Wharton Discovers Virtual Worlds


Famed biz school Wharton has a great article about the structure and economies of virtual worlds. Among those quoted about it are Dan Hunter, a legal studies scholar at Wharton and a contributor to what is quickly becoming one of my must-read blogs, Terra Nova.

Some tidbits:

A large unresolved question about virtual worlds is whether mining and trading digital assets can be defined as real-world work. For instance, should the U.S. government track employment in these worlds? Hunter and Whitehouse both suggest that life in the virtual world is indeed work. After all, work is merely creating something tangible that is valued by others. "Economics is really just about choosing preferences," notes Hunter. "If I'm willing to spend $20 on a magic breast plate, that's tangible. Increasingly, these worlds are becoming workspaces."

For some highly-skilled players, it could actually be a significant source of income. If a player in Asia can acquire one power an hour by playing a game and then sell it for a profit to another player, he could make a living wage, accounting for exchange rates. Not surprisingly, such farming operations have been set up across the globe to facilitate these transactions. It has become "a cottage industry," says Castronova. "Individuals farm gold (virtual assets) for a company and then take a wage as independent contractors."

And, gee, this seems to sound familiar:

Experts such as Hunter argue that the burgeoning virtual asset market embedded in games like Second Life and World of Warcraft will create economic petri dishes to monitor consumer behavior, currency changes and productivity.


Worlds like Second Life can provide for micro-economic insights on the way people react to changes, adds Ondrejka. Linden Lab has already learned one lesson: Don't tax too much. In 2003, a group of players protested what they viewed as excessive taxation on players who built those properties that added the most value to society. The issue was resolved by introducing permanent structures to the game. Previously, a player's property left when he did, but was still taxed as if the property were there full time. Today, property and businesses can remain in the game -- and potentially generate revenue -- even when a player isn't online in Second Life. "This greatly simplified the system, allowing residents to forward invest," says Ondrejka.

As I mentioned in another of my always enjoyable lunches with T&B's owner, Kevin, a lot of the studies of gaming doesn't quite match my own interest in the subject. This article gets much closer to the heart of what fascinates me. The economies of places like Second Life are interesting, but I'd prefer to just see people evaluate these things as tools. Time and again, in readings on testing economic theory or game theoretic predictions, I was always left with a slightly...unsatisfied feeling reading about the structure of various experiments. At base, they often didn't seem to model the depth of emotional involvement that some people may feel in numerous situations (commons usage, willingness to pay questions, declared valuations on various aspects of life, etc.) . With the extent of involvement people feel for these virutal worlds, I think it might be worthwhile to ask if these things might not be a better test-bed for experimentation.

Oh, and another question: what do you think my chances would be of getting into a good PhD program by admitting I wanted to study, in part, video games? I'm getting visions of rejection letters with "Thanks, but we don't have a stipend large enough for what we believe your munchies-habit must be."



I didn't believe someone like you existed. It's great to know that someone else sees virtual worlds' potential for macroeconomic experiments. It's disappointing that the only thing people focus on right now is real money trade. People are entertained reading articles about sweatshop video game players and the such, and this kind of stuff really just makes it harder to prove the potential of virtual worlds in academia.

Anyway, nice post. If you'd like to talk, I'm always up to it.


That's funny, I used to get that same opening line a lot from women. When I found one that didn't say it, I married her. But anyway...

Always good to learn of a new blog, and Awkward Utopia looks intriguing so far. And I'm glad to hear there are other people interested in this as well. Now, if we could get all of us, including the Terra Nova folks (esp Dan Hunter) in the same city, it might make for a rollicking evening at the pub.

Haha. A get together would certainly be interesting. Good job with the blog, it's great reading as always.


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This page contains a single entry by published on October 20, 2005 10:29 AM.

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