Terra Nova

Hurricanes and Virtuality

Long ago (in internet time) Facebook began letting people give each other virtual gifts. Last month, Facebook enabled this virtual system to purchase and send tangible gifts. The world yawned. Therefore, Facebook announced it would have an event at FAO Schwarz in Noo York City! At this event, the world would learn how many exciting opportunities the Facebook Gift program would provide. Strikes me as a big coupon book, but hey. Anyways, Hurricane Sandy has come along and canceled the event.

I keep thinking of computing as a slow hurricane, massively forceful, irresistable, steadily raising the waters and drowning the old ways day by day. Each year the coast looks very different. But since most people live somewhat inland, all they notice are the streaking clouds and the thundering surf. "My house is safe," they say.

REAMDE and a thesis

Hello!  Two sort of related things:

1) I'll be speaking with Neal Stephenson this evening at the University of Washington about his new book, REAMDE, focusing on the legal dimensions of gold farming and virtual property.  The available seats seem to be booked at this point, but there's standing room -- more about that here. 

On page 35 of REAMDE, Stephenson describes the way that Richard Forthrast, the book's protaganist (well, the main protaganist) hit upon the idea that made him rich -- a MMORPG that encourages gold farming and is premised on a stable virtual currency:

It didn’t take a huge amount of acumen, then, to understand that the value of virtual gold in the game world could be made stable in a directly analogous way: namely, by forcing players to expend a certain amount of time and effort to extract a certain amount of virtual gold (or silver, or diamonds, or various other mythical and magical elements and gems that the Creatives would later add to the game world).

Which sounds suspiciously like Bitcoin, no? 

2) And speaking of Bitcoin and its intersection with virtual economies, earlier this month, Mark Jansen pinged Ted and I about his M.A. Thesis, recently submitted at Utrecht University.  It is embedded below and it offers a whirlwind tour of Bitcoin, goldfarming, currency systems, cyberlibertarianism, etc.  Very much of a piece with the themes of Stephenson's REAMDE and a nice intro to the issues.

Update: Worth reading from Technollama -- it seems like there's a very large amount of concentrated wealth in the Bitcoin economy.

Bitcoin the Political Virtual of an Intangible Material Currency

Can I get a tax deduction for cheating?

Yes

About £34 million worth.

We can know whether we are in a simulation

Remember the Bostrom argument from 2003? He argued that since technologies of simulation increase without limit, the only reason we would not be living in a higher power's simulation right now would be if that higher power simply did not enjoy making simulations. It's one of those asymptotic arguments - carry a thought out to infinity and the probability of something weird goes to 1. Do I understand it? Nah. But physicists in Germany argue that with current technology we should be able to detect whether this existence is a simulation - because of the physics of simulation. Do I understand that? Nah. But it is fun to think about.

More on the Exodus Recession: Technology, Entertainment, and Our Economic Doldrums

Interesting essay today by Robert Samuelson, a respected nonpartisan economist. He argues that our expectations are out of whack. During the 20th century, it was normal for an economy to grow, on average, several percent per year in real terms. This meant that when a crash came, it was followed by an energetic recovery. In the future, says Samuelson, we may have to get used to a zero-growth environment, and when recessions come, we may have to tone down our expectations of the recovery. It will just OK, just enough to get us back to zero.

As evidence, Samuelson cites a recent paper by Robert Gordon, a pretty eminent fellow. Gordon talks about technology and growth. Since 1800, technological advance has been associated with economic growth. The new stuff being built saved labor input, which was then put into the construction of other things. However, the most recent technological advances may not be growth-inducing. As Samuelson puts it, "Gordon sees the Internet, smartphones and tablets as tilted toward entertainment, not labor-saving."

This research puts some nuts and bolts and evidence on the table, making an exodus recession, a recession caused by people devoting more attention to digital things ("entertainment"), a little bit more than mere conjecture. Back to Samuelson though. He points out that an era of zero growth and massive inequality confronts our societies (he's talking about Europe, the US, Japan, everybody) with a completely different set of policy problems. For example, when an entitlement program is heading into bankruptcy, there are only two *painless* ways to save it. Either you have to have more babies (and hence more young contributors), or you have to make the workers you have more productive. But the developed world's culture is just not into babies any more. And that means, either we have to get productivity growth, or we'll be forced to dramatically cut benefits or dramatically raise taxes - just to stay solvent. Without productivity, the politics of the next 30 years look really, really ugly.

Which, by the way, will only encourage people to take refuge with even greater frequency in digital worlds, where every problem has a satisfying solution.

WaPo on Virtual Economies

Nice article on virtual economies, this weekend in the Washington Post. I still wonder about the economy. Here we have the Fed moving into unprecedented degrees of stimulus, after almost four years of huge deficit spending. The textbooks say that our economy should be screaming along by now. In fact, the textbooks I studied in the 1990s all would have judged the current policies to be dangerous. If you push a machine hard for a long time, they said, you're going to break the machine. But this machine won't run. The government is doing everything in its power to make the economy go, and it just sputters along. The rules must have changed. I keep wondering if we're seeing the first effects of a broad virtualizing of the economy. It doesn't take much to make an economy sputter. If the people simply decide to spend less money, even a couple of percent, it's enough to get the whole thing to sputter.

What have we come to expect of a "healthily growing economy," after all? We expect something like 1-3 percent real growth per year. That means, 4-6 percent measured growth, with 3-5 percent inflation. This is what we've enjoyed ("we" being the developed countries) since about 1800. Think about how different, how much richer, the world has become since 1800. From the standpoint of human history as a whole, a persistent 1-3 percent growth in wealth is extreme. It ain't normal in any way, shape, or form. Until 1800, and for most people in the world even now, "normal" meant subsistence. But we expect now to go beyond subsistence, persistently. We insist that this must be so, now and forever, indeed for everyone.

Folks in the Green movement might say that this is precisely the problem, that we have been growing too fast for too long and are now suffocating the planet with our flesh.

The vision of perpetual enrichment is internally consistent. If everyone is devoted to getting more stuff, their passions spur the economy to grow rapidly. Their demand for things create profit opportunities. The profit opportunities attract productive resources. Stuff gets made and sold. The profits enable people to pursue still more passions. The machine runs.

But virtuality throws a small wrench in the works: Satisfaction at extremely low cost. Suppose we discovered that we could satisfy all of our mental needs by sitting down in a quiet room and meditating. The economic consequences would be catastrophic, wouldn't they? A society of hermits needs food and a bunch of quiet rooms - that's it. Therefore a society moving toward hermitage will have an economy in free fall.

Now compare two groups of people: "Car People" and "Internet People." Car People are folks from the 1950s. They want big houses, fast cars, fine food, prestigious degrees, big families, high-powered jobs, and sexy sex. They want stuff to play with and they want stuff to happen, all the time. They are out and about. Internet People are folks from the 2000s. They want sugar and fat. They want freedom - from work, obligations, expectations. They want sexy sex (some things never change). They connect online, hang out at home, and commit to nobody and nothing. They hate ads and avoid them wherever possible. They want to pass the time as cheaply as possible.

Internet People are not hermits by any means, but they are a lot closer to hermitage than Car People. Their interest in the acquisition of material stuff may just be 10-20 percent lower than that of the generations before. They still want stuff, but they're happy to get it virtually. If that's true, then the turn to the virtual may explain why the economic machine just doesn't seem to run like it used to.