Eyjolfur Gudmundsson is a very unlikely central banker. While he spends his days thinking about inflation and monetary growth, his jurisdiction exits only in the virtual world of EVE Online, a massively multiplayer online (MMO) game set against a science fiction universe. Gudmundsson is the Chief Economist for the Iceland developed game in which around 200,000 players take part in an intergalactic military and capitalistic tug of war.
Online gaming has already taken the world by storm. With players for a game like World of Warcraft at around 11.1 million (and growing!) it sure has a knack for taking away hours off a gamer’s life! Now a unique if not uber-capitalistic phenomenon of virtual economies has evolved. As developers introduced trading of in-game goods amongst members, they need standardized data about the economy helping them track prices and make investment decisions. Traditional economic theories are being tested in this player controlled game world. As in EVE’s example, the economist watches complex mathematical simulations of price bubbles, designing “sinks” that can soak up excess money when there is a glut.
Researchers have tracked games like EverQuest II, another MMO, to test hypothesis regarding the choices that societies and individuals make. After studying more than 300 million ‘transactions’ in one of the fantasy worlds in the game, researchers were able to calculate the GDP of one of the game servers which hosted it. As more people flocked to that world, spending in-game money on new items, inflation spiked to more than 50 percent in just five months! This kind of volatility is seen either during times of war or in developing economies.
There is a strong case however, to ‘save capitalism from online capitalists’. There have been instances of frauds committed online that are no less ingenious that any Ponzi scheme.
In EVE Online, a player pulled off a massive multi billion ISK (the in-game currency) IPO scam that promised to reward backers with high returns and expensive ships before the player left the game. The player took advantage of his visibility, perceived worth, and so-far spotless reputation to raise 50 billion ISK, promising 200 percent returns. He then privately contacted many players online to fund a ‘shortage’ in the offering. These along with oversubscriptions, netted the player around 374 billion ISK (worth US $15,000 in real world money according to the unofficial exchange rate).
This however pales in comparison to another event in the game’s online history, wherein the player-run EVE Intergalactic Bank embezzled around 790 billion ISK, worth US $170,000. Since this happened two years before the IPO scam, the inflation was 221% a year. Not only have you needed an economist, but a regulator as well!
To have a sense of scale, in a more recent example, the rights to an entire space station were sold off for US $330,000, setting a record for the most expensive (if not for the most ludicrous spending) on a virtual world object. The acquirer has justified his purchase by ascertaining value of its mining leases, real estate, space craft docking charges, and the most imperialistic charge of all, taxes. Previous comparable transactions have given credence to any potential gains if not revenue earning capability from the rights of such ‘virtual investments’ itself.
In-game capitalism may yet be a microcosm of the way economies behave in the real world, with all the scams and financial skullduggery. However, there is something good to come off it too. Consider the instance of the ever popular Facebook app, Farmville. The game recently raised around US $ 1 million for school children in Haiti by simply selling large quantities of a virtual good within the game: Sweet Seeds. This in-game philanthropy sure has won many hearts but remains to be seen to what direction this phenomenon takes us.
Till then, investment banks better start scouring the gaming worlds for business as there is surely an intergalactic corporation merger waiting to be sealed.
