Series Info...Biting The Hand #32:

It’s the Other Economy, Stupid!

by Jessica Mulligan
August 20, 2002

People want economy and they will pay any price to get it.
Lee Iacocca, New York Times, October 13, 1974 edition.

While Iacocca was obviously making a tongue-in-cheek reference about economy in the sense of cost-efficiency, the quote has a sideways application to persistent world gaming; we’re still looking for a working in-game economy and we’d probably pay a hefty price to have one that did work as advertised.

Much has been made in the press and on fan sites of the economies found in – and out – of persistent world games. Most of the press attention has been given to the out-of-game economies, as typified by auction site sales of game characters and inventory items, probably because the exchange of real money makes more sense to most people than the exchange of reagents, platinum or broadswords. Earlier this year, Edward Castronova, an associate professor of economics at California State University at Fullerton, looked at eBay and other auction site sales derived from one game and made the claim in a research report that, by his calculations, Sony Online’s EverQuest was comparable to the 77th richest economy in the world, based on per-capita gross domestic product.

Such speculations are all well and good and they certainly reveal some interesting statistics about the lengths players are willing to go to acquire ‘uber’ characters and in-game possessions. Heck, I’ve always found that fascinating; the practice has been around at least since 1989 or 1990, when I was first became aware of a transfer of ownership of a game account on GEnie that had been sold for $2,000 in cold, hard cash. That was back when $2,000 meant something besides two-thirds of one month’s rent of a seedy, bug-ridden hovel in Silicon Valley. Considering that Islands of Kesmai, MUD I and British Legends started charging for access in 1984, there is no doubt in my mind that there was some surreptitious sales happening long before my first acquaintance with the practice.

All social rules and all relations between individuals are eroded by a cash economy, avarice drags Pluto himself out of the bowels of the earth.
Karl Marx, Das Kapital (1867)

And that’s nothing compared to the largest amount paid for a persistent world account that I know of: $10,000 for a Kingdom of Drakkar account, sold under the table in the mid-1990s by an MPG-Net employee after he’d used privileged gamemaster commands and tweaked it to be maxed out in attributes, weapons, armor and other possessions. As a generous afterthought, the employee reportedly tossed in a copy of the source code. Or maybe the code was the sale and the tweaked character was the afterthought (ya think?). This may also be the first recorded instance of an employee selling in-game items from a persistent world for cash. When finally detected and fired, it was estimated that this enterprising young capitalist had generated a second income of over $30,000 per year for a number of years by selling tweaked accounts and rare items to fanatic Drakkar players. Reportedly, he was caught as are most criminals nabbed, through sheer stupidity on his part: he was slow once in delivering the goods after having received payment, the buyer became impatient to get his copy of the source code and called the general office number to inquire when it might be forthcoming. Oops.

Considering that the employee in question came to MPG-Net from one of the other pioneering online game developers and is reputed to have brought the source code from one of their games with him (something for which I have no official confirmation), it may be that he was supplementing his income in this manner as early as the mid to late 1980s. This is now becoming an issue worldwide, as an article about NCsoft banning 200,000 accounts for such activity demonstrates.

It also goes to demonstrate that some players and developers recognized early that virtual lives have an intrinsic real-world value to the players. The concept is getting widespread notice only now due to the increased number of persistent world players and the advent of public auction sites on the Internet. There is probably a column here about the near impossibility of trying to enforce such prohibitions (hey, it didn’t work for alcohol and has pretty much backfired for illegal drugs), but I’ll save that for another time.

A creative economy is the fuel of magnificence.
Ralph Waldo Emerson (1803-1882)

We’re all familiar with such market economies, if only because most of us have direct, daily experience with buying and selling goods. Trying to implement something similar in a persistent world has never quite worked out, however. The general feeling is that there isn’t a true ‘working’ in-game economy in any of the current persistent worlds, and I suspect the developers would be the first to admit it. The reason is simple: Market economies are hard, to paraphrase Scott Jennings of Mythic Entertainment. Among the reasons they are hard to implement include:

  1. Persistent worlds are complicated buggers and tend to have bugs that allow unscrupulous players to exploit the economy and debase the currency, much like a counterfeiter can destroy a national economy by flooding the market with enough bogus dollars, marks, won, euros, what have you;

  2. Market economies are influenced by the scarcity or plentitude of goods, and that is influenced by a wide range of factors, including weather, geography, profiteering, governmental needs and influence, the inflation rate (i.e. debasing of the currency), war and so many other factors it would be tough to list them in a 2,000 word column. Just thinking about trying to code all those variables to work correctly together to make a market react properly by design can cause piteous whimpering and grey matter to start leaking out of one ear;

  3. Persistent world developers aren’t economists (nor do they pretend to be). They don’t understand market economies beyond the simple buy/sell level, don’t clearly understand the role of local and national governments in influencing a market economy and don’t know how to design and implement the tedious checks and balances that might serve to keep an in-game economy stable and useful for the players. They see the transaction portion, which is a necessary component, but there it ends.

  • This doesn’t make developer bad designers, per se; a case can be made that no one could construct a viable, transaction-based market economy in a persistent world game with today’s technology. Nor would we necessarily want to; market economies are built on scarcity and capital and game players expect a certain level of availability. As capital is used to control products and decrease scarcity in a controlled manner to create a profit, it is spent and the object of the scarcity cycle eventually becomes scarce again. This flies in the face of the need of players of persistent world games to be able to create their personal legends by having access at all times to certain commodities, such as monsters, armor, weapons, et al. The rudimentary attempts to date to create value through scarcity have also created not a little anger among players, forced to camp out for hours or days to complete a quest or acquire an item. If it is even possible for them to do; as British nobles looking for a quick profit did with traditional commons grazing and farming areas in the period from about 1500-1800, the strongest teams in games tend to wall off these places for their own use and profit-generation, either equipping their own team mates or harvesting the rare items to create an artificial scarcity, a major advantage for themselves and/or a monopoly for real-world sales.

    Market economies in persistent worlds might work well if what you were trying to do is model the real world. We’re making games, however, so we shouldn’t feel shackled to trying to perfectly recreate reality, which is where most such game economies go wrong. Or let me modify that by saying: Most designers aren’t trying to perfect recreate market economies, but they’ve had limited success at managing player expectations by relating to the subscribers just what they are trying to accomplish.

    And they may be headed down the wrong path, anyway. There is another sort of economy that is almost totally ignored in the development of online gaming. Its absence may explain why persistent world economies will be out of whack even if the economy is, technically, functioning perfectly, and why its inclusion may actually ‘fix’ persistent world economies to the point that it doesn’t matter if the market economy is whack or not.

    Quidquid luce fuit tenebris agit*: but also the other way around. What we experience in dreams, so long as we experience it frequently, is in the end just as much a part of the total economy of our soul as anything we “really” experience: because of it we are richer or poorer, are sensitive to one need more or less, and are eventually guided a little by our dream-habits in broad daylight and even in the most cheerful moments occupying our waking spirit.
    Friedrich Nietzsche (1844–1900)

    Existing side-by-side with any market economy is a process called a ‘gift exchange’ economy. Whereas a market economy focuses on the transaction, i.e. transferring goods from the seller to buyer for as much profit as can be squeezed from the mark, the gift exchange economy focuses on the contributions of the several or many for the common good of all. If a market economy is represented by “I own it, only those who pay can use it and no one can contribute to it,” the gift exchange economy is exemplified by “No one owns it, everyone can use it and anyone can contribute to it.”

    That common good may represent the prosaic, such as the aforementioned English commons land, or the unusual, such as the development of the Internet, USEnet and World Wide Web before 1993 by the contributions of many individuals with no expectation of monetary profit. The beauty of the gift exchange economy is that anyone can contribute and anyone can benefit from the results; it isn’t owned, in the normal sense of the word. Rather than diminishing supply by removing something from the economy and causing it to change hands, gift exchange contributions tend to stack up geometrically, creating more and more benefits to the community as a whole. No one really cares whether people ‘free ride’ or not; the object is to build the base of information, land, tools, whatever, which provides benefits to the common use and good. Think of it as a transaction of the collective soul, rather than a transaction of the individual wallet.

    As an example of how this might work in a persistent world, imagine that a number of citizens portion off a section of unused ‘land’ in the game, create a park and are then able to trip a flag that makes the confines of park and some portion of the surrounding area incapable of player-versus-player (PvP) combat. One or more players might donate buffed-out NPC guards to patrol the park and keep the player-killers from hanging at the edges of the PvP zone to attack those entering or leaving. Another might contribute the deed to a gazebo, and another a fountain, others might donate tables, chairs and other decorations. Some players might donate ‘sweat equity’ in the form of leveling the terrain, so fountain and gazebo can be laid down in advantageous positions, or donating time to act as supplemental guards over the area. And perhaps someone donates a metal forge, free for use by all at no cost, other than bringing in your own raw materials to be worked. The end result would be a safe harbor that any citizen could enjoy, and which would probably be used for unplanned purposes, such player weddings, picnics, meetings and other events (such ‘non-game’ events are quite popular in persistent worlds).

    Sure, there will always be people trying to take advantage of the situation. In the example used here, no doubt PK guilds and griefers would hang out just outside the guard radius and try to find ways to upset the quiet enjoyment of the commons by others. The point is that the gift exchange portion of the economy is what has been missing from persistent worlds all along and is only now starting to receive serious attention from developers. This delay has not been unreasonable, because, as mentioned before, designers and developers are not economic theorists and it would be difficult and time-consuming to code such relative values; they are not easily quantifiable. I mean, how do you quantify the beauty of a park or the satisfaction of watching a couple wed in a commons to which you contributed sweat equity by planting grass? Compared to that, market economies are so much easier to build. It was tried somewhat in Ultima Online and there are indications that Star Wars Galaxies and Ubisfot/Wolfpack’s Shadowbane will try to implement some facets of the gift exchange, though I doubt either team thinks of it as such. Such efforts are usually expressed as community building and player bonding and they do have those effects; they just aren’t the cause in the cause and effect chain.

    Still and all, this is a subject that needs more thought by development teams. Until we understand, as an industry, the ramifications of both market and gift exchange economies, it will be impossible to construct the virtual worlds that most designers are striving for and that many players long for. If the goal is to enhance player-generated content, the gift exchange economy is one key, perhaps the most important key, to making it happen.

    *What we do in dreams, we also do when we are awake.

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