Virtual Economies

Game Studies has an article by Edward Castronova on the virtual worlds that have come about in the multi-player games. From the abstract: “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.”