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. icon
    boomhauer (profile), 6 Feb 2008 @ 6:35pm

    this is exactly...

    what ron paul has been preaching years. While the fed tinkers with rates and the money supply, the result is inflation that kills savings, which is especially harmful to retirees who no longer have income.

    You cant even hedge against this either... if you invest wisely and "keep up with inflation"... you still pay cap gains tax on your gains.

    The justification is that cheap money promotes faster economic growth by encouraging spending yada yada. But explain how stealing from any savings i have is anything different than just that: stealing.

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