When it began it was loose, open and BY DEFINITION reliant upon DM additions, interpretations and alterations. That WAS the game for the DM - building YOUR world from the mere framework suggested by the rules.
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What eventually happened, particulary with 3E and 4E is that well-meaning, clever people with experience and understanding of GAME DESIGN began to... DESIGN the game. They removed as much of the need and desire to "fill in the blanks" as they possibly could.
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I agree with the OP that doing so was a significant mistake.
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They treated the rules as officially sanctioned, unalterable and graven-in-stone. Never, ever, NOT ONCE since they have acquired D&D has anyone in an official capacity said that the answer to ANY rules question is EVER to just do what you want. The response has always been "DO IT THE WAY WE TELL YOU."
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The tragedy is that they're dead wrong. And THAT is what's missing.
I personally find this post as bizarre as someone claiming the sun has ALWAYS come up in the west.
You could certainly claim that complete *examples* of using the system to build a complete system were present.
But can you give me ANY actual reference on which you base "DO IT THE WAY WE TELL YOU." ?
Perhaps you are confusing the idea that when someone asks a "how does this work under RAW" question, then a simple direct raw based answer is perfectly appropriate. But the constant refrain was, "here is the formal answer, now do with it whatever you want."
Yes, gaping holes earlier editions FORCED DMs to invent new subsystems. And since RAW itself was loaded with ad hoc, inconsistent and even contradictory subsystems, the DM was guided to make similar half-baked unhinged subsystems.
Does that mean it was not fun? Hell no, it could be a blast. And a really good DM could, of course, build quality subsystems as needed.
But a free hand to build within a well structured system is far better than a free hand to build in a inconsistent mess. The implication that a better structure somehow brought any limitations with it is absurd. There is nothing that you can do in 1e or 2e that I can't do in 3e. A lot of 3PPs produced total CRAP that was broken and disfunctional. And if it made the game more fun for you, then you can use it.
Green Ronin produced a lot of awesome stuff that was different than "the way". There was never any resistance. Want to play a game that is 40% D&D 3.5 and 60% Monte Cook AE? Sounds cool. Want to re-invite a whole new school of wizard spells? Go for it!!! Are you new spells balanced? "Yes, the structured system makes this easy". Great!! or maybe "Hell no man, this school is AWESOME DUDE, no way it should be limited to those loser school powers". Great!! Who cares? Whatever is fun is what goes.
My "need and desire" to create new content was ANYTHING but removed. By making that process far more rewarding, third edition simply enhanced my appetite for building.
Frankly, 3E was about the OGL. 1E went after Role Aids and 2E was the era of fan site cease and desists. Both system mechanically and company behavior historically the reality is the opposite of image you create.