The 20th Anniversary of Chung-Hwa Institute of Buddhist Studies-- English VersionThe p----- I w----- to vivst is China._百度知道
The p----- I w----- to vivst is China.
提问者采纳
The place I want to visit is China。希望能帮到你. 翻译，祝更上一层楼O(∩_∩)O有不明白的请继续追问：我想游览的地方是中国答案, want 即：place
提问者评价
其他类似问题
为您推荐：
等待您来回答
下载知道APP
随时随地咨询
出门在外也不愁Edward Castronova is Associate Professor of Economics at
California State University, Fullerton, USA.
On Virtual Economies
by Edward Castronova
Currently, several million people have accounts in massively multiplayer
online games. The population of virtual worlds has grown rapidly since 1996;
significantly, each world also seems to grow its own economy, with production,
assets and trade with Earth economies. This paper explores two questions about
these developments. First, will these economies grow in importance? Second, if
they do grow, how will that affect real-world economies and governments? To shed
light on the first question, the paper presents a simple choice model of the
demand for game time. The model reveals a certain puzzle about puzzles and games:
in the demand for these kinds of interactive entertainment goods, people reveal
that they are willing to pay money to be constrained. Still, the nature of games
as a produced good suggests that technological advances, and heavy competition,
will drive the future development of virtual worlds. If virtual worlds do become
a large part of the daily life of humans, their development may have an impact on
the macroeconomies of Earth. It will also raise certain constitutional issues,
since it is not clear, today, exactly who has jurisdiction over these new
economies.
I. Introduction
At this writing, there are several million people around the world who have
access to a synthetic world. These worlds, known technically as MMORPGs
(massively multiplayer online roleplaying games), are environments that allow
people to undertake various tasks, hunting, socializing, exploring, producing and
consuming goods and generally leading a more or less full, rich and detailed
life. They have their roots in the text-based multi-user domains that date back
to Richard Bartle's MUD1, deployed in 1978. Now, as then, many players spend no
more time in virtual worlds than they do in ordinary hobbies. Many others,
however, approach virtual worlds as an alternative reality, devoting a
substantial fraction of their time to them. According to a survey in Summer 2001,
about one third of the adult players of EverQuest spent more time in a
typical week in the virtual world than in paid employment (Castronova, 2001a).
Since that time, at least 10 major new titles in development have been announced,
including several by corporate powerhouses such as Microsoft, Vivendi and Sony.
As this market expands, it seems entirely possible that living a part of one's
life in cyberspace may eventually become a common practice.
Such a development would be worth some attention, because life in cyberspace
seems to be different in important ways from life on Earth. This is especially
true of economic life. True, at first glance there are many similarities between
Earth economies and their virtual counterparts. In an earlier paper (Castronova,
2001a), I described the economy of Norrath (the virtual world of the game
EverQuest) as if it were a normal Earth economy, complete with statistics
covering such activities as production, labour supply, income, inflation, foreign
trade and currency exchange. There is evidence that the economies of these
virtual worlds generate a surprisingly high level of per capita production, and
that people who &live& there (a substantial fraction view themselves
as citizens) have accumulated significant stocks of real and financial wealth.
All of this suggests that there is something very normal and mundane about
people live there, work there, consume there and accumulate
wealth there, just as they do on Earth.
However, further thought suggests that virtual economies may be anything
but normal. As an example, consider a simple policy question: Should governments
attempt to control prices? Most economists would say &no,& since the
costs of doing so outweigh the benefits. Moreover, the costs often end up being
borne by the people the policy is supposed to help. These perverse effects happen
because any effort to control prices creates either excess supply or excess
demand, which in turn generates all kinds of social costs. Surplus goods must be
bought up and destroyed, or shortage goods must be allocated by a mechanism that
usually turns out to be both unfair and costly. But what if it cost the
government nothing to buy up a surplus of goods and destroy it? And what if the
government could simply produce whatever quantities were demanded, at no cost to
itself? If those two acts were possible, then a policy of government price
control would be feasible. In cyberspace, the coding authority does indeed have
the power to create and destroy any amount of any good, at virtually zero cost.
Therefore, as a de facto government, the coding authority can indeed control
prices. And, therefore, price controls may actually be good policy in cyberspace,
even though they most certainly are not good policy on Earth.
The preceding example suggests the possibility that virtual economies may be
very different from Earth economies, in certain well-defined ways. As economic
and social activity gradually migrates from Earth to cyberspace, these
differences may begin to have an impact on the lives of large parts of the
population. Details about the functioning of virtual economies may, in time,
become important public issues. Even today, small changes in the code of a game
can generate intense controversy among the players. If these little firestorms
are a portent of things to come, it would be useful, even now, to analyze some of
the unique features of virtual economies and ask how these features may
eventually influence economic and public policy questions.
As an initial approach to these issues, consider the following two kinds of
questions:
The future of games: Will multiplayer online games become an
important part of the social life of humans? What does the market for games
look like? What sort of market structure can we anticipate in the future?
The impact of games: How would a large emigration of work and play
time to these virtual worlds affect the economy of the real world?
This paper attempts to address these questions, beginning in Section II with a
simple rational choice model for determining the demand for game time. Given the
unique features of gaming as a consumer good, Section III assesses possible
market structures in the games market: will one game eventually dominate the
world? Section IV considers the macroeconomic implications of large-scale
expansion in the gaming phenomenon, especially for GDP and the tax base. Section
V lays out some of the policy issues that widespread gaming will raise. Section
VI concludes with a list of simple teachings in economics that are held to be
always true on Earth, but that seem to be less than entirely true, or at least
open to doubt, in virtual worlds. These topics represent avenues of future
II. An Economic Theory of Games: The Puzzle of Puzzles
To develop a theory of the games market, it might be natural to start with the
field of game theory. However, game theory, as a research program, is mostly
interested in improving methods of genera its objective is
not to analyze the markets for cultural objects identified by the word "game."
Game theory is interested in fascinating games like the Prisoner's Dilemma, but
you will not find a home version of that game in toy stores ("Now with repeated
N-player action!"). And a search of several literatures in the social sciences
suggests that neither game theorists nor anyone else has devoted much time to the
things that we call games in the real world, even ones as simple as
Absent of any specific prior theoretical treatment in economics, perhaps the
most intuitive approach might be to think of the market for games as a market for
simple, durable entertainment goods. Following the modernist way of thinking,
this would be the right choice: there is nothing in a game but entertainment,
which peop hence the demand for games is like the demand
for, say, books.
The post-modernists would counter that at the level of massively multiplayer
gaming, the metaphor of games-as-books breaks down fairly completely. Gaming
remains an entertainment good, but it immerses the player so thoroughly in the
virtual society and economy that events in the virtual world have an emotional
impact on people no different from the impact of Earth events. Events in the
virtual world can have an influence that extends well beyond the borders of the
relationships, incomes and even lives on Earth may be affected.
Thus, a post-modern way of thinking would require a theory that is unique to
games, in recognition of the importance that real-world people place on events
that happen in the game.
Economists are apparently forced to be post-modernists on this question. The
economic theory of value seems to require it. In economics, the value of objects
does not depend on their characteristics or their components, but rather on their
contribution to the well-being of the people who use them. Value is subjective,
wholly created in the minds of people. If people in free markets determine that a
shiny crystal called &diamond& is worth $100,000, economists
basically accept the reality of that valuation. If the object in question is not
a shiny crystal called &diamond& but is rather a magic sword called
&Excalibur,& that exists only in an online game, economists would
still put the value of the item at $100,000. Similarly, if people are willing to
incur large time and money costs to live in a virtual world, economists will
judge that location to be lucrative real estate, regardless of the fact that it
exists only in cyberspace. The mere fact that the goods and spaces are digital,
and are part of something that has been given the label "game," is irrelevant.
Willingness to pay, to sacrifice time and effort, is the ultimate arbiter of
significance when it comes to assessments of economic value. As avatar games consume more
human time, the assets within them will very
understanding
how these assets are produced and traded will ultimately require a unique theory
of the demand for avatar gaming.
As soon as one begins to think about an economic theory of the demand for
gaming time, however, one encounters a puzzle relating to the nature of
constraints. Put succinctly, in a normal market the demanders are willing to pay
money to have constraints removed, but in a games market they will pay money to
have constraints imposed. Think of a market for jigsaw puzzles. A puzzle with 900
billion pieces would probably not command much willingness to pay, since the
entertainment value of the game involves solving the puzzle, and that seems
impossible. The agent gains emotional well-being by choosing actions that
maximize the progress toward solving the puzzle, under the constraints imposed by
the inherent difficulty of the puzzle. A puzzle that is too hard imposes
constraints that are too
relaxing the difficulty constraint
should therefore raise utility and hence willingness to pay. However, a puzzle
that is too easy is also no fun & who would pay money for a jigsaw puzzle
with only two pieces? If the puzzle went from two pieces to, say, 100 pieces,
however, it would become more difficult but also more entertaining, and would
therefore command a greater willingness to pay. The puzzle of puzzles is that the
demand for a good can rise when a constraint becomes tighter.
The &puzzle of puzzles& arises primarily because economics is
constructed from a model of human behaviour that asserts a universal conflict
between our ends and our means. The essence of behaviour, to the economist, is a
process of choosing actions under the constraint that we cannot have everything
we want. Formally, our wants are given by a utility function, and we seek to
maximize this function subject to our constraints. If anything happens to release
the constraints, say if the price of a good falls, then our utility goes up. Most
economists would also assert that we are happier. Utility is good, constraints
are bad. If we want to make people happier, we should remove their constraints.
Hence, if we want to give people puzzles that make them happier, we should make
the puzz by this reasoning, puzzles imposing the lightest
constraints should be the most demanded in the market. This line of economic
reasoning therefore leads to a deep conflict with observed behaviour in game
players hate games that are not very challenging. It seems, then, that
an economic theory of demand for puzzles, games and other interactive
entertainment goods needs to modified in some way to allow for constraints that
can raise utility and demand.
As a start toward such a theory, it is probably reasonable to first assume
that emotional well-being is always one goal of human behaviour. People do things
that make them feel happier. Second, it is also probably safe to assume that
confronting and overcoming challenges makes people happy. Given the choice
between a puzzle that is mildly challenging (put together a 100-piece puzzle) and
one that is not (put together a two-piece puzzle), people will prefer the mildly
challenging puzzle. At the same time, most people would prefer a 100-piece puzzle
to one with 100 the function relating challenge to fun is not
monotonic. Third, if there are rewards for solving puzzles, we can assume that a
puzzle with higher rewards is preferred, holding challenge levels equal.
These assumptions can be summarized in a simple economic model. Let S measure
the emotional satisfaction a player receives from working on a puzzle, and let R
and C indicate the available reward and the challenge level, respectively. Then
we can capture the assumptions above with a simple function like this:
1) S = aR - b(C - W)2
where W represents the challenge level that is ideal for the player.
Now we can introduce the utility function as a function that indicates,
numerically, the intensity of an individual's desire to achieve some
objective.
When it comes to games and puzzles, the choice involves the amount of time spent
in one game versus another. Suppose we had games A and B, each producing
satisfaction levels SA and SB per hour of play. Let the
choosing agent have T hours to allocate between the two games. A simple utility
function that illustrates the choice problem is:
2) U(HA, HB) = SAln(HA) +
where HA and HB are hours of play in the two games. If
total time available is denoted by T, hours would be allocated by maximizing the
utility given in (2) subject to the constraint T = HA + HB.
This setup assumes that the differing rewards and challenges of the two games
produce different levels of emotional satisfaction, and that the satisfaction
effects act as weights in the motivational function. And while play time in one
game does not affect the satisfaction one receives from play time in the other,
there is nonetheless a diminishing marginal utility from gameplay: repeatedly
playing the same game gets boring. In this setup, the player allocates time
between the games in an intuitive way: she plays games with higher rewards more
she spends more time on games whose challenge level is not too high and
and she will play a game that is less inherently satisfying, at
least for a time, simply for the variety of it.
We can introduce the price of gaming as follows. Let pA and
pB be the prices of games A and B respectively, and let G represent
consumption of all goods other than gameplay. Let pG = 1. The
utility function will have G as a third argument, but if the agent has Y dollars
of income to spend on games and other goods, then we have:
3) G = Y & pAHA &
The objective function regulating hours of game time could then be expressed
4) U(HA, HB, Y & pAHA
& pBHB) = SAln(HA) +
SBln(HB) + &ln(Y & pAHA
As above, the agent would solve this problem to find the optimal levels of
HA and HB, and would allocate time accordingly. Games that
are more fun would
no one would devote all of his time to
games that are more expensive to play would be played less often.
Whether this is a particularly elegant approach to the market for games is
open to debate, of course, but it certainly is useful for exploring some of the
unusual features of that market, specifically its interaction with real world
labour markets. According to an earlier paper on EverQuest (Castronova,
2001a), many people spend more time in games like EverQuest than they do
at work. Moreover, those who devoted more time to the game seem to have somewhat
lower wage rates, but not dramatically lower. At the same time, the paper
documented the fact that people can make real money by selling the digital items
that they produce while playing, and the average wages of game players were
somewhat below average for Earth workers of similar education levels. There seems
to be a distinct emigration of work time from Earth to Norrath. This is an
important aspect of real world gaming, and it has distinct, and odd, implications
in the context of this choice model.
To explore this further, assume the choice is now to devote time to work time,
denoted by L, and time in a single game, denoted by H. In other words, now we
abandon the separation of gaming time into several games, and focus just on
gaming versus work. Let game time have a price p, and produce satisfaction S, and
let work be compensated at the wage rate w. Then:
Let non-gaming leisure time be Z, a third variable in the utility function,
6) Z = T& & H & L
Continuing with a log-linear utility function, we have:
7) U(H, wL & pH,& T & H & L) = Sln(H) + &ln(wL
& pH) + dln(T & H & L)
The agent allocates time among the game and work so as to maximize Equation
While the problem does not admit a simple solution, inspection of it reveals a
number of interesting features related to the demand for games. First, the
constraint aspect of the games, given by the challenge level C, enters the model
as a weight on the utility function. This separates it mathematically from the
constraints of time and money, which, in most utility maximization problems,
appear as constraint equations and only enter utility indirectly, as in (7).
Conceptually, this allows us to think of two kinds of constraints in the world:
the traditional constraints of economics (time and money), whose relief always
results in higher utility, and the new category of gaming constraints, whose
relief may actually reduce emotional satisfaction, and hence result in lower
utility. The &puzzle of puzzles& is resolved here by recognizing that
constraints can have a positive effect on emotional satisfaction, and therefore
states with tougher constraints may actually be more desirable. The utility
function is then designed to give higher weight to more desirable states, since
they are preferred over less desirable states. As a result, utility can be higher
when a c hence there can be a willingness to pay for tougher
constraints.
A second aspect worth mentioning is the possibility that wages have both
income and substitution effects with respect to game time. People with higher
wages tend to be richer, hence they will demand more of all normal goods,
including game time. However, highly paid people also face a higher opportunity
cost of gaming, hence they will demand less. This suggests that game demand may
be U-shaped with respect to wages.& Very well-paid people can play more
because they can afford all kinds of leisure activities. Poorly-paid people can
play more because they are not sacrificing very much income to do so. Conversely,
those with moderate wages may be very sensitive to the impact of gaming time on
their earnings and careers.
Third, note that money enters this problem in an unconventional way. As usual,
we have goods prices in the budget constraint, and wages as the price of leisure.
What is new is the possibility that money can enter the problem as a parameter of
the utility function. This happens if the rewards of playing (R), which affect
gaming satisfaction (S), happen to be partly denominated as cash. As mentioned
above, in a game like EverQuest, players can make substantial amounts of
money by farming the virtual world and selling the produce in internet truck
markets like eBay. Some of these players explicitly consider these funds as
some think of their farming as a job, as work, not play. How should
economists approach this? Perhaps it is a sub-problem, where the agent must
choose to allocate time between Earth work, virtual work and virtual play. Or,
perhaps these game earnings should be treated as a price discrimination scheme,
effectively lowering the net price of the game for the more serious players. In
that case, farm receipts should be taken out of R, and instead be subtracted from
p in the budget constraint. A third approach would be more radical: instead of
thinking of game time as partly work, perhaps we should think of work time as
just another game. Then the issue can be handled elegantly in Equation (2). Game
A happens to be the always-exciting Work Game of Earth, where you go to the
office and face the challenges, denoted by C, that are presented by your boss,
your co-workers and your competitors, and where overcoming those challenges
garners you rewards, denoted by R, in the form of wages, perks, fringe benefits
and assorted entertainments involving the office copy machine. People who get more
satisfaction from Game A will put more time into it. Nonetheless, Game A can get
boring, so even the most rabid fan of Game A will be observed putting some time
into Game B. Regardless of how it is approached, it is clear that there is a
substitution between Earth work and game time that depends, to some extent, on
the financial rewards available in each.
Thus, simple as it is, the framework developed so far throws light on the two
most critical aspects of gaming as an emerging economic phenomenon: Game time is
a substitute for other consumption goods, and it is also a substitute for work
time. The degree to which this substitution occurs depends on wages and prices
both on Earth and inside the games. It also depends on the emotional
satisfactions and general costs of game time. In the most radical approach to
game/ work substitution, the emotional satisfactions of Earth work are directly
compared to the emotional satisfactions of game time. These Earth/ game
substitutions involve real economic transfers. It has already been shown
(Castronova, 2001a) that labour devoted to games produces durable economic assets
with observable market values. The wealth stock and annual production of a game
world is already significant o they will become significant
macroeconomic aggregates if the stream of Earth to game substitution becomes
strong. And we can gauge the potential strength of substitutions into gaming by
asking how satisfying and costly game time may possibly become in the future.
III. The Market for Virtual Worlds: Technology and Market Structure
We cannot see the future, of course, but there are a number of technological
innovations that are relevant to gaming, that are also fairly easy to see coming.
Currently, access to gaming involves some sort of access to computing technology,
and access to gaming that can earn money involves access to a shared, persistent,
physical computing environment, specifically a virtual world (Castronova, 2001a).
The technology supporting virtual worlds is advancing so quickly that it would be
foolish to describe the next generation in any detail. Suffice it to say that
there are large, lucrative industries working energetically on different
dimensions of the environment that virtual worlds thrive in.
These industries produce three items of interest, namely, connections,
interface and content. Developments in connections include the internet and,
increasingly, wireless communications. Development of interfaces includes voice
command, head-up displays and body motion detection (computer-controlling gloves,
gaze readers). Developments in content include the supply side of the market for
games, where annual revenues have grown beyond Hollywood box office
All three industries are expanding at a rapid rate. Whatever emotional
experiences people seek, it may become possible, in the near future, to
effortlessly connect to a virtual world that provides that experience at fairly
low cost. Kurzweil (1999) argues that the explosion of computing power alone may
be sufficient to change the daily course of life.
Since these developments all involve networks, they may seem to suggest a
monopolistic market structure. If economic life online involves getting your
email and hanging around with friends, there will be positive externalities with
respect to the sheer size of the virtual world one visits. If I spend my time on
Rubi-Ka, while you spend your time in Albion, we cannot talk to one another, and
we cannot do things together. Thus, our time in virtual worlds is more valuable
if everyone we know is in the same world. Moreover, if two worlds compete and one
has more players than another, wouldn't everyone have an incentive to join the
larger world, so as to enjoy the larger network of society, communication and
entertainment that it affords? Might such network externalities lead to a
domination of this market by one player?
There are reasons to expect, however, that this market is not likely to be
monopolized. First, there seems to be a great diversity of tastes for the
different features of a world. Mr. Bird may want to be on Pluto, while Mr.
Castronova prefers medieval Britain. One of the major attractions of life
mediated by avatars is the anonymity it affords, and anonymity requires a person
to have exit options: other worlds to escape to if one's reputation in this one
gets unpleasant. Perhaps a savvy game developer could make a world so large and
varied as to provide the essential minimum level of entertainment and anonymity
to a sufficiently large number of people, so that membership in that one world
becomes optimal for all. This seems unlikely, however, given that there is a
marginal cost to creating and maintaining game content. Moreover, there are no economies
of scale on the supply side to match the increasing returns on the demand side
(Liebowitz and Margolis, 1994). Production of game content and its maintenance
are both labour-intensive activities. One could perhaps increase production of
content by allowing other producers (say, by opening game code to the public),
but continued control of the world being created would be problematic. On the
whole, it seems very unlikely that one developer could produce a world big enough
to monopolize the market.
A second reason involves congestion. Virtual worlds are virtual because they
are online, but they are worlds because there is some physicality to them.
Avatars take up space. If a world has a certain amount of entertaining content in
it, that content will almost always be subject to some kind of congestion effect.
The cool monsters are in the Dungeon of Befallen, but if tens of thousands of us
go there to hunt them, none of us will have a good time. Sometimes the only way
to reduce congestion is to add content, but this, again, is labour intensive.
There will also be congestion effects related to connection speeds and
bandwidth.
A third reason that the market will probably not be dominated by a few
companies can be found in the many competitive strategies that are available even
now, but have not yet been exploited by new entrants. For example, the current
set of developers have managed to impose huge switching costs on players by
structuring gameplay around the time-intensive development of avatar capital. A
player starts the game with a weak avatar, but gameplay gives the avatar
ever-increasing powers. As power increases, the avatar is able to take more
advantage of the game world, to travel farther, do more things, see more people.
A person with a high-level avatar then faces a high hurdle in switching games,
because in the new game he will start out poor, defenceless and alone again. This
situation definitely locks in the game's player base, but it is also open to
defeat by any number of schemes to reduce the switching costs. Surprisingly, no
competitor to a current game has offered new players the opportunity to start
their avatars at a higher level of wealth and ability if they can provide
evidence of a high level avatar in another game. On the other hand, two games
(Ultima Online and Dark Ages of Camelot) now offer methods to effectively start
out ahead: in Ultima, you can dire in Camelot, you can start
a new avatar at level 20 if you have already gotten one to level 50. These
strategies help companies discourage the buying and selling of avatars outside
the game, perhaps at a cost to the atmosphere within the world. In sum, what
appear to be strong lock-ins and switching costs in the game market today may not
be as when savvy competitors appear, the player bases will
generally be at risk.
A final argument against a monopolization tendency comes from the nature of
the content itself. Games are art, for the most part, and markets for artistic
output exhibit a great deal of churn due to herding effects and the star
phenomenon (MacDonald, 1988). If a company designs a better game, it will attract
players. And while it is true that development costs can be significant, it will
always be possible to produce a fun virtual world for a tiny amount of money and
then scale it up as it becomes more popular.
Whatever network externalities, supply-side returns to scale, and barriers to
entry may exist in the market for virtual worlds, they seem insufficient to
produce domination by a single company. The distribution of populations in
virtual worlds is perhaps less like a natural monopoly market than a club goods
market. Populations will sort according to the services, ambience, and fees of
the various worlds. Virtual worlds will compete, as clubs do, but their size will
be limited by congestion effects and by the marginal cost of increasing the scale
of the world.
This analysis allows a tentative answer to the first question of the study: in
the medium-term future, the online multiplayer gaming market will probably
consist of a number of large, densely populated worlds, with varying degrees of
portability between them. The worlds will generate large revenue streams and will
occupy many hours of human time, some of it considered play, some of it
considered work. The hours that people devote to games will result in the
accumulation of stocks of digital capital goods. These objects will have
considerable economic value. Given the expected growth in connectivity, interface
technologies and content, there is reason to believe that this digital capital
stock may eventually become quite large.
These considerations then lead to the next set of questions: If virtual worlds
do become more important, how will this affect the real Earth economy?
IV. A Macroeconomic Impact of Virtual Economies?
If virtual worlds do, in fact, grow as a human phenomenon, there may be some
implications for Earth economies. It is important to recognize from the start
that the mere fact that Earth economies may suffer as people spend more time in
cyberspace, does not imply that humanity is worse off. The fact that labour hours
that were once producing automobiles are now producing avatars does not mean
anything about the level of wealth in society. The basket of produced goods is
simply changing. A proper accounting would show, in fact, that the actual
production of well-being per capita is rising.
The difficulty is that current national income and product accounts do not
place any value on online assets. Nor do they seem likely to do so anytime soon.
Concepts like the GDP are nation-based, but to what Earth nation do assets in
virtual worlds belong? The answer is none, at the moment anyway. As a result, a
migration of value creation from Earth economies to virtual economies would
appear as a decline in standard measures of economic activity, such as the GDP.
Earth economies would seem to be in recessions or depressions.
A second impact involves the demographic structure of the transition. If
devotion of time to virtual economies has a U-shaped relationship to the wage, we
might predict that migration to virtual worlds would proceed much like the usual
Earth migrations. The vast majority of &migr&s from Earth would be
those whose wages on Earth are low relative to their wages in cyberspace. And
then there would be a substantial number of very well-paid people for whom
interworld travel is relatively costless. Together, both groups might represent a
significant brain drain from the Earth economy, the former group because tech
savvy is probably going to receive a higher return in cyberspace than on Earth,
the latter because the well-paid may find virtual worlds generally more
entertaining than Earth. On the other hand, the opening of a cyberian frontier,
like other frontiers, will have a very refreshing leveling effect: those whose
Earth shapes expose them to brutality, stigma and insufferable limitations will
find freedom and relief when they live through less stigmatized virtual
A final impact worth noting involves the fiscal health of Earth governments.
If economic activity migrates into virtual economies, where there are no Earth
jurisdictions, there will be a net loss of taxable assets and incomes in Earth
economies. At the same time, there may be substantial reductions in demand for
Earth government services (e.g. roads). There may be long periods of time in
which the tax base is eroding more rapidly than service demands, and there may be
severe inequalities across jurisdictions in these rates as well.
Taking these fiscal policy effects together with the possible labour supply
and GDP shocks, it would seem that a large migration to the cyberian frontier
could conceivably impose serious stress on Earth political systems. Whether or
not these shocks and stresses actually appear depends on the degree to which the
connection, interface and content industries succeed in their efforts to produce
immersive gaming experiences on a massive scale.
Of course it is not possible to see specific aspects of the future with much
accuracy. What seems most likely, on a broader level, is that a large migration
of economic activity into cyberspace would have to have some impact on the way
that one conceives of the macroeconomy. New statistics and economic management
policies may have to be developed. However, if the emergence of virtual worlds
does eventually require some governmental reaction, it is still not clear which
Earth governments should be involved. Virtual worlds seem to exist as separate
political entities at the moment, and this raises new constitutional issues.
V. Constitution and Governance
Indeed, the most salient current policy issues both within and outside of
games involve issues of governance. In the United States, there have been
judicial rulings indicating that Earth courts have no jurisdiction over events
that occur online (Kaplan, 2001). An argument (recently successful in court) has
been made that video games are speech, and are therefore entitled to
constitutional protections that would make game companies the de facto legitimate
governments of their game worlds (Au, 2002). However, players in these games are
citizens of Earth countries and their incomes from game activities are certainly
subject to tax. Legal scholars have long recognized the formation of law within
virtual worlds (Mnookin, 2001; Dibbell, 1999). Now they have begun to address
broader issues involving the intersection of virtual world activities and Earth
law (Lastowka and Hunter, 2004). As the value of virtual world assets and trade
rises, economic agents will have ever greater incentives to seek the usual
protections, damages, and claims from some higher authority. Moreover, the real
emotional investment of people in their online lives will almost certainly lead
them to seek out a forum where their grievances may be aired and then acted upon
with force (Becker, 2002). Only time will tell who the governing authority will
ultimately be.
Earth courts may eventually be the final authority, and Earth governments may
be another. But at the moment, the game owners are effectively filling this role,
with interesting implications. Their power derives from the fact that every
player who logs on to a game accepts an End User Licensing Agreement (EULA) that
strongly limits their rights to affect events in the game world. Under Sony's
EverQuest EULA, every click and motion in the game is defined as
&uploaded content,& to which the player waives any and all rights of
control. A player could therefore develop in-game assets worth hundreds of
thousands of dollars, have those assets wiped out by a coding error and have no
recourse for damages. To handle such issues, the game companies put significant
resources into their customer service operations. Mythic Entertainment (developer
of Dark Age of Camelot) formally appointed a "player representative" to act as a
customer service spokesperson. She expressed the state of affairs clearly in a
discussion board post:
"Any one issue might have several viewpoints, all of which are probably
represented within the company itself. I can understand the frustration that
people feel when they don't hear anything about their pet issue (because I feel
it myself), but the fact is it doesn't get discussed publicly until a decision
has been made. Games are not democracies. SOMEONE has to drive, and as I've said
on several boards, I as the player representative do not drive the Good Ship
Mythic, I am merely the most annoying backseat driver ever. The only 'votes' are
called dollars. If you aren't having fun, you shouldn't be playing." (Sanya
Thomas at player2player.net/forums/ on June 6, 2002.)
Evidently, game owners are dictators whose benevolence depends only on the
constraint that they must remain profitable.
This power structure has predictable effects. In every game currently on the
market, the owners consider it their right to introduce changes to game mechanics
at any time, without prior consultation with the players. As a result, avatars
can have their real market value destroyed overnight, without warning. The only
option for players is to complain loudly at various fansite discussion boards,
and the players make use of this privilege zealously. A typical board (e.g.
) is flooded every day with arguments, suggestions and pleas, of a
breathtakingly varying quality, about every aspect of the game. Any change to the
game is immediately met with howls of protest fro those who
gain, typically, say nothing because they are in the game, enjoying their new
benefits. Game owners occasionally seem to pay attention to these forums, which
must represent only the tip of the iceberg of player input in the form of emails
and other communications. The net result is that the political structure of every
virtual world consists of a group of all-powerful executives surrounded by mobs
of angry, harassing supplicants.
As an example of ongoing governance problems, consider foreign trade policy,
currently one of the most pressing issues facing this polity. &Foreign
trade& refers to the common practice of selling in-game items for real
money in out-of-game markets such as eBay. This trade is simple to conduct and
hard to detect.
It also puts game owners in a quandary. On the one hand, all transactions like
this improve the well-being of both parties, and therefore make their enjoyment
of the game greater. They are happier customers. On the other hand, widespread
foreign trade can ruin the ambience of the game world. Most games seek to give
the player a rags-to-riches experience, but the satisfaction of that experience
can be significantly lessened if one observes that other players, who ought to be
poor like oneself, are instead very well arrayed in expensive equipment that they
bought for hundreds of dollars outside the game. Foreign trade therefore erodes
the equality of opportunity of gameplay, and damages the entire gaming
the situation is a commons tragedy, where the self-interested
trading behaviour of individuals destroys the game's atmosphere, to the detriment
of all. Whether or not to allow foreign trade therefore involves deep questions
about the purpose of the game, the desired atmosphere and the interests (economic
and emotional) of all the players.
The game companies have taken varying stances, from formally outlawing the
practice, with and without serious enforcement efforts, to complete laissez
faire, and policy pronouncements in this arena have had dramatic effects on the
value of assets and the quality of the gaming atmosphere. One company's efforts
to control foreign trade did produce a wonderful gaming atmosphere, but resulted
in a formal court action by market-oriented players (Becker, 2002). Without
taking a position on this and other cases, one thing is clear: foreign trade
policy has certainly been imposed on the people rather than with
the people.
To anyone versed in political history, it should be no surprise that the game
companies have made themselves vulnerable by approaching these matters as
customer service issues rather than governance. In their own minds, the players
are not customers, but citizens, with corresponding rights. Users of early
text-based worlds certainly conceived of themselves in this way (Mnookin, 2001;
Dibbell, 1999). Indeed, "A Declaration of the Rights of Avatars" has already been
proclaimed (see Raph Koster's work at www.legendmud.org/raph/gaming/index.html).
Little wonder, then, that player-company relations tend to be very tense, even in
the best games. There seems to be some possibility that game company autarchs may
follow Frederick the Great into the dustbin of history. The customer service
state, like all benevolent despotisms, suffers from illegitimacy.
On the other hand, unlike Frederick the Great, a game company must make
decisions that meet the profit test. And while the players may be powerless
within the game, they are not serfs. They have both voice and exit as options for
resistance. Thus, survival in the competitive world of gaming requires that a
company remain popular with its gamers. The net results of this jurisdictional
competition are very hard to predict. It seems most likely that populations will
sort according to tastes, with those who desire some voice in their affairs
seeking more democratic forms of game governance. Those who want a non-market,
equality-of-opportunity game world will be a those who wish
to buy and sell their way to the top will find an arena that suits those tastes.
Overall, however, it seems likely that constitutional issues will be important
for some time.
VI. Conclusion: On the Uniqueness of Virtual Economies
This paper has attempted to describe some of the unique features of economies
in virtual worlds. Living in these worlds involves a leap into a fantasy
existence, something that humans have apparently been trying to do since the dawn
of civilization. The demand for game time can be expressed in a simple economic
model, and it seems to have increased as the immersive satisfaction available
from gaming technology has increased. If this pattern continues, the advances of
the information age could make gaming a significant aspect of the lives of
millions of people. That scenario may have macroeconomic implications, as well as
some effects on government policy.
A common theme throughout the paper is that the analysis of virtual economies
will require slightly different tools and approaches than we are used to. The
differences are dictated by the specific features of life in cyberspace. In
virtual worlds, the entire physical universe is open to direct and costless
manipulation by the owners of the game. The human beings behind the avatars are
real, and physical, and subject to the laws of Earth, but the avatars themselves
do not inherently face any physical constraints at all. The discovery and
description of avatar-mediated economic life represent the most important current
research avenues in the economics of games.
Indeed, further thinking about some of the topics in the preceding sections
reveals a number of areas in which the behaviours and outcomes that we generally
take to be standard in Earth economics do not seem to hold in avatar economies.
Some examples:
Economics, on Earth, argues that no wise government will try to control
prices. In an avatar economy, however, the government can effortlessly peg many
prices at any value. Since the goods are digital, they can be costlessly
created and destroyed. Hence price ceilings create no excess demand, and price
floors no excess supply. It may make sense to control some prices.
Economics, on Earth, assumes that work causes disutility. In an avatar
economy, however, it is lack of work that causes disutility. Regardless of
earnings and loot rates, people who play games must have something to do or
they will be bored. If a game structure limits their ability to be meaningfully
engaged in some mission, quest, or activity, they will be unhappy. Work is
Economics, on Earth, believes that economic growth is always good. In an
avatar economy, however, increases in per-capita wealth & which make it
easier to accomplish various quests and missions & will lower the
challenge level of the game, potentially making it a less interesting puzzle.
Growth can be bad.
Economics, on Earth, takes the population of humans as fixed, and also
assumes that their tastes and initial abilities are fixed. In an avatar
economy, however, people are free to choose a significant subset of their
abilities. They also can choose when to be alive and when not to be, as well as
how many different people to be. The choosing economic agent can be a fairly
complex entity.
These examples present a number of puzzles for economic research. It should be
possible to generate fairly simple theories and arguments explaining why things
do seem somewhat different in virtual economies than they do in the Earth
economy. As those arguments are made, we will learn more about the things that
are the same in all economies, both virtual and Earthly: the true nature of human
motivation and well-being, and their true relationship to objects in the
immediate physical world.
people to compare and contrast virtual and real economies include John Beezer and
Zachary Booth Simpson, both of whom have unpublished analyses of game economies
on the internet. Richard Bartle's vast experience with game economies is now
available in his textbook (Bartle, 2003), which is strongly recommended for
anyone thinking about actually building one of these places.
2002, I searched the Econlit database (which covers for articles in economics,
political science, public policy and elsewhere) for the following terms:
checkers, chess, go ( &go& in keywords brings too many
hits), landlord's game/darrow (&monopoly& returns too many hits),
jeopardy, let's make a deal, backgammon, cribbage, tetris, contract bridge
(&bridge& returns too many hits), yahtzee, tomb raider, sim city,
euchre, pac-man, trivial pursuit, myst, craps, poker, blackjack, slots/slot
machines and horse racing. The results: zero hits for all games except: chess
(2), jeopardy (1), let's make a deal (1), contract bridge (1), poker (2), slots
(2) and horse racing (14). The seminal work on chess (Simon and Schaeffer, 1992)
argues persuasively that games as complex as chess are not usefully studied from
a von Neumman - Morgenstern game theory perspective: there are so many nodes in
the tree that it is impossible to make an exhaustive assessment of the terminal
value of any given move. A massively multiplayer online roleplaying game like
EverQuest is infinitely mor it is not even clear what
&victory& means. Beyond Simon and Schaeffer (1992), few of the other
papers address games qua games. The game-show papers are fairly
tongue-in-cheek analyses of the incentives posed by certain aspects of these
games (Metrick, 1995; Page, 1998). The bridge and poker papers are in the vein of
&Here is a phenomenon that is a lot like bridge/poker,& not really
analyses of the games as actually played (Shubik, 1999; Nash and Shapley, 1997;
Engwall, 1994; Mazalov, Panova, and Piskuric 1999). The slots papers are about
gambling revenues (Nichols, 1998). Only the horse racing papers amount to a
legitimate literature on the game in question, as actually played in real life.
Yet horse racing is actually a spectator sport, a subject for which we do have a
well-developed literature and journals (for example, the Journal of Sports
Economics). On the whole, then, it is safe to say that social scientists
simply have never explored the games that people really play. (There does seem to
be a fairly large literature in the AI community.) The oversight is especially
glaring in the case of games like SimCity and its spin-offs. I suspect
that many of my colleagues in the social sciences have played SimCity,
enjoying the job of Big City Mayor for an evening. Like them, it never occurred
to me to ask whether the fact that millions of other people also seemed to like
roleplaying this job was worthy of further investigation. Nor did it occur to me
that this behaviour, in itself, might reveal something fundamental about the
economic and social behaviour of people. The opportunity to make these
investigations is only growing, those mobs of pseudo-mayors will soon
become part of actual virtual cities in the Sims Online.
Police and
courts in Korea now regularly get involved in cases of theft of virtual world
items. In the United States a mock trial held before US Circuit Court Judge
Philip M. Pro on July 30, 2003 (of counsel: Richard Salgado, Department of
Justice and Jennifer Granick, Stanford Law) determined that the loss of US$5,000
in digital game items would constitute a real loss, sufficient to trigger a
potential felony prosecution under US Code Title 18, Section 1030.
utility function enumerates the motivational strength of a person's goals, but it
does nothing more than that. It is a numerical guide to what people will do. It
is not a numerical guide to what makes them feel good. And while it makes
sense to assume (as I do here) that the things that make people feel good will
also be the things that people pursue, the converse does not necessarily hold.
People may well pursue things that do not make them feel good. Certainly, anyone
who works in the therapeutic industries can confirm that many people devote
significant amounts of energy to behaviours that they quite consciously know will
not make them happy. In theoretical terms, this idea can be captured if we let S
be a satisfaction ordering, such that among two states x and y, xSy implies x
makes me happier than y. Let U be a motivational ordering, such that xUy implies
that I am willing to pay more to obtain state x than state y. Then I think it is
reasonable to assume that xSy implies xUy. However, it is not reasonable to
assume that xUy implies xSy. Obsession with work and money is a well-known
counterexample in economics (Easterlin, 2001). In another paper (Castronova,
2001b), I argue that there is nothing in cultural or biological evolution that
guarantees that the motivational orderings of human beings must also be their
satisfaction orderings. On the contrary, the process of economic development
introduces a systematic bias that points our motivational orderings away
from our satisfaction orderings.
implication of this framework that is worth exploring: a competitive market in
games will generally not produce games with the ideal challenge level for a given
player. Game content is costly to produce, and maintaining both rewards (R) and
the challenge level (C) can only be done at some marginal cost. As long as the
marginal cost of challenge is positive, competitive game companies will introduce
challenge to the extent that its marginal cost of production equals its marginal
revenue to the company. Profit-maximization entails equating marginal revenues to
marginal costs, so, if the marginal cost of challenge is positive, profit-seeking
will force game companies to choose a challenge level where marginal revenues are
also positive. At this optimum point, the marginal contribution of challenge to
emotional satisfaction must also be positive. And this will only happen at values
of C that are below W. Thus, in competitive markets for puzzles, all puzzles will
be at least a little bit too easy.
Pricing in
MMORPGs is primarily a flat-rate monthly fee for game access. Therefore, in the
model, I ignore the one-time cost of buying the game software and concentrate
instead on the idea that gaming must be purchased in units of time.
One way of
judging whether the Work Game of Earth is entertaining is by counting how many
people play it. By that standard, it seems to be a very entertaining game.
Indeed, it seems to be especially fun for people in richer cultures. Cause and
effect are hard to sort out in this case, however.
the Turing Test will first be passed in a game. Content developers have been
focusing especially hard on the artificial intelligence of software agents, with
some success (Johnson, 2002). University of Michigan computer scientist John
Laird has argued that games represent the forefront of AI research.
2002 Electronic Entertainment Expo, developers at a workshop on virtual worlds
repeatedly insisted that the ongoing customer support costs required to keep the
world in existence equalled or surpassed the entire development cost.
is the strategy of Project Entropia (Mindark) and Neverwinter Nights
(Bioware).
developers at E3, mentioned above, also asserted that no virtual world could be
developed for less than US$15 million. Nonetheless, Mythic Entertainment
developed the successful world of Dark Age of Camelot for only US$2.5
million. It is no coincidence that the workshop speakers were representatives
from the very large players in this market (Sony, Universal/ Vivendi, Microsoft),
who of course had every incentive to quash expectations of success among the many
tiny competitors in the audience.
References
Au, Wagner James (2002), "Playing Games With Free Speech," Technology and
Business, , May 6.
Bartle, Richard. Designing Virtual Worlds. Indianapolis: New Riders,
Becker, David (2002), "Game Exchange Suit Goes to Court," ,
February 7.
Borges, Jorge Luis (1962), "The Lottery in Babylon," translated by John M.
Fein, in Borges, Labyrinths: Selected Stories and Other Writings, New
York: New Directions Publishing.
Castronova, Edward (2001a), "Virtual Worlds: A First-Hand Account of Market
and Society on the Cyberian Frontier," CESifo Working Paper No. 618,
_______ (2001b), "Achievement Bias in the Evolution of Preferences," Gruter
Institute Working Papers on Law, Economics, and Evolutionary Biology, Volume
Dibbell, Julian. My Tiny Life: Crime and Passion in a Virtual World.
New York: Henry Holt, 1999.
Easterlin, Richard A. (2001), "Income and Happiness: Towards a Unified
Theory," Economic Journal, 111, 465-484.
Eco, Umberto (1989), Foucault's Pendulum, translated by William Weaver,
New York: Harcourt Brace Jovanovich.
Engwall, Lars (1994), "Bridge, Poker, and Banking," in Donald E. Fair and
Robert Raymond, eds., The Competitiveness of Financial Institutions and
Centres in Europe, Dordrecht: Kluwer Academic Publishers, 227-39.
Johnson, Steven (2002), "Wild Things," Wired, March.
Kaplan, Carl S. (2001), "Florida Community Can't Shut Down 'Voyeur Dorm,'"
New York Times, October 5.
Kurzweil, Ray (1999), The Age of Spiritual Machines, New York:
Penguin Books.
Lastowka, F. Greg and Dan Hunter (2004), "The Laws of Virtual Worlds,"
forthcoming in California Law Review.
Liebowitz, S.J. and Stephen Margolis (1994), "Network Externality: An Uncommon
Tragedy," Journal of Economic Perspectives 8(2), 133-150.
MacDonald, Glenn M. (1988), "The Economics of Rising Stars," American
Economic Review, 78(1), 155-66.
Metrick, Andrew (1995), "A Natural Experiment in 'Jeopardy!" American
Economic Review, 85(1), 240-53.
Mazalov, Vladimir V., Svetlana V. Panova, and Mojca Piskuric (1999),
"Two-Person Bilateral Many-Rounds Poker," Mathematical Methods of Operations
Research 49(2), 267-82.
Mnookin, Jennifer L. "Virtual(ly) Law: The Emergence of Law in an On-Line
Community." In Peter Ludlow (ed.) Crypto Anarchy, Cyberstates, and Pirate
Utopias. Cambridge: MIT Press, 2.
Nash, John F. and Shapley, L. S. (1997), "A Simple Three-Person Poker Game,"
in Mary Ann Dimand and Robert W. Dimand, eds., The Foundations of Game Theory,
Volume II, Cheltenham: Elgar Reference Collection, 13-24.
Nichols, Mark W. (1998), "The Impact of Deregulation on Casino Win in Atlantic
City," Review of Industrial Organization, 13(6), 713-26.
Page, Scott E. (1998), "Let's Make A Deal," Economics Letters 61(2),
Shubik, Martin (1999), "The 'Bridge Game' Economy: An Example of
Indivisibilities," in Martin Shubik, ed., The Selected Essays of Martin
Shubik, Cheltenham: Elgar, 184-187.
Simon, Herbert A., and Jonathan Schaeffer (1992), "The Game of Chess," in
Robert J. Aumann and Sergiu Hart, eds., Handbook of Game Theory With Economic
Applications, Amsterdam: Elsevier, 1-17.
& 2001 - 2004 Game Studies
Copyright for articles published in this journal is retained by the journal, except for the right to republish in printed paper publications, which belongs to the authors, but with first publication rights granted to the journal. By virtue of their appearance in this open access journal, articles are free to use, with proper attribution, in educational and other non-commercial settings.