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Will Virtual Economies Affect Real-World Economics?
Thanks to Game Studies for their Edward Castronova-authored article discussing the economics of massively multiplayer games, which asks the question: "Will these economies grow in importance? Second, if they do grow, how will that affect real-world economies and governments?" It's suggested that "the mere fact that Earth economies may suffer as people spend more time in cyberspace does not imply that humanity is worse off", as "the basket of produced goods is simply changing." Finally, some of the unique economic facets to virtual worlds are pointed out: "Economics, on Earth, argues that no wise government will try to control prices. In an avatar economy, however, the government can effortlessly peg many prices at any value."
It may be easier to fix prices in a virtual world (No Cops or raids neccessary). But that does not mean it will not hurt the virtual economy, or that a black market will not appear. Think of all the stories about selling virtual objects and characters on Ebay.
Spencer Ogden
Real, unwise governments institute price controls all of the time with devastating effect. Witness how the US healthcare industry is reacting to price ceilings instituted via insurance and government health programs and how the oil markets reacted to Nixon's attempts to curb inflation in the 1970's.
Conformity is the jailer of freedom and enemy of growth. -JFK
If I can Pimp freely, I'll be happy. Both the real world and virtual world need Pimps to keep the peace between the Hoes.
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One is born into aristocracy, but mediocrity can only be achieved through hard work.
Virtual economies could be a good breeding ground for ideas about how to gain economic advantage. Just as real world memes are part of virtual economies, memes that emerge in virtual economies will cross over into the real world. So, for example, it should be possible to see the seeds of future criminal schemes by observing behavior on the edges of acceptability in virtual economies.
of virtual economies is that they could enable experimentation with different socioeconomic theories without (serious) risk of screwing up real people's lives with the failures. I wonder how Marx's or von Mises' writings would have been affected if they'd had MMO simulators to play with?
Life is like surrealism: if you have to have it explained to you, you can't afford it.
Currencies not backed by gold are already virtual in many senses. Governments use the money supply all the time to affect the real-world.
"the mere fact that Earth economies may suffer as people spend more time in cyberspace does not imply that humanity is worse off", as "the basket of produced goods is simply changing."
The mere fact that the economy may suffer as SCO spends more time producing lawsuits does not imply that humanity is worse off, as the basket of produced goods is simply changing.
I think mostly existing tools were used beyond what they are generally designed for - i.e. expanded into a virtual world. The thing on which it is applied is different but the tools and approaches used are not.
When I see two words "value" and "worlds" so close to each other the thought that jumps to my head is world of religion and its value. Do we have one religion ? Does the size matter when you can choose yours ? Does one religion dominate the world ?
Don't know if there is such a correlation beween the two, because it is hard to pin down what "higher rewards" and "challenge levels" are. Firstly, how can you be sure that the coder has captured the "reward" or "challenge" value in a pattern of numbers ? And secondly, regarding preferences, it is well known that one man's cake is another man's poision. One way to visualize it is to see a see-saw in motion.
I guess what it could mean is that if you find that you have committed a sin in your religion, it is then not a bad idea to shop around for another religion that doesn't consider it a sin - if the analogy made with religion is appropriate.
Now it sounds quite like religion to me. I can just imagine the power structures you described and those described in religious history.
Well it depends on how you visualize the function of its growth. If it is linear or quadratic, then you probably could be right. If the function is of a higher order the growth of digital stock might find a limiting value, or even reverse itself. It usually happens when currencies of differnt nations are allowed to partially or freely float agains the currencies of other nations. And hopefully if that could be predicted, then it might be comparable to the accomplishments of George Soros - who broke the Bank of England.
To see a world in a grain of sand, and then to step back and see the beach where the sand lies
...the we live in a virtual economy already? I work for 40 hours a week and some virtual funds are direct deposited into my checking account. I then write a virtual check to pay my bills online. There's no such thing as money anymore; the gold standard never lasted, the paper standard is a joke, the digital standard is just a virtual economy with solid objects as the prize for playing the cubicle game. Hell, pay for your Everquest subscription using your credit card, pay the card with a virtual check, it's all just ones and zeroes!
I wonder when the U.S. Internal Revenue Service will require online gaming companies to report the earnings of players? At least some MMORG players are starting to worry about this issue.
The extent that virtual economies let "players" perform virtual jobs and earn virtual money that can be used to buy valuable products and services is the extent such virtual income is taxable. If enough players earn more money online than they pay in monthly fees, then said players are effectively gainfully employeed and profitable. If the virtual money is exchangable for real money, then it becomes much more likely that the IRS could get interested.
Hmmm... do virtual earnings count as earnings in foreign country?
Two wrongs don't make a right, but three lefts do.
I don't play any MMORPGs... well I did play NWN for a bit but it's not a persistant world. (yet?)
I'm wondering though... don't some games have skill based trades? How will Kraginlor's +5 Armorsmithy hold out against online manufacturing outfits when selling stuff on ebay? I recall an article about some guys who had min wage workers playing Everquest or something like that to gain items to sell online. How about automated equipment factories run by computers playing games so the owners can post items for sale?
Will offshore MMORPG play factories undercut mom & pop's kids' profitability?
Deltron 3030 - Virus (music video)
<1000/1000hp 400/400mp 600/600mv 10000 gold>
The Tax Collector has entered the room.
<1000/1000hp 400/400mp 600/600mv 10000 gold>
The Tax Collector hits at you with an IRS form!
You lose 9900 pieces of gold.
<1000/1000hp 400/400mp 600/600mv 100 gold>
The Tax Collector leaves to the north.
In an avatar economy, however, the government can effortlessly peg many prices at any value."
I've played a number of online RPGs, and there's really nothing that can be done to control prices within the game short of putting item sale and trading and such in NPC hands.
I'll use the example of a game I used to play called Dransik. Several of the game's servers have had years of gold buildup in the player base, leading to virtual hyperinflation. When I first started playing, the best items in the game were 15 million gp if you were a good seller. Last time I checked, somebody could negotiate 600 million gp for a high end weapon on the Classic servers, and on some of the servers that use the game's newer graphics engine, gold prices are so inflated that gold is nearly useless, and you can't buy an item except to trade dozens of simmilar items, and even then, people often refuse. A single item sale thread on the messageboard will usually contain both "I want items if possible, not gold" and "I don't want those items. If I wanted a +4 broadsword, I wouldn't be selling my +5 sabre."
As long as you leave it in the hands of players, it seems inexorable that inflation eventually sets in. When a new server comes up in the game, it starts out good. People get a few +1 weapons, and give them to their friends, and they generate more and better weapons, and prices come down as things start circulating. Then, somebody gets a high end monster drop, and it's like a death knell for the server's economy. From there on, the game is just a struggle to generate wealth at the rate that prices increase.
Inflation:
What you are describing is sometimes called "Mudflation" - in essense money can become worthless in muds (MMORPGs). It is a topic of discussion in Everquest.
This will happen if there is nothing worth buying with you money, or if money is so easy to obtain that it becomes worthless.
To have any sembelance of a real economy, game designers must make it really tough to get actual cash. They have to fix any exploits promptly. This requires lots of work.
Further, there must be some money or item sink in the economy. Money must be removed from the game or else it will pile up and become worthless. You can buy things off NPC vendors. Sometimes you do so for quests or to buy skills or equipment.
Everquest has outragously expensive horses one can buy. It's sort of a status thing. It has been a pretty good way to get rid of money. The horses cannot be traded between players, and can be sold back, but at a loss (around 10% lost). Further, everquest has consumable items such as food, drink, arrows, and spell components.
If they were to add houses (or other property) you could rent or NPC's which you could pay to cast spells on you it could take loads of cash out of the economy. Other suggestions are to make armor and weapons degrade over time and thus have to be repaired. Some kind of money sink is necessary. Ideas abound for how to best do it.
Deflation:
Items that drop in game and are tradable between players will generally become worth less over time. Everquest has added lots of content over time and old gear that was considered great is now virtually worthless. It's as if the best sword used to be +5 but then the +6 sword comes out. As people are motivated to run out and get a +6 sword (even if it takes lots of real life time and effort) they, invariably, have to sell the old +5 one and thus with enough people doing so the lesser ones will become worth vastly less, and on down the line.
To impede this, gear has to leave the system. One way is to have NPC vendors buy it. How much is that +1 sword worth? Well, if a vendor will buy it for 100 gold coins, probably you will not sell it for less than that. (But now you are adding money to the economy, thus contributing to inflation...)
One way of resolving this is to make the new, +6 sword "no drop" meaning it cannot be traded between characters. The one who picks it up has it, forever. This also prevents "camping" where a single group sit at a location to "farm" it - endlessly gaining the same or similar items over and over to sell later. A way to inhibit (but not stop) this is to mark items "lore" which in Everquest means you can only have one. Even though with a little effort you can run off and sell one and then come back to get another, that extra effort makes lore items much less attractive to "farmers", and thus inhibits farming, a bit.
Another, harsher, way of controlling items is to simply allow them to break (or ware down) after extended use.
Player Flux:
New players are generally good for the economy because they buy up the low end items (causing them to inflate a bit) but they also generate cash for those of higher levels to buy the better stuff - thus keeping the economy moving.
Everquest added a new playable race last year, and it raised prices alot as people made new characters and put some money into them. I personally sold tons of otherwise worthless stuff (which otherwise I would just sell to a vendor). There is a new class coming out soon and I expect similar effects. Thus, old people starting new characters can have a big impact.
Players leaving generally dump all their equipment and money to friends. Of course, all their "no drop" stuff just vanishes. It is expected that as new MMORPG's come onto the market, there will be loads of new high end gear coming to market, which should deflate costs. However, who knows how much money these people have. Perhaps the vast wealth of these people being given away t
a war on terrorism? How can we end a war on a method?