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Virtual Economies
October 21, 2006 9:13 AM   Subscribe

As virtual worlds economic activity and populations grow, the importance of Real Money Trade comes to the fore. When does fraud inside game worlds become illegal? when do earnings from online worlds become taxable? [discussion], and what happens when real day traders get interested? [more inside]
posted by MetaMonkey (25 comments total) 5 users marked this as a favorite

 
Preview of a Chinese Gold Farmer Documentary, notes on an IPO in Eve.

Samuel Lewis reports on his advanced mmog economy roundtable at the GDC.

Long, interesting article on Edward Castronova and virtual economies (Google Cache unfortunately).

Castronova's landmark research:
On Virtual Economies
Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier

For the legally inclined only: Internet Gambling Regulation Present and Future -Technology Outpaces Legislation as the MMORPG Problem Emerges
posted by MetaMonkey at 9:17 AM on October 21, 2006


Related mefi threads: 1, 2, 3, 4, 5.
posted by MetaMonkey at 9:19 AM on October 21, 2006


It's interesting to note that Ed Castronova's just been given a decent amount of money to develop an MMO set in Shakespeare's version of the time of Richard III.
posted by thanotopsis at 9:21 AM on October 21, 2006


The real benefit of virtual worlds will be to explore the stability issues of specific economic policies or theories.
posted by Brian B. at 9:25 AM on October 21, 2006


Synthetic Worlds as Petri Dishes
posted by MetaMonkey at 9:28 AM on October 21, 2006


I'm starting to wish that SecondLife did get eaten by grey goo. But I want it to take out World of Warcraft first.
posted by loquacious at 9:41 AM on October 21, 2006


The documentary on Chinese gold farmers looks awesome, though. I can think of worse ways to make a living in China.
posted by loquacious at 9:47 AM on October 21, 2006


Ever since it's announcement, I've been depressed that the 3D internet ended up getting created by a business, rather than through open standards. The fact that the second life economy is essentially grounded on the artificial scarcity of land, which is essentially a monopoly good produced by Linden Labs, with the inevitable associated deadweight loss. As the economy of second life grows, there will be continually increasing pressure for Linden Labs to profit via currency manipulation of either land or linden dollars. It's not happening now, as far as I know, but eventually many millions of dollars could be there for the taking, and it's hard to imagine they'll resist the temptation.
posted by gsteff at 10:08 AM on October 21, 2006


Q: Does anyone have a patent on virtual worlds?
posted by Brian B. at 10:14 AM on October 21, 2006


gsteff, while I agree to a certain extent, I think 'the 3D internet' game has only just begun, and Second Life is merely a prototype, along with The Croquet Project, and there are a couple of similar open metaverse initiatives around. Sooner or later people will be able to start their own 'worlds' (servers/clusters) that just plug into a standard metaverse, and presumably some kind of meta-currency standard would be created. Thats when the economics will start to get really interesting.
posted by MetaMonkey at 10:25 AM on October 21, 2006


That's the dream, metamonkey. Time will tell if it actually turns out that way.
posted by gsteff at 10:43 AM on October 21, 2006


Second Life bothers me in a way, because of how much it resembles the kind of 3D worlds that the dotcom-bust types were building. Hey, come to our 3D world and go shopping! Go to a casino! And so forth. It's an incredibly economics-centric world, where you'd expect and hope for something much more social. Kinda like MySpace, in a way.
posted by reklaw at 10:47 AM on October 21, 2006


If Linden gets greedy, someone else will create a cheaper 3d world. It's not as if there aren't dozens and dozens of them already.
posted by empath at 11:10 AM on October 21, 2006


Something to remember is that the fictional metaverses and cyberspaces of science fiction that we know and love were all about commerce in their respective stories.

It's just that those stories are often flights of fancy of either founding, owning, hacking or otherwise working the system against itself for fun and profit - and were therefore ideal playgrounds.
posted by loquacious at 11:37 AM on October 21, 2006


NERDS!!
posted by aerotive at 11:42 AM on October 21, 2006


I really enjoyed this post, as pointful or pointless as it may ultimately be. I ended up reading most of the links, and all I have to say in response, really, is... sounds like fun.

Although I've never been able to get into EVE.
posted by blacklite at 11:52 AM on October 21, 2006


It would be impossible to create an "economy" in a totally open system, because there would be no scarcity (except time, I guess).
posted by delmoi at 12:38 PM on October 21, 2006


It would be impossible to create an "economy" in a totally open system, because there would be no scarcity (except time, I guess).

Since nothing is real in a virtual setting, what about the scarcity of the currency itself, as privilege to services?
posted by Brian B. at 1:24 PM on October 21, 2006


Brian: the scarcity of the currency only determines its buying power. If you can get just as much no matter how much currency you have, they're just "points", and it isn't really an economy.

What I think you're suggesting, though, is that services are scarce, as they depend on the time of the players providing them — or, perhaps, they are provided by NPCs but the NPCs are faster at said service than a player would be. It's the services that matter at that point, then, not the currency.

The problem I have with a lot of virtual world economies is that ... what's the point? What do I get out of having ten trillion virtual yen? Sure, other people want them, so I get the same thing that I get out of having (say) US$10,000, but in a much less liquid form (i.e., it's more of a pain in the ass to spend it.)

Maybe if I had a shiny new computer instead of the old crap I always use, I'd be more excited by spending my time in virtual worlds making not-entirely-virtual money, but I make more money for the same amount of time in the real world, and it's not even really that fun to do it virtually. Work is never virtual, even if the payback and environment are.

Since realworld economies are almost always going to give you a better payback, unless you're in a really shitty realworld economy (you get paid $0.02 for work in China) or you have no access to the one you're in (you're 13 and you live in Kansas), there is no economic motivation to have fully liquid virtual economies until demand diversifies to the point where one's personal productivity is more efficiently spent creating virtual goods rather than real goods.

Which is pretty ridiculous, when you think about it. When I was little we learned about the primary sector, the secondary sector, the tertiary sector... there was some handwaving about a quaternary sector, but it was very brief. Where do you categorize service providers who operate solely in a virtual world? Shouldn't there be a line, somewhere, where we say as a species "this is not helping us anymore", and stop abstracting?
posted by blacklite at 1:44 PM on October 21, 2006


Thanks for the explanation, blacklite. I haven't been to 2nd life, but I'm wondering what prevents a V-world from becoming a virtual market if we assume web advertising or some other form of employment. Say that a company solicits a form of advertising in a virtual world by paying in V-world money (which they purchase from the V-world owners), and then they redeem the V-world's money as goods and services on the web as a coupon feature to recapture it. Is this some kind of parallel market that already exists? What do they call it?
posted by Brian B. at 2:05 PM on October 21, 2006


When I was little we learned about the primary sector, the secondary sector, the tertiary sector... there was some handwaving about a quaternary sector, but it was very brief. Where do you categorize service providers who operate solely in a virtual world? Shouldn't there be a line, somewhere, where we say as a species "this is not helping us anymore", and stop abstracting?

The basic rule of economics is that things are worth whatever someone is willing to pay for them. I would argue that virtual entertainment is entertainment like any other - paying to play a subgame, or to get better equipment, or clothing in SL, I don't see how any of that is really different to having a stamp collection, or buying jewelery because its shiny and affords status. People enjoy games, other people's creations, status symbols, its all the same to me. (though I haven't bought anything virtual myself, I don't buy much crap IRL either).

It would be impossible to create an "economy" in a totally open system, because there would be no scarcity (except time, I guess).

Well, yeah, but time is the ultimate scarcity, not a minor exception. The two major things people pay for in virtual worlds are

1. items/characters - paying money to avoid time spent 'grinding' (in my opinion this is often a flaw in game design which won't last for too long)

2. in-game content - items, location, and in SL scripted items and locations. This seems no different to me to paying for any other kind of online content or game fun.

Of course the third element is space in a virtual world, which translates effectively into real world server costs, particularly in SL.
posted by MetaMonkey at 3:47 PM on October 21, 2006


NYT: A Virtual World but Real Money

Crayon Claims To Be First SecondLife Company
posted by MetaMonkey at 4:57 AM on October 23, 2006


The Next Big Thing

We are, nevertheless, on the cusp of the Next Big Thing and those who are ready for the transition to 3D virtual worlds will be far ahead of the game. Those who are actually acquainted with VW will be in a position to help determine the direction of the many critical policy debates that will be engendered as the online VW experience becomes increasingly indistinguishable from the RW. So don't say I didn't warn you.
posted by MetaMonkey at 5:03 AM on October 23, 2006


Thanks, MetaMonkey. I read the Cox piece and I got the feeling he was holding out. There are even bigger implications to VW when it gets around to reordering RW, and the race is on. Do you happen to know where they might discuss the details of things like this?
posted by Brian B. at 9:19 AM on October 23, 2006


I read the Cox piece and I got the feeling he was holding out. There are even bigger implications to VW when it gets around to reordering RW, and the race is on.

I tend to agree; it's a subject of massive importance (imho), but I've yet to see any really insightful analysis of the likely practical (and philosophical) direction/unfolding of the metaverse/3d web. Not that I've looked too hard.

Do you happen to know where they might discuss the details of things like this?

I don't know of anthing that really goes in depth, terranova is the obvious one, and 3pointd crops up for me quite often. If you come across any other good sites, please let me know.
posted by MetaMonkey at 8:08 AM on October 24, 2006


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