Virtual Economy Weirdness

23:52 Mon 18 Jun 2007. Updated: 00:39 20 Jun 2007
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Yesterday’s New York Times Magazine has a good article on what being a gold farmer in World of Warcraft is like. I read the author(Julian Dibbell)’s book on the topic of MMORPG economies, Play Money, last year and liked it. Reading the book, or the article, or Edward Castronova’s piece on Everquest currency years ago, all bring forth a similar feeling: disjointed vertigo.

How can these game worlds be worth so much money? How can the game currencies be traded in ways that make them seem stronger than the currencies of numerous real-world countries? How is it that the act of playing a game “creates” this considerable wealth—wealth that can then be harvested by those less interested in play and more in money?

This was probably the most dizzying moment in the article, in a segment about a Chinese gold farmer called Fan:

Fan himself is a striking case of how off-hours play can serve as a kind of unpaid R. and D. lab for the farming industry. He is that rarest of World of Warcraft obsessives, a Chinese gold farmer who has actually bought farmed gold. (“Sure, I bought 10,000 once,” he said, “I don’t have time to farm all that!”)
—Julian Dibbell, “The Life of the Chinese Gold Farmer”, New York Times Magazine, 17 June 2007

Is that insanity, with even those engaged in exploiting the market for gold becoming consumers, or is that perfectly rational consumer behavior, exactly the same rational behavior that pushes players to hire out the search for game wealth rather than spending their own time on that quest?

According to the article, about 100,000 Chinese workers are employed in the gold farming field. That’s not exactly a huge proportion of the Chinese economy, but it is rather a lot of people. Is this whole affair a sign of capitalism spinning itself off into spirals of increasing abstraction, of its disconnection from actual production? Or is that unfair, since gold is being produced, not real gold in our shared universe but a resource nonetheless that wouldn’t have existed otherwise?

It seems a little less insane if we simply consider the “game worlds” involved as equivalents of other areas of speculation/collection. If MMORPG items are like e.g. baseball cards, then this kind of activity has been consuming larger and larger chunks of the world’s economy for years. Especially in the United States, where collectibles are ubiquitous. It’s much harder to measure the collectibles market, and it’s not sectioned off from the rest of the economy by the necessity of virtual-to-real money exchange. But there’s a lot of it out there, and I wouldn’t be surprised if it dwarfed the purchase of in-game goods. Given the fact that almost all values on everything in the market are assigned arbitrarily, it shouldn’t be a surprise that markets can produce results that seem rather odd if one attempts to measure “intrinsic” rather than speculative value. (Tulips!) Of course, that’s the whole point of capitalism: there is no instrinsic value, just a price that the market sets.

In any case, if virtual game goods are considered similarly to collectibles, then the amount of money involved, and the sense of oddness, recedes somewhat. It’s just another segment of the economy spending hard-earned cash on things that make no sense to the majority of the population, and that’s commonplace these days.

But is it that same? The intangibility of the goods isn’t necessarily enough to say otherwise (Dibbell makes an excellent point in Play Money about how access to events is also “intangible”, and tickets get around this only as far as a fancy real-world certificate for a certain amount of World of Warcraft cash (that would be accepted by some authority) gets around the intangibility of the World of Wacraft currency.

Perhaps one of the odd aspects is that this is largely a question of collectibles that are sold by third parties, while the “manufacturer” doesn’t directly sell any of the items. Another oddity is that because all of these things are digital, any scarcity is by definition artificial. The cost to create another copy of anything (including gold) is zero for the game administrators. That cost rises when playes have to do it in-game, so we end up with the manufacturer refusing to create at zero cost that which others can sell after spending resources to create it.

But how strange is that really, once we’ve accepted the idea of money, and particularly the idea of money not actually backed by anything specific?

4 Responses to “Virtual Economy Weirdness”

  1. Lev Says:

    Since 1972 our own US dollar hasn’t been backed by anything other than collective faith of its users in its continuing value. The representation of value as WoW Gold, MtGO Tix or other forms of Space Bucks is no more or less arbitrary than our slavish devotion to number$ on a $creen, and substantially more practical than carrying around printed notes, metal disks or tulips. What I find absurd about the gold farmer story is the vast disparity of economic development that makes it necessary for these intelligent, hard-working young men to toil in order to marginally increase our level of entertainment.

  2. Tadhg Says:

    Lev: yes, I’m not convinced that WoW gold is more like “funny money” than US Dollars, or at least that its funniness factor is significantly higher. It’ll probably crash sooner than the Dollar, but that just makes it another speculative vehicle. Part of the point I’m getting at is that capitalism allows for some rather odd avenues for speculation.

    As for the disparity of economic development, why does that stand out more here than in the case of the probably equally hard-working and intelligent young people who e.g. manufacture the WoW CDs themselves? Or any number of others who toil to provide many other items that only marginally increase our level of entertainment? It seems that at least one of the reasons it’s more noticeable here is because they’re toiling inside something that’s supposed to be game, a leisure activity, on top of its being a virtual world, and so the whole edifice seems to take on Escher-like aspects (as with the gold farmer purchasing gold himself).

  3. JC Says:

    In the world of collectibles, digital or otherwise, there is no such thing as intrinsic value as it is essentially zero in most cases. As to the speculative value, it is no more arbitrary to what you’re willing to pay for bottled water (or Vitamin water in your case). Free market forces does a fairly good job at regulating the prices of virtual goods. What would the value of a MTGO Orim’s Chant if a trading function was never implemented?

    I’ll admit there are some other forces at work as well. How else could you explain the prices of MTGO Snow-Covered lands when dealers are sitting on stock of thousands that they can’t move? There are other economic impacts unique to the virtual goods world that are worth examining. I would be interested in finding out what happened to, say WoW items, after the eBay ban.

  4. Tadhg Says:

    JC: Well, on what basis do we decide that free market forces do a fairly good job of regulating the prices of virtual goods—or of any goods, for that matter? They might most of the time, but clearly speculative bubbles appear with alarming regularity, and both for goods with apparent intrinsic value and those without.

    I’d also be interested in those WoW item prices, before and after attempts by Blizzard to regulate the market.

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