This is night city, the futuristic metropolis which is home to most of the action taking
place in cyberpunk 2077, which has quickly become the most popular PC benchmarking software
in 2020.
There are a few reasons I wanted to explore the economy of this fictional world, for starters
I gotta cash in on a subject that’s at the top of Google Trends, It’s been a while
since I have done a virtual economy, I need a way to class my new gaming PC as a business
expense and of course it actually genuinely very interesting.
Part of the appeal of this game was the way it wove an alternative reality in with themes
and events that are taking place in our modern world to build an economy that both feels
abstract but also entirely possible.
That virtual economy then builds the framework of an immersive world that is equally realistic
and fanciful.
The world of Cyberpunk 2077 is a cautionary dystopian tale that takes modern economic
issues, like wealth inequality, corporate influence, white-collar corruption, militarisation,
black market dealings and environmental degradation, and then turns those headlines up to to a
whole new level to let people experience making their way through a world where these problems
go unchecked.
It also goes without saying that this game has made headlines for a host of technical
issues that have perhaps continued the theme of shining a light on economic problems in
the real world.
So the economics of cyberpunk 2077 is a great case study for lots of weird and wonderful
economic happenings.
How did the economy of this virtual world get to where it is in the year 2077.
What are the key components of Night City’s economy?
And a bit of a tangent
What business decisions led to the chaos surrounding the game’s launch.
Oh and cyberpunk 2077 technically takes part in an independent city-state so you know what
the hey, may as well throw it on the economics explained national leaderboard.
Oh but first A little disclaimer, this video will not have any spoilers relevant to the
plot, so don’t worry for all of you that haven’t been able to play the game yet (which
is basically everybody).
Intro Add
Cyberpunk 2077 actually takes place in our own world in a form of alternative history
where a few distinct changes in our past led to some very unfortunate results in our future.
The basic history is that in the late 20th century the CIA, FBI, NSA and the DEA all
teamed up together to form the gang of four which would go on to wield significant political
influence over the united states and therefore the world.
These organizations were no longer beholden to the government which they served and were
able to put figureheads in place to ensure that there operations could be carried out
undisturbed.
This influence culminated in the war on drugs been taken to a level so extreme that it eventuated
in an all-out conflict in central and south America.
The governments and cartels on the receiving end of this invasion retaliated by setting
off a nuclear weapon in new york city, which is the centre of world finance.
Taking out massive stock exchanges caused worldwide panic as nobody was able realise
the assets that they held in company equity.
What’s actually really interesting is that the Nasdaq and the new york stock exchange
the two largest securities exchanges in new york city and also the world are actually
totally prepared for exactly this scenario.
The intercontinental exchange is the company that owns the NYSE and in their investment
prospectus they detail contingencies in place to ensure that ownership records and trading
functionally remain in a situation where new york does not.
For what it’s worth these days the main data centre that makes these exchanges tick
is not in manhattan, its not even in NewYork city, or state. It’s just across the border
in some non-descript warehouse in new jersey.
None the less losing this financial center was obviously a huge blow to the confidence
people had in the US economy and this event kicked off a massive collapse that made the
great depression look insignificant in comparison.
Now this is actually quite unlikely and while an event like this will cause economic turmoil,
and for what it’s worth has caused economic turmoil but it is something that could be
recovered, especially with our modern understanding of fiscal stimulus, which was something that
we lacked back in 1929.
Although it is hard to predict the alternative past so who knows what kind of political mismanagement
could have accelerated this collapse, especially with the gang of four pulling the strings.
The eventual outcome of this economic downturn was that the united states became effectively
a failed state which was reflected in the US dollar falling out of favor as the world
reserve currency and being replaced by the eurodollar, which was the fictional equivalent
of well you know the euro, which was controlled by a far more stable region at the time.
This is a really interesting detail in the game, becasue it shows a potential outcome
of the US Dollar falling out of grace as the world reserve currency. We have explored this
concept a few time’s on the channel before, and I will leave a link in the video description
to a few video’s that cover this topic in a lot more detail.
Needless to say that currencies are much more than just tokens of exchange in our modern
economies. Running a country using the currency of another sovereign region or nation is possible
but it’s far from ideal.
Some nations like Vatican City or Monaco just use a foreign currency for convenience, the
expense, and difficulty in creating their own currency outweigh the benefits of being
able to conduct their own monetary policy.
Then of course there are nations like Venezuela that have been forced into adopting the USD
because their own currency has been made more or less useless through reckless hyperinflation.
Interestingly enough this alternative United States in the year 2077 used a combination
of their own currency and eurobucks.
The closest real-world equivalent to this today is Argentina where the argentine peso
will be used for basic day to day transactions, but major financial transactions like buying
a house car, or even getting paid will normally be done in USD.
Video on Argentina coming soon BTW so you know, like subscribe comment and all that
good stuff.
Anyway, this global turmoil festered over the decades and the world saw widespread manmade
plagues, massive natural disasters, tyrannical presidents and ongoing trade and physical
wars between world superpowers.
Think 2020 but twice as bad and then repeated every year for 50 years.
Oh and if you think this is just a direct parody of our current predicament, remember
this video game started development 8 years ago, and it is based off a board game that
came out in 1990. The original name of that 1990 board game, was cyberpunk 2020. You can’t
make this stuff up.
Ominous foreshadowing aside this global turmoil created a power vacuum that was quickly filled
by
The Age of Megacorporations
There is an interesting theory in economics and political science that power gravitates
over time towards more authoritarian institutions with fewer people to answer to. Of course,
it is just a theory, but especially during times of extreme turbulence, an institution
like a large corporation is able to seize power a lot more effectively than say a government
that is beholden to internal bureaucracy and those pesky checks and balances.
I have recommended it before, but if you haven’t seen it already go and watch CGP greys video
called rules for rulers because he explains this theory far better than I ever could.
Regardless after years of failing governments, gangs controlling the streets, and widespread
unemployment a host of megacorporations rose to prominence and became the true powers operating
in the united states.
These corporations controlled everything from basic municipal services all the way up to
military and emergency services aswell as the Net.
The Net is analogous to the internet in our modern world, but remember this fictional
world was originally perceived back in the 1980’s so again, it is pretty remarkable
how much they got right.
Of course The Net of cyberpunk 2077 is set far in the future and controlled exclusively
by these megacorporations which use it to monitor, track, and collect information about
everybody who uses it.
Everybody from potential customers or corporate rivals, all the way up to their own employee’s
are constantly monitored all to drive more sales, quash competition and weed out insobordination
respectively.
Now I know a world of megacorporations that control everything and monitor our lives 24/7
using the internet, pretty hard to imagine right.
Well everything so far might be par for the corse, but what was a bit different was that
one of these companies effectively founded their own sovereign city nation called Coranado
City.
This city was founded in modern-day California which had also claimed independence from the
greater united states.
This city was built as a haven for trade and business that was meant to be sheltered from
the crime and instability that was plaguing the world at the time. It was developed by
night inernational in collaboration with a selection of other megacorporations as an
administrative center for corporate executives to live in relative safety. Almost like the
world’s biggest gated community.
Of course this idealistic dream did not exactly work out and the city fell into the same kinds
of conflicts that were going on everywhere else in the world. Corporate competition was
no longer competing on price, it was competing on a battlefield.
These tensions eventually culminated in the death of richard night, who was the founder
and CEO of night international, leading the city to be renamed in his honor.
Purely from an economic perspective, Night City has many similarities to Hong Kong, they
are both special economic regions, they are both very business-friendly and these similarities
extend down to the fact that the head of each respective area is a CEO rather than a mayor,
or governor.
But perhaps the best real-world equivalent would be historic European free cities or
communes. These were medieval cities formed not by a government or nobility but rather
by a collection of merchants that needed a safe and facilitating area to conduct their
business.
These historic entities tended to develop a de facto set of guidelines based around
the fact that everybody was there to do business and violence was bad for that business.
Never the less the same kind of corporate conflicts that drive the storyline of cyberpunk
also plagued these ancient city-states. Places like Venice, Genoa and Pisa came to be defined
more for the business they accommodated rather than the governments that ruled over them.
Now on the topic of effective leadership, we would reminisce if we didn’t mention
the issues
surrounding the game at launch.
Given massive performance problems with the game especially on last-generation consoles
sony has offered full refunds on all orders done on their virtual store, while also removing
the game for sale.
For people that haven t been following this closely, this is truly a massive business
decision. Cyberpunk 2077 was easily the largest game release of the year, and it was launched
just before Christmas after several delays had pushed the project back so many times
it basically became a meme.
This decision will see sony give back tens of millions of dollars while also forgoing
millions more in sales that would have been made online in the lead-up to Christmas morning.
This is more business than economics of course but perhaps there is still a valuable lesson
to be learned.
Most of the blame for these issues has been directed at the game companies executives
which pushed what was obviously an unfinished faulty product out to market to meet the quarterly
sales targets needed to secure them some nice fat bonuses.
This certainly can’t be excused by consumers that were not given the product they were
promised, but there is a more foundational issue.
When working on projects, deadlines are important. It’s all well and good to say have all the
time you need to develop something perfect, but perfection is unattainable, and the longer
a collective project gets drawn out the bigger and more bloated it becomes.
Various teams want to add this feature and that extra storyline, and by the time one
component of a swelling project is finished another part needs to be updated.
It might run contrary to conventional thinking, but not many projects involving this many
people are made better by taking longer.
Timeframes need to be realistic and adhered to. This goes for everything in business not
just video game development. But as I say this I should also apologise to our patrons
over on Patreon for this preview not being up a full 24 hours early, I had to rewrite
this script, partially to add this chapter here about the games development issues.
So if that’s not severe hypocritical irony well I don’t know what is.
Ranking
But anyway it’s now time to put night city on the economics xplained national leaderboard,
and for what it’s worth another city-state is currently top of the list although of course
hong kong does have the disadvantage of being grounded in reality.
Pesky reality is also a problem for creating some of these ranking because normally for
consistency we use gdp, and population figures from the international monetary fund, but
unfortunately they havent spent the time capturing these figures for night city so we are going
to have to work it out ourselves.
GDP is going to require a bit of reverse engineering and we are going to have to make some assumptions
about consumer spending habits. The average rent in night city varies wildly from poverty-stricken
beggars renting coffin-sized apartments apply named coffins for around 200 eurodollars a
month all the way up to executive penthouses that start at at least 6 times that.
By taking this, and assuming that around 1/3rd of wages is spent on accommodation and applying
a high-income gini of 0.90 which looks reasonable for a dystopian corporatocracy like night
city we can find household income is 5.4 billion euro bucks a month or 65 billion annually.
When we convert this to USD which hovers around 2 dollars for every 1 eurodollar in 2077 this
gives us annual household income of 130 billion usd’s which to be honest is actually pretty
pathetic.
If we looked at household incomes to GDP rations in modern-day city-states like hong kong and
singapore which are roughly 1 to 2 this would give night city a GDP of 260 billion dollars,
which was way less than I was expecting and gives the nation a 6/10.
A few things to consider is that given all the turmoil in the world and minimal government
intervention inflation is not as strong as it has been in recent decades so these nominal
figures are pretty close to what they would be in 2020.
The other thing to consider is that a very large component of night cities business dealings
go, hmm unreported shall we say. If we were to include the black market I have no doubt
this figure would be far larger.
It’s also possible given the cramped conditions that people just naturally spend a smaller
portion of their paycheck on accommodation which would give us a larger GDP figure.
Now with a population of 6 million people, this breakdown would give Night City a GDP
per Capita of $43,333.00. Again given how advance some of their technology is I was
expecting this figure to be higher but I guess a good portion of the city does live in extreme
poverty so it shouldn’t be too surprising. Either way this is in line with modern-day
nations like Germany Belgium and Canada so it gets an 8/10.
Stability and confidence is also quite hard to pin. If we were to compare it to it’s
peers in 2077 it is a relatively solid beacon of corporate solidarity, where business comes
before needless destruction.
But the world in 2077 does not set a high bar for this category and since this list
is to compare nations in the modern day we really can’t ignore the flagrant corruption,
criminal activity and acts of corporate violence that are commonplace in night city. So it
gets a 3/10.
Growth, again this is quiet hard to pinpoint, but given that this city is five decades into
the future and only just going toe to toe with it’s modern day peers, it’s safe
to say that economic growth has not been fantastic. It gets a 2 out of ten because atleast the
megacorporations look to be getting richer, so wooo.
Finally industry, well here is where the natural advantage of been set in the future really
pays off for night city. Even the poorest members of this society have access to technologies
that are unimaginable for us today.
Cybernetic enhancement as well as an internet that puts what your looking at right now to
shame means that as compared to any current economy in needs to get a 9/10. Only loosing
out on one point because a lot of these technical advancements have been used for destructive
purposes rather than productive ones.
All together it gets an average score of 5.6 out of 10 which is not great and puts it here
on our list. Where it will be taken back off because… well maybe I will start an economics
explained leaderboard for fictional economies one day... but for now it was just having
a bit of a laugh playing around with some silly numbers.
But you know what’s not silly numbers that you should be laughing at, your retirement
savings. Fortunately, these can be made to look a lot more serious…
With acorns.