The Evolution of Gaming

What if economists could experiment on people? What experiments might they run?

In an article I read from  The Washington Post titled; "The Economics of Video Games", game producers and economists explain how working on realistic MMO games is a beneficial investment for both parties. 

SOURCE: http://www.washingtonpost.com/

"It’s a sprawling economy, with more than 400,000 players participating in its virtual market — more people, in fact, than live in Iceland. Inflation, deflation and even recessions can occur. Which is why, from his office in Reyjkjavik, Guðmundsson leads a team of eight analysts poring over reams of data to make sure everything in Eve Online is running smoothly. His job bears more than a passing resemblance to that of Ben Bernanke, who oversees the U.S. economy from the Federal Reserve.

“For all intents and purposes, this is an economy that has activity equal to a small country in real life,” Guðmundsson says. “There’s nothing ‘virtual’ about this world.”

Guðmundsson runs a team of analysts who make sure that the in-game economy is running properly. A Massively Multi-Player Online Game (MMO), operates almost like the real world. Its interesting how inflation, deflation, and recession can occur in a virtual manmade game. One of the most common examples of this is Runescape with its Grand Exchange. Player can choose what price they want to sell items they have and based on this, the quantity supplied and demanded would change. For example, the main reason why I started to play Runescape again was becuase of its economy. One of the items that was easy for me to obtained went up more than five times the value. This made me return to the game and make more money. Guðmundsson's in-game economy operates the same way except it is more realistic and complex. You can barely call it virtual at this point. 

"Nowadays, many massively multiplayer online video games have become so complex that game companies are turning to economists for help. Without oversight, the games’ economies can go badly awry — as when a gambling ban triggered a virtual bank run in the online world of Second Life in 2007, with one bank alone costing players $750,000 in real-life money."

Since Guðmundsson's economy is so realistic it becomes necessary to involve economists. Economists can regulate the economy and avoid inflation, deflation, recession and other problems that the virtual game world is threatened to face. 

"But there’s a flip side, too. Just as video game designers are in dire need of economic advice, many academic economists are keen on studying video games. A virtual world, after all, allows economists to study concepts that rarely occur in real life, such as non-fractional-reserve banking, a popular libertarian alternative to the current banking system that cropped up in Eve Online. The data is richer. And it’s easier to run economy-wide experiments in a video game — experiments that, for obvious reasons, can’t be run on countries."

This is the revolutionary part. As the economists are helping the in-game economy to thrive and not collapse, they can experiment on the economy itself. With so many people playing the game and so many factors and variables to change, it behaves like an economist's sandbox. They can change the "world" and run experiments. Then they can record their data and find new ways to change the world in a much faster way. These are all things that is difficult or impossible to do in real life. 

“Economic theory has come to a dead end — the last real breakthroughs were in the 1960s,” says Yanis Varoufakis, a Greek economist recently hired by the video-game company Valve. “But that’s not because we stopped being clever. We came up against a hard barrier. The future is going to be in experimentation and simulation — and video game communities give us a chance to do all that.”

At least, that’s the dream. The reality, as always, is more complicated. Game companies are often wary of meddling economists trying to conduct experiments that suck the fun out of their virtual worlds. And some academics scoff at the notion that there’s anything to learn from universes filled with warlocks and starfleets. Game companies and economists may need each other. Now if only they could learn to share the controller.

The economic theory has remained stagnant and boring since 1960's. However the hard barrier of economic theory can only be resolved by using experimentation and simulation. The current nature of MMO's provides exactly that. Economists get to regulate the simulated economies and experiment the effects of multiple factors and variation. In turn, the game producers also benefit because it makes the game more realistic and keeps the simulated economy from collapsing. One problem that arises though is that the game may become too hard. Although some may argue that this may become a turn off for gamers who enjoy manipulating the game's mechanics to unfairly get successful (cheating), using video games can further research in a field that has been stagnant for a long time.


DISCUSSION QUESTION: If games become increasingly more realistic, how will this impact the players? How should game producers balance non-fiction with fantasy?