Monday, September 19, 2005

When Virtual Is Just Another Kind of Reality

[Cross-posted on The Agitator.]

Just a quick thought on the phenomenon -- noted by Baylen Linnekin among others -- of people using real-world money to purchase virtual-world goods and services (e.g., I pay a real person $40 via PayPal in exchange for his EverQuest character giving my EverQuest character a Blood-Bladed Dagger). Naturally, as an economist, I find the blurring of the line between real and virtual economies fascinating. But I won't consider the line gone until I see the reverse phenomenon: people using virtual-world money to purchase real-world goods and services (e.g., a Swedish woman gives me a real back massage in exchange for my EverQuest character giving her EverQuest character 50 gold pieces). Anyone know if that's happened yet? And dare I even mention the tax policy and monetary policy implications of such transactions becoming common?

(By the way, I never got involved in online role-playing, so I can't claim to have experienced even the original phenomenon.)

12 comments:

Lee said...

Having played several MMORPGs games (EQ, Star Wars Galazies, World of Warcraft) and friends that have played Anarchy Online I can attest that this has occured.

I have personal knowledge of swaps paying for lunch, fantasy football players, guitar lessons, and I think an old DVD player. It is a lively market with no government oversight (YEAH!).

I am a bit frightened of when the governments finally figures it out.

Glen Whitman said...

Lee -- Are you describing barter transactions (I make you lunch, your character gives mine a suit of armor), or monetary transactions with virtual money (I make you lunch, your character gives mine a bag of gold)? It's the latter that I'm most interested in.

Pete Guither said...

I think there are transactions that may apply in the online game Blogshares (sort of a virtual stock market where virtual shares in real blogs are traded, along with virtual "ideas" created by the blogs).

As part of the game, there is a section for "missions" where members can offer virtual rewards for real-life activities. For example, one such mission states: "I'm willing to pay 100 million to whoever that can design a basic template shaped exactly like [site name] The template must be made for the Blogger platform. I will pay the winner 100 million and I might even consider more if I like the design." [That's B$100,000,000 -- blogshares money]

There are missions like this that are available and posted on a regular basis.

Lee said...

It was both, in game gold/credits for real world services/items.

Lee said...

Decided I wanted to expand on that answer a bit.

Predominantly it was for gold/credits ingame. The reason is that an item may be of use for a short period of time, but cash is always useful. It is much like RL (real life) in that manner.

I can go on about this for hours, so be careful I do not go into geek mode ;)

Tim said...

A friend of mine the other day went to buy someone a drink at the store in exchange for gold in World of Warcraft.

Caliban said...

I think that transactions of this type are going to be a really neat loophole. Sure, like you've said, we have the virtual currency to real currency issue.

But as some of the commenters noted, it gets really interesting when you start thinking in terms of just using virtual currency.

Because currency as well all know only has value because people "believe in it" what stops people from trading services and goods for virtual currency? Such virtual currencies already have trustworthy entities (major corporations) backing them up, highly-developed counterfeit control and exchange rates with "real" currency.

The only thing they lack is inflation control. Some games are more careful about creating money sinks and taps, but not all. Many just simply mint more money endlessly.

But the real question is: what stops us from trading EVERYTHING in these online currencies and avoiding sales and income taxes altogether?

Lee said...

Actually you'll find (much like with RL nation-states) the games that were developed earlier have little inflation control and even little knowledged of how much money is in the system.

In the later games, they know EXACTLY how much money is entering the system and how much is being spent. Star Wars: Galaxies used this knowledge to track down duping (counterfieting) and still keeps a tight control on inflation.

Caliban said...

"In the later games, they know EXACTLY how much money is entering the system and how much is being spent. "

Definitely. And their economies work better because of it.

I've read screeds by hardcore gamers who have never picked up a single economics book give flawless macroeconomic analysis just from their experience playing a single game.

Do they give a damn about macroeconomics? Nope. They're just pissed because they can't buy their Golden Sword after they saved up for it. And they know why.

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