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Eyjólfur Guðmundsson, the world's first full-time virtual-world economist
CCP Games

Eyjólfur Guðmundsson is the only economist on Earth who spends his days studying the fluctuating cost of warp-disruption batteries and T2 light drones. That's because he's the world's first virtual-world economist.

This past August, Guðmundsson took up residence in EVE Online, a massively multiplayer online game, to report on its economy, research its society and coordinate with academic institutions on their entrance into virtual worlds.

Think Alan Greenspan—only in Battlestar Galactica. In EVE Online players buy, sell, trade, earn, steal and otherwise work to accumulate interstellar kredits (ISKs)—a currency that, officially at least, is only valuable inside EVE. To earn ISKs, players can mine ore from asteroids, process it into salable goods, clear the world of computer-controlled pirates or turn pirate themselves and attack other players.

"The players are very specialized," Guðmundsson notes. "All some do is mine, move stuff around and trade, just like any other industrialist. Pilots need bigger and better weapons and people to trade them. They all need information to communicate [about] the economy, just like any community needs to know how interest and inflation affect its wealth. It's important to have a visible economist to analyze events and participate in discussion[s]."

Why Do Virtual Worlds Even Need Economists?
Other virtual worlds, such as Second Life and Entropia Universe (and unlike EVE Online), use currencies that can be cashed out for real-world dollars and also have economists who work behind the scenes. Guðmundsson's role, however, is as both a spokesman and an analyst. He aims to provide the EVE player community, which numbers over 200,000, with vital information about their trades. He'll then study those trades to learn what insights from a virtual economy can be applied to the real one.

"Generally speaking, economists are dealing with the same principle, no matter what the product," Guðmundsson says. "How do we know what to produce and when to produce? Those are the questions from Econ 101."

John Zdanowski, CFO of Linden Lab, which makes Second Life, provides similar information to the Second Life community while managing the supply of its currency, lindens, to keep a steady exchange rate with the U.S. dollar. He agrees that economic management is important, but believes that EVE might be going overboard.

"When you break it down at the end of the day, it can end up being quite a bit simpler than it seems," he says. "I don't think you need a PhD in economics to manage this."

In theory, EVE is a closed system with a player-controlled economy. The game operators may seed the asteroid belts with ore and write the mission requirements for pirate hunting, but they also try to allow players to dominate in the realm of trade.

"We try to follow the philosophy of laissez-faire," Guðmundsson explains. "I've been looking at the mineral markets [in EVE], and it's quite obvious that the markets operate just like Adam Smith predicted 200 years ago: The market succeeds without interference."

In fact, Guðmundsson says that so far his work hasn't had any direct effects on the virtual economy. His recommendations for price caps are still pending, and the tools he is developing that will affect in-game economic behavior have yet to launch.

"I am keeping a special watch on the money supply, but so far all indications show that the monetary system is healthy," he remarks. "And as long as the economy is in good shape, I remain hands-off."

When Too Much Zydrine Is a Bad Thing
That doesn't mean that the developers of EVE Online won't occasionally take a hands-on approach. Just as in real-world markets, in-game prices are sensitive to the law of supply and demand. Prior to Guðmundsson's arrival, a new asteroid belt was seeded with an abnormally high level of the usually rare mineral zydrine. Prices dropped for six months until the ore sold for half its normal cost. The developers then updated the game so that less zydrine could be refined from other compounds. In the meantime, players began to stockpile the mineral until the price leveled out, which Guðmundsson points to as proof of a working economy.