Session 3: Economy & Finance

(with a detour into n00bs, 1337s and the value of Discourse communities)

McKnight

“Economics sees value wherever humans decide that some construct of theirs has utility but is scarce.”

--Castronova

“‘Social goods’ are anything that a group of people believes to be a source of power, status, value or worth, whether this be ‘street smarts,’ academic intelligence, money, control, possessions, verbal abilities, ‘looks,’ age, wisdom, knowledge, technology, literacy, morality, ‘common sense,’ and so on through another very long list.” --Gee

Gee misses the element of scarcity.

Why?

Social goods tend to be positional – it’s the amount we have relative to others, not the strict quantity. Being #1 is inherently scarce.

So why do goods have value in virtual worlds?

Social goods

Artificial scarcity

social goods

“Very often dominant groups in a society apply rather constant ‘tests’ of the fluency of the dominant Discourses in which their power is symbolized. These tests take on two functions: they are tests of ‘natives,’ or at least ‘fluent users’ of the Discourse, and they are gates to exclude non-natives.”

-- Gee

Thus,

it’s good (a social good, an economic good) to be 1137,

and it sucks to be a n00b

“There is a certain irony in the fact that fashion shares with computer games a status of low-brow pastime, even though the perceived consumer groups are very different and would no doubt gaze upon each other in horror if confronted.

“However, we are convinced that exploring the connections between these two popular culture forms will demonstrate that games do not operate in isolation from the rest of popular culture and that cross-over discussions can reveal interesting perspectives in our cultural panorama.”

-– Klastrup & Tosca

So, what

Castronova says from economics

Gee says from linguistics

Klastrup & Tosca say from anthropology -

Human spaces are human spaces, and we behave like humans in them

This concept still baffles a lot of people.

Why?

the pernicious legacy of the Magic Circle?

– the social construction of childhood– the Protestant Work Ethic– Olympic “amateurs”

artificial scarcity

“Did you know that the first Matrix was designed to be a perfect human world, where none suffered, where everyone would be happy? It was a disaster. No one would accept the program, entire crops were lost.

“Some believed we lacked the programming language to describe your perfect world, but I believe that, as a species, human beings define their reality through misery and suffering. The perfect world was a dream that your primitive cerebrum kept trying to wake up from. Which is why the Matrix was redesigned to this, the peak of your civilization.” --Agent Smith

“So why is it so easy to make lots of gold with activities which require basically no effort at all? Economic theory would suggest that people take the path of least resistance to earn money, and would be all over gold-making opportunities like this, thereby destroying the market for fish and inks. The reason why that doesn't happen in World of Warcraft is that fundamentally boring activities like fishing and milling herbs just aren't fun, and people value fun higher than currency in a virtual world.

“The basic principle of "opportunity cost" still applies, but now that "cost" is calculated in "lost fun", not in time or effort. Some WoW economists get all upset when people say they "farmed something for free", but that notion isn't all that stupid as it appears: If the activity of farming for some reason is not boring, but actually fun to the person doing the farming, his opportunity cost as calculated in "lost fun" is really zero.” -- Tobold

economics and finance from the outside in:– gold farming– RMT– virtual goods– virtual currencies

economics and finance inside– SL:

• the $US and $L economies• the challenges of marketing

– WoW: • inflation and gold sinks• playing the Auction House:

http://www.youtube.com/watch?v=4xbBGN5-td0 • guild finance and banking

the economic value of guilds– artificial scarcity– social goods– “Alone Together”– “From Tree-House to Barracks”