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Usually when people talk about virtual economies, what
they mean are game economies.
They'll create a bunch of markets
that allow people to trade things
that are useful in the game and they'll pay real money.
Something like EVE Online has around half a million players.
There are giant spaceships that can be bought for $10,000 US.
And then there are smaller ones that
can be bought for a few hundred or a few thousand.
And the economy of that virtual world
is worth around $36 million.
How many people are in virtual economies generally?
Probably over a billion at this point.
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Real world economic theories definitely
can be applied to virtual worlds.
Economics is all about scarcity and the allocation
of resources.
Just about every large game ends up having a virtual economy,
whether the developers want it or not.
There's scarcity in virtual economies,
but it's an artificial scarcity.
Once a developer creates a fancy sword,
they could, in principle, create any number of them
at virtually no additional cost to them.
But to make that sword special, they're
going to limit how many there are.
These can be very complex economies.
And if you think about it, you've
got hundreds of thousands or millions
of people who are all vying for the same goods and services.
And so these can be quite complicated.
The game developers keep a very close eye
on the economy in these large games.
And many of them have hired economist
to help them keep the game in check.
They want to keep a steady rate of growth,
but if they allow the economy to grow too quickly then all
of a sudden it becomes a lot less fun
because you don't have the scarcity and the challenge
that people are looking for in any game.
If you go back to the history of social gaming, in the 1970s
there were players who would sell accounts for items
to other players for real money.
There was a graphical game in the 1980s
called Habitat that had a pretty robust virtual economy.
And in the late '90s, two MMORPG games came about.
Ultima Online was one of the first, and EverQuest by Sony
was another one.
And those were the ones that really
started the business of making money off of virtual economies.
So essentially, some people quit their day jobs
and full time went about collecting virtual items
and then reselling them for real money.
So basically any mechanism that you
use to acquire virtual wealth within a game
can also be a mechanism for making real money
as long as you have that crucial component of being
able to figure out a way to get the player who wants
the valuable item to transfer you real money in exchange
for it.
They do it for two reasons.
One is to acquire status by having
a very rare prestigious item that makes
their character look neat.
And the other one is that they'll spend money in order
to buy things that help them advance
their career in the game.
So I think it's just inevitable that when
you have the choice between spending a couple of hours
doing something you don't really want to do,
you will trade real money in exchange
for a virtual artifact.
I think the biggest misconception
about virtual economies is that the virtual objects
are essentially imaginary and have no value.
And I think you should compare it to something
like a person who plays golf and is
willing to spend a lot of money to buy golf clubs because it's
an enjoyable leisure activity.
What do they get out of it?
Nothing.
Maybe walking around and talking with people.
But essentially I think a lot of people
that participate in virtual economies
are doing the same thing.
And I think there are a lot of players in video games
that don't want to buy power ups.
They don't want to participate in the black market
of virtual economies.
They just want to play the game for the regular subscription
fees.
So often it's a pretty small percentage
of players that are willing to pay a whole lot of money,
and those are the ones that, I think,
are driving, primarily, the virtual economies.
The remarkable thing about virtual economies
is that they don't exist in a bubble.
There's inequality, there's imbalance,
there's difficulty regulating how much currency
is flowing to who.
And those are problems that face video game players just
as well as office workers.
Gold farms are these kind of sweatshop operations
where players are almost chained to their keyboards
playing the game and, you know, chopping away at monsters
or trying to harvest resources that they can then
sell and turn it over into real world currency.
And in China in particular, there
have been instances where prisons have actually been
found to be running gold farms.
And they make the inmates play these games as a form of labor,
that then the guards will take the fruits of.
So with gold farming, you're really treating a lot of people
badly.
And it creates a situation where not only can
a virtual experience be corrupted,
but actual people can be harmed.
The virtual economies as they exist now
are only regulated by the game designers.
But now that virtual economies are actually
amounting to tens of millions of dollars in real money,
lawmakers might want to step in and say that gold farming can't
happen or virtual economies need to be more harshly regulated.
The US already has a Gaming Commission
that controls what happens with casinos.
And a similar situation could come
into effect with video games to ensure
that players aren't cheated out of things
that they've worked to earn.
So some games have made the decision
that they won't allow any in-game purchases at all
and the player really has to go through the whole experience.
It is sad that these virtual economies
have stumbled into such a position when they didn't
really mean to be initially.
But really the situation is that any kind
of group of flawed humanity clustering
around a single currency or valuable item, there
will always be those who want to cheat the system.
There's always going to be a group of people
who are willing to invest in the technology needed
to run these big, immersive game experiences.
But I think more and more what we're seeing
are smaller screens, people interacting
in a very casual way.
And I think that is going to continue and blossom.
The questions facing virtual economies in the future
are things like, should they be connected to the real economy?
Are video game objects worth real money?
How will in-game objects be taxed?
Will the government step in to economies
like World of Warcraft or EVE?
And all of these things really can't
be answered until they happen and the legal precedent is set.
GREG LASTOWKA: I think the virtual economies are only
going to grow.
If anything, we're going to put more value on intangible items.
And I could see the development of virtual economies
being very important to our technological future.
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