Eyjólfur Guðmundsson, the world's first full-time virtual-world economist
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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.
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12 Comments
Add CommentIn EVE the laws of supply and demand are reversed by the game makers, High Supply = High price. The Players can then exploit these mistakes in the game pricing system and follow the real law of supply and demand. Evey time the players find a way to make a huge profit, the game makers intervene and change the world like the real world governments do.
Reply | Report Abuse | Link to thisThey even added taxes, and a thousand rules to make it like good old earth.
It is a find space game. It is Elite's great grandson. The space battles are a blast!
The corporations (groups of players) operate like real corporations to control the Eve universe.
It makes a Monte Carlo simulation look like child's play.
If the massive statistics of this game are analyzed some new law of economics may pop out.
Calling Guðmundsson "The world's first virtual economist" seems like a bit of hyperbole. There (www.there.com) had a full-time economist on staff when I was working there (pun unavoidable) in 2004. It's a fascinating field; unfortunately this article barely scratches the surface of what it entails and what we can learn from it.
Reply | Report Abuse | Link to thisI thought Dr. Cowen's comments were a little odd. Putting a pre-selected group of people in a room and playing controlled games seems far less statistically relevant than letting random people play in an uncontrolled environment.
Reply | Report Abuse | Link to thisThe Downside to the Eve 'Economy' is that there is a loop hole, players can buy GTC (game time cards) and sell them for isk (game money) this breaks the relationship of effort to value in Eve because those with the luxury of a fat wallet in RL(real life) can by pass the entire earning process in game.
Reply | Report Abuse | Link to thisI happen to play this game. Its very good that the economy is player driven and it works fair to a certain degree. However the Adam Smith doctrine takes the reservation that there is a perfect economy. In this game there is not, even tho its player driven, there is the game mechanics which breaks natural laws, and the fact that you dont starve to death or anything if you get robbed and gets poor. Your in game character will never suffer the demands from creditors or lawsuits from bancruptcy court. If you get killed you will have a clone and live again.
Reply | Report Abuse | Link to thisNevertheless you sit in your office chair playing the game with a cup of cheap coffee imported by some real life multicorporation, and eat your cookies with its cheap sugar farmed by oppressed south american people. So remember its just a game! Real life economics are far far worse!
One huge difference between Eve and reality is you simply can't cheat the system in Eve. The markets are clear and fully comparative. They operate with perfect items producing a clean-room of trading.
Reply | Report Abuse | Link to thisyaguara wrote:
Reply | Report Abuse | Link to this> The Downside to the Eve 'Economy' is that there is a
> loop hole, players can buy GTC (game time cards) and
> sell them for isk (game money) this breaks the
> relationship of effort to value in Eve because those
> with the luxury of a fat wallet in RL(real life) can
> by pass the entire earning process in game.
Not really break it. I believe the amount of ISK one can purchase with a GTC is market driven also. Someone else has to put in the grunt work earning the ISK to pay for that GTC in game.
If the number of GTC's start to flood the market then their ISK value will drop, resulting in far less people willing to throw money into that deep pit of faction bidding.
Just to sum up the GTC transaction for those that don't play Eve - While the one paying cash for a GTC gets ISK on a platter, the one producing the ISK is getting free gaming time in return.
I think the main point here is that people will waste huge amounts of time, money, work and emotion on junk that has no value whatsoever and just doesn't matter. I know I do.
Reply | Report Abuse | Link to thisI play Eve Online. I have for Years and I have to Earn a living so to speak in game inorder to afford the Tech(mods) and Knowledge(skill books) I need to suceed in the extremly competitive world of Eve online. I have noticed in Real Life aswell as price of basic commidities(gas in Rl/ Minerals EVE) go up or down it greatly affects the world around virtual or not
Reply | Report Abuse | Link to this~ Josh
~Phoenix Necro - Eve
The Arizona Credit Union System (ACUS) is pushing to abolish the payday advance industry in the Grand Canyon State, but consumers should realize the ACUS is just trying to eliminate the competition. The credit union is stepping up its lobbying efforts to level the payday loan industry so that it can claim all the former cash advance customers as their own. As part of a massive e-mail campaign, the ACUS is attempting to reach almost 1.6 million credit union customers to convince them that Proposition 200 is worth voting against. However, Proposition 200 supports institutions like the Arizona Community Financial Services Association which points out that Proposition 200 will in fact lower Arizona’s loan fees, eliminate extensions by implementing flexible payment plans, keep Internet lending in check, and lower the number of walk-in stores in Arizona. These up-and-coming reforms will not only benefit payday loan customers, they will also prevent industry employees from joining the unemployment line. Who can afford to lose their job while the economy is struggling like it is?
Reply | Report Abuse | Link to thisPost Courtesy of Personal Money Store
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The importance of a working economical model in virtual worlds is very important to create value inside of the world. Many people spend significant amounts of time inside virtual worlds to create and contribute to the world so it is normal that people who work inside of simulated environments receive some sort of payment. Many worlds have their own economy driven by a currency. A new virtual world who also uses this economical model is Dreamworld at http://www.virtualworld.sl this world uses the VEC as its currency model which stands for Virtual Economy Currency.
Reply | Report Abuse | Link to thisVirtual worlds aren't that different from the real world so it's logical that some sort of economical model is created, since we live in a modern age of technology simple swapping of goods would be a Neanderthal solution therefore virtual currency bids a great alternative to simple trading of goods for example.
The virtual markets of Eve Online are a great opportunity to study economics in a constrained environment. In the real world economy consumer price index, interest rates, wages and most economic variable are estimated because they cannot easily be found. Moreover, in EVE exact economic data is recorded so there is no measurement error. I would expect to see more research on virtual economies in the future due to the exactness of the data.
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