Inflation can be a headache for any central banker. But it takes a certain type of economist to know what to do when a belligerent spaceship fleet attacks an interstellar trading post, causing mineral prices to surge across the galaxy.
Eyjólfur Guðmundsson is just that economist. Working for the Icelandic company CCP Games, he oversees the virtual economy of the massively multiplayer video game Eve Online. Within this world, players build their own spaceships and traverse a galaxy of 7,500 star systems. They buy and sell raw materials, creating their own fluctuating markets. They speculate on commodities. They form trade coalitions and banks.
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 Reykjavik, 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.”
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.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
full-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.
That ability to experiment on a massive
scale, academics say, could revolutionize
economics.
“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.
In June, Varoufakis announced on his blog
that he had been hired as an in-house economist
by Valve, the maker of the popular HalfLife
games. Varoufakis wasn’t an obscure
number-cruncher. From his perch at the University
of Athens, he had become famous for
his trenchant analyses of Greece’s debt woes
and the euro crisis.
It was clear why Valve was interested.
The company oversees a network of games
such as Team Fortress 2 that run on its online
gaming platform, called Steam.
Valve wanted to link different Steam
games together so players could trade virtual
items. As Gabe Newell, the chief executive
of Valve, explained in an e-mail to Varoufakis:
“We are discussing an issue of linking
economies in two virtual environments (creating
a shared currency), and wrestling with
some of the thornier problems of balance of
payments.”
Whom better to ask, Newell figured, than
an expert on the difficulties that Germany and
Greece faced after joining the euro?
To date, only two companies—CCP and
Valve—have gone so far as to hire in-house
economists. But several academics who study
virtual worlds say they have consulted with
game designers.
“If you’re creating a game with 100,000
users, with things that they can buy and sell,
you need an economist just to help you tweak
that system so that it doesn’t spin out of
control,” says Robert Bloomfield, an economist
who studies virtual worlds at Cornell’s
Johnson School of Management.
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