« (Virtual) Virtual Worlds Symposium: The Future of Retail in Virtual Worlds and Web 3D | Main | Big Brother wants a cut »

Nov 01, 2008



I think a modern version of monopoly should be made. message: Politicians are parasites that eventually drive everyone to bankruptcy. And if you don't have the golden parachute card, bankruptcy = death. game over.

I'm a comment poster and I approve this message.

but more on topic, UO originally had the most accurate depiction of a real economy in an MMO (unless there is one that I missed) and it just doesn't work for games. They eventually had to drastically change the entire economic system for it to work (and by work, I mean fit in the game for it to be 'Fun'). In MMO's there is the unknown variable 'Fun' to contend with. Once the economy of an MMO becomes broken for whatever reason the game itself can become unfun and therefore the game would die off. The necessity to adapt to the needs of it's players is a hindering factor in any MMO economy. I'm not an economist, but I don't think this necessity applies to real world economies. Do I think that MMO economies should somehow evolve into something that closer resembles real world economics? yes. Maybe the real question is how?


I heard a great report on NPR about credit default swaps. The point that struck me relative to gaming was the following:


"The line between investing and speculation or gambling in financial markets is always a pretty gray one," he says. "And speculation is always a motive."

So, how did we get from one of the safest activities on the planet — insurance — to one of the riskiest — gambling? There's one key difference between an insurance policy and a credit default swap.

"The way that I first described the credit default swap is, you own the bond and you want to transfer the risk to someone else. But what if I want to buy protection but I don't own the bond?" Berman says.

But isn't buying protection on a bond you don't own like buying fire insurance on a house that's not yours?

"It is exactly like buying insurance for a house you don't own," Berman says. "So it's like you took out fire insurance on your home, and I also took out fire insurance on your home, and a thousand other people took out fire insurance on your home.

"And when that happens, what you're doing is, you're betting on the house."


There's some very game-y stuff going on here, and elsewhere in the economy, and most of it comes down to elements that are similar to gambling. Now, of course, at some level, any investment is a gamble: you're betting on the future. When I take out even a reasonable, standard mortgage, I'm betting that the increased value of the home, plus the value of living in it for 10-30 years, is greater than the interest I'm paying.

But that's a "bet" that is very different than gambling in two major ways. First, in terms of time. I'm making a bet, but the outcome is so far in the future, that my bet is (essentially) in the overall health of the economy and value of my neighborhood. Second, the "gambling-ness" of a standard home purchase has more to do with non-gambly things than with the bet itself. I want to live in a good neighborhood. I want good schools. I want clean air, water, good access to utilities, etc. My bet reflects deep needs and commitments to ideas and efforts not directly related to a simple calculation of monetary gain.

When we turn those two things around and get people concentrating on short-term (monthly, quarterly, yearly) gains, and on the money aspect as the only focus... we get trouble.

A game that could model how small "wins" (flipping mortgages, credit default swaps, interest-only loans) can wrap around and become big losers would be interesting. I get +1 to my bank account now, but there a -1 to long-term stability, -1 to available credit, etc.

It reminds me a bit of elements of Civilization. Yes, you can have that huge army... but the people get pissed. Yes, you can drop a nuke... but you ring up huge environmental costs.

Gambling, as a game, is about money in and money out in a short-term window. Economics, as a game, is about long-term stability and growth. The overlap of those game modes could be quite interesting, I think.


"Given the bewilderment of the students and the public with the current financial crisis (and likely an economic one), for the next generation, should the bar in virtual world economics design be raised?"


Complex financial instruments come about in the real world as a result of real-world needs and motivatons. In a game, people don't have the same needs and motivations, so that there is no reason to think you can make a model (in a game) that would parallel real-world behavior. Simple buying and trading between players comes out looking roughly like a real market, but anything more complicated is iffy.

The WSJ article you linked to is a good example of this. The kids playing the stock market with play money have every reason to go for high-risk strategies: If they win big they get a trophy,but merely making a nice profit is the same as losing it all. Now imagine all these traders in an on-line game making an actual market between themselves. It wouldn't look much like Wall Steet actually behaves.


The premise that games somehow "have" lessons is particularly distasteful to me, though I readily admit that lessons can be bestowed with the wave of the intellectual wand to games and oak trees and bathtub fixtures alike.

Therefore, on the specific matter of economic lessons in games: Most likely not. Economics remains one of those social sciences dedicated to understanding context by measuring minutiae, and my current position is that attempting to understand really large-scale contextual topics is closely analogous to attempting to understand really small-scale quantized topics, about which RFeynman noted: you can't.

Nevertheless, while economics depends upon contexts very likely other than the context of mmos, it seems that social interactions and orders may well depend upon contexts very similar. Thus, if you wanted to observe the "natural" laws of economics, you might best look elsewhere. But, if you are satisfied with observing social interaction in the raw -- for instance, at least somewhat (yet here and there) outside the influence of economics -- then mmos become an interesting choice.

The comments to this entry are closed.