far because he was locked in a side room with a girl) and gave him a broken sword and convinced the kid to be a hero. And that kid was actually the one who killed the big bad, with the broken sword.
In another game, it devolved into a batlle royale, as the party split into the larger "Team Gold" who was willing to betray the monastery to the Big Bad for profit and "Team Honor" who was going to keep their word and fight on. And Team Honor won, barely. Which led to everyone at the table whooping and cheering, because it was an awesome story.
And I see it, well, every year. Take the same DM, the same adventure, the same characters, change out the players and you get a completely different experience. A greater experience. I wrote down those notes because I did not want to forget how AWESOME those sessions were.
The players really make the game.
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Actually, I wouldn't mind ditching Halflings in favour of Gnomes. I always found Halflings to be kind of bland, and Gnomes a lot more interesting. To the Elves the forests, to the Dwarves the Mountains, to the Humans the plains, and to the Gnomes to foothills. For each race 1-2 "antagonist races" and that's all the sentient species a world needs.
I sort of did the same. I kept them in and wrote around them, and I do really like the lore for the twin goddess, but Halflings themselves don't interest me as much as gnomes.
But, I figured some people would expect them, so I had an explanation ready to go.
I ended up making them a nomadic caravan people. Never really explored it much, because no one wanted to play halflings, so they faded out of sight and out of mind.