Friday, January 02, 2004

Castranova on Virtual Economies
In his article in Game Studies, On Virtual Economies, Edward Castranova introduce significant insights in between his insistance on using words like "synthetic worlds" and "virtual worlds". It is fascinating to me how he manages to keep using words indicating that what happens in a game world is something beyond reality, at the same time as his articles position games as very much within and with a significant impact on the flesh world.

Many others, however, approach virtual worlds as an alternative reality, devoting a substantial fraction of their time to them. According to a survey in Summer 2001, about one third of the adult players of EverQuest spent more time in a typical week in the virtual world than in paid employment (Castronova, 2001a).

However, I find that when I translate virtual, alternative and synthetic with digital, online or computer mediated, I get drawn into the level headed analysis of the economic impact of games. Castranova realises that a game economy is different from a national economy, and that the a game cannot be a model for a flesh world economic structure, no matter the amount of simulation built into the game.

In cyberspace, the coding authority does indeed have the power to create and destroy any amount of any good, at virtually zero cost. Therefore, as a de facto government, the coding authority can indeed control prices. And, therefore, price controls may actually be good policy in cyberspace, even though they most certainly are not good policy on Earth.

The insights which make me enjoy reading this article relate to the first gaming article by castranova, the one that made such an impact on the game study community. It is the understanding that games is a commodity just like everything else, and a commodity that changes the quality of life. Castranova compares making and playing games to building and driving cars:

If virtual worlds do, in fact, grow as a human phenomenon, there may be some implications for Earth economies. It is important to recognize from the start that the mere fact that Earth economies may suffer as people spend more time in cyberspace, does not imply that humanity is worse off. The fact that labour hours that were once producing automobiles are now producing avatars does not mean anything about the level of wealth in society. The basket of produced goods is simply changing. A proper accounting would show, in fact, that the actual production of well-being per capita is rising.

This points to the fact that it may not be the object: the car (or the washing machine, the cellphone or the swimming pool) which is important, but the experience of being able to aquire and use - or play with - these objects. This connection between games in the flesh world and games in the digital world is illustrated by Castranova's equation, where he illustrates his example by describing game A ar the flesh world game of work:

Game A happens to be the always-exciting Work Game of Earth, where you go to the office and face the challenges, denoted by C, that are presented by your boss, your co-workers and your competitors, and where overcoming those challenges garners you rewards, denoted by R, in the form of wages, perks, fringe benefits and assorted entertainments involving the office copy machine.

A large part of the article is concerned with predictions of how games will develop and impact the flesh world, based on economic models and connections between the interests of the producers and that of the players. Parts of this I see as speculation - it might be informed guesswork, but still - predicting the future is always risky... The most important insight, in the light of the direction of debates on Terra Nova, where Edward Castranova is a a moderator, comes in the conclusion:

A common theme throughout the paper is that the analysis of virtual economies will require slightly different tools and approaches than we are used to. The differences are dictated by the specific features of life in cyberspace. In virtual worlds, the entire physical universe is open to direct and costless manipulation by the owners of the game. The human beings behind the avatars are real, and physical, and subject to the laws of Earth, but the avatars themselves do not inherently face any physical constraints at all. The discovery and description of avatar-mediated economic life represent the most important current research avenues in the economics of games.

Games are part of the real world and have always been! But at the same time they are distinctly different. Games can give us some insights to the nature of humanity and society, but they can't explain it all. And it is very reassuring to see Edward Castranova write it out, at the end of such a lucid discussion of the connection between time and money. Which, to me, is what it all comes down to: the base for industrialised society, the pricetag on our time.

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