Truck and Barter

Fake Money, Real Incentives

I apparently missed the hullabaloo surrounding this paper -- "Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier" -- by Edward Castronova when it originally came out. It's an investigation into the economics of online mutiplayer games.

There's an interesting article on it at Walrus magazines site: Game Theories. (And no, I didn't like it just because of the name.)

Excerpts:

[Castranova] began calculating frantically. He gathered data on 616 auctions, observing how much each item sold for in U.S. dollars. When he averaged the results, he was stunned to discover that the EverQuest platinum piece was worth about one cent U.S. — higher than the Japanese yen or the Italian lira. With that information, he could figure out how fast the EverQuest economy was growing. Since players were killing monsters or skinning bunnies every day, they were, in effect, creating wealth. Crunching more numbers, Castronova found that the average player was generating 319 platinum pieces each hour he or she was in the game — the equivalent of $3.42 (U.S.) per hour. "That's higher than the minimum wage in most countries," he marvelled.

Then he performed one final analysis: The Gross National Product of EverQuest, measured by how much wealth all the players together created in a single year inside the game. It turned out to be $2,266 U.S. per capita. By World Bank rankings, that made EverQuest richer than India, Bulgaria, or China, and nearly as wealthy as Russia.

[...]

Not all social inequities are absent, of course. For instance, Castronova discovered that women in the game are worth less than men, in a very measurable way: when he compared the sale of male and female avatars, he found than female characters sold for 10 percent less than male ones at precisely the same power level. Players with female avatars also say it's harder to advance in the game, at least initially — even though the female characters are often being played, in real life, by men. (A study by the game academic Nick Yee found that male players "cross-dress" as female characters at least one-third of the time.) Men play as women characters partly for the kinky thrill, but also because female characters are given random presents of free stuff by other players, a chivalric custom known as "gifting." "Personally, you receive a lot more stuff when you start out as a female," as one male cross-dresser wrote to Yee.

Ultimately, Castronova says, EverQuest supports one of Adam Smith's main points, which is that people actually prefer unequal outcomes. In fact, EverQuest eerily mirrors the state of modern free-market societies: only a small minority of players attain Level 65 power and own castles; most remain quite poor. When game companies offer socialist alternatives, players reject them. "They've tried to make games where you can't amass more property than someone else," says Castronova, "but everybody hated it. It seems that we definitely do not want everybody to have the same stuff all the time; people find it boring." It is a result that would warm the heart of a conservative.

It's not a short piece, but it's worth a read.

Posted at May 24, 2004 02:08 PM

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