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."

Comments

Fixing Prices

[spencerogden]

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.

Re:Fixing Prices

[tc]

Runaway inflation is a problem because the money supply is uncontrolled in many virtual economies. Prices for raw materials and items from in-game vendors can be fixed, but that doesn't stop the player prices from spiralling uncontrollably, and typically turning into barter economies for all but the most common of goods, with money (gold, credits, whatever) being essentially worthless for non-newbies.

The originally planned in-game economy becomes useless for meaningful trade, and the 'real' game economy is conducted via eBay or primitive bartering. Where of course it's difficult for the operators of the virtual world to perform any regulatory functions.

Re:Fixing Prices

[mutewinter]

Ever notice that inputing cheats into a game to give you powerful or all items makes the game a whole lot less interesting? Decrease the price artificially (which isnt really the correct word to use -- since the scarcity of the item in a virtual world too is artificial) and eventually the player will loose interest.

"Hey look I got this cool, rare xxxx!"
"Oh yah? I got it too"
"So do I"
and eventually its not so "cool" anymore.

Hm.. perhaps this explains why fads and clothing styles don't hang around very long. Forget implications to the virtual world.. its really just a mirror of ourselves.

Re:"Wise" Being the key word

[bj8rn]

price control is a good idea if you're dealing with a monopolistic market, especially one with very high entrance costs but producing something that many people use. as, for instance, is in the case of electricity and water (or telephone) in some places.

Already happening

[Anonymous Coward]

Currencies not backed by gold are already virtual in many senses. Governments use the money supply all the time to affect the real-world.