Virtual Economies Are Not So Dissimilar to Their Real-World Counterparts
Virtual or real, capital is king in a capitalist society. It is no surprise, then, that all around us we see a variety of competing currencies. But beyond the dollars, pounds, yuan and Euros of the world, there are countless virtual currencies which many of us use every day. The largest and most interesting examples of these currencies come from MMOs which form living, breathing economies not so dissimilar from those we are used to in the real world. Let’s take a dive into the world of virtual economies.
Defining Virtual Economies
Before looking to some examples, we need a definition. For the purpose of this article, we’ll define a virtual economy as an emergent economy existing in a virtual world, which relies on the exchange of virtual goods and currency.
In such a way, true virtual economies can be seen to have five factors which can also be found in real-world economies.
- Rivalry: Resources are limited to one (or few) persons per item.
- Persistence: The economy persists across and between user sessions.
- Interconnectivity: Resources are affected by other users.
- Secondary Markets: Virtual resources can be created, traded, bought and sold.
- Value added by users: The economy is enhanced by users customizing or changing the value of resources.
By considering these five factors it’s easy to see how virtual economies directly reflect their real-world counterparts.
While the majority of these currencies merely facilitate fun, and furthering one’s experience within a game by buying new gear, upgrades or cosmetic items, some players do utilise these currencies for “real” economic benefits. To do so players can be found to sell goods or items in the game for real world currency.
Overlapping Real and Virtual Economies
Back in 2001, Edward Castronova published a landmark paper which went on to being the most downloaded paper in the history of the Social Science Research Network. He claimed that the humble world of Norrath—at the time housing less than a million inhabitants—had a currency stronger than the Japanese Yen.
This world of Norrath is the stage for the legendary MMO EverQuest, released in 1999.
Castronova’s analysis of EverQuest’s economy found that the game’s platinum piece was valued at around US$0.01072—around 1 cent. At first glance, this may seem pretty insignificant, but after calculating the total value of currency and in-game items accumulated by players every hour, Castronova concluded that players were earning the equivalent of $3.42 per hour. To adjust that for inflation, that’s around $5 per hour.
In 2001 the game already had an avid fanbase of players who would certainly be willing to sink hours into the game. Castronova stated that some users spent upwards of 80 hours per week in the game. Calculating a weekly wage from this lands us at $273.60 which, when converted into an annual salary is $1200—pushing our theoretical earner over the official US poverty line.
Of course, considering it’s 80 hours a week, such a wage would be unlikely. However, conceiving that it would be possible for an individual to earn so much by simply playing a game was Castronova’s revelation.
Taking EverQuest as a whole, Castronova also calculated the game’s gross national product—it’s entire value—placing it at around $135 million. Not only that, but when divided equally amongst all its users the GNP per capita was $2,266. This, theoretically, ranked the world of EverQuest as the 77th most prosperous economy on Earth in 2001.
Although the world has come a long way since EverQuest and large MMOs from EVE Online to Final Fantasy XIV and Elder Scrolls Online provide players with an incredible variety of economies to get involved in.
But, from as early as 2001 it has been clear that Virtual Economies not only act similarly to their real-world counterparts but can directly interact with real-world currency for players who are crafty enough.