More Evidence Of Why Virtual World Economies Are Risky

from the inflation-inherent-in-the-system dept

We've already discussed the inherent dangers of basing a business model on the economics of virtual worlds. While there definitely is quite a bit of trade in virtual goods (often for lots of money), it's mostly based on ideas of artificial scarcity on goods that are effectively infinite. To drive that point home, Josh sent in an interesting story about a lawsuit between two founders of one such virtual world, where part of the complaint was that one of the guys effectively handed over the company to a third guy -- who planned to make money by selling the game world's currency, noting that once he controlled the company, he could just create an "infinite" amount of money in "a few minutes" and sell it at "below market" prices. While this suggests the folks in question had little sense of how basic economics works, it also highlights a pretty serious risk in these virtual worlds. At the same time that we're seeing Ben Bernanke struggling with managing the monetary policy of the US economy, for virtual worlds where there really is no scarcity at all, the temptation to simply flood the market without recognizing the consequences is just too great.
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Filed Under: economics, inflation, virtual worlds


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  1. identicon
    Atheron, 16 Jan 2009 @ 2:02am

    Virtual Economies

    If you want to see this idea taken to its apex, check out Entropia Universe. The ingame currency is actually pegged at 10:1 with the US dollar.
    I actually work for the company behind it, so I'm not going to pump out the sales pitch on you here. I will say this though, that while there are genuine points here e.g. that there is no real scarcity in real world terms, there are a lot of misconceptions also e.g. that money can be created out of thin air without serious consequences to the economy.
    Also, I can understand that traditional MMO gamers may feel it's cheating being able to buy your way to the top, but there are very few that actually do that. In fact I think the real economy adds a very exciting extra dimension to the game play.

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