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Source link: http://archive.mises.org/4533/role-playing-games-and-money/

Role Playing Games and Money

January 7, 2006 by

I came across this old thread in the Austrian Economics forum, and I thought some of the older folks who read this blog (but not the forum) might be interested in this description of what happens in a “Massively Multiple Online Role-Playing Game” (MMORPG) when the setup allows for injection of monetary units whenever someone’s agent kills a monster and (I think) the computer randomly picks an amount of money that the monster had. (The point is, there’s not a fixed amount of money at any given time; when a player’s character kills a monster and finds money on its body, that is like an injection from the Fed.) As someone obviously more familiar with it than me put it:MMORPGs (and other online games with currency, such as Diablo 2) have already shown the impact of rapidly devaluating currency on people’s willingness to use it. Short version is, most people don’t. Longer version is that usually a currency is rapidly devalued when some players figure out a way to generate tons of cash, usually through programs that have a character doing high profit activities even while the player is away or asleep. The basic format for a “farming bot” follows: “Select weaker monster, attack until monster dies, heal self, loot monster’s corpse, repeat.” If this is done nonstop, day and night, the player using the bot makes a fortune for basically no effort. If the game company hosting the servers can’t stop players from using bots, the economy is flooded with cash and everyone (except those who are using bots) switches over to some other in-game commodity. Pretty soon the only people willing to deal in cash are the players who use bots, and prices adjust accordingly (while the market shrinks) until they, too, switch over to something else. Usually at that point the botters will write programs to accumulate large amounts of the new medium of exchange, and the process repeats itself. Most people are unwilling to exchange their stuff for a devaluing currency, even if they plan on spending it quickly. Fewer people are willing to accept the currency, which has a snowball effect on its undesirability.

{ 18 comments }

zuzu January 7, 2006 at 10:18 am

MUD/MOO/MMORPG server administrators are notorious for both an utter lack of economic understanding and near-total centralized administration.

That no one has yet capitalized a distributed virtual free market interaction space for gameplay rather astounds me. Apparently people stopped reading The Virtual Community and have given little notice to < ahref="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=338500" title="On Virtual Economies">Edward Castranova.

The closest yet has been SecondLife, with maybe Smalltalk Croquet a distant second.

zuzu January 7, 2006 at 10:20 am

Edward Castranova, rather; On Virtual Economies.

Roy W. Wright January 7, 2006 at 1:38 pm

That no one has yet capitalized a distributed virtual free market interaction space for gameplay rather astounds me.

I’ve been thinking a lot about this lately, and almost wishing I had the knowledge to develop my own MMORPG. It would greatly enhance gameplay if the NPCs in such gamees were subject to the constraints of reality. For example, if they had limited resources and even had to make some sort of profit. From what I’ve seen of SecondLife, it’s not exactly what I’d have in mind — the ability to pay real money for special in-game abilities seems unfun to me.

The Economist January 7, 2006 at 2:37 pm

I was an amateur Diablo II player back in the day and I think the game provides some very valuable insight on monetary theory. The “official currency” in the game was gold pieces, but there were limits to how much gold a person could carry, gold was perpetually being created in large quantities by monster drops, and never taken out of the world due to being impossible to carry around, bothersome to pick up and useless in the purchase of goods. Hyperinflation ensued, and it was due to anyone using bots. The money was simply worthless.

What happened next is the really fascinating part: players adopted another currency! They used a rare item that was compact and extremely value-dense in exchanges, called a Stone of Jordan. It didn’t make for a very liquid market but eventually all items were priced in these stones.

It would make an interesting research paper.

Pete Canning January 7, 2006 at 2:40 pm

The fact that the economies are based on killing likely prevents the possibility of them being successful as modeling a real economy.

How does one model actual productive activity?

The Economist January 7, 2006 at 2:44 pm

Pete: Hunting and fishing are based on killing and they were once a large part of the economy. These online games are really weirder forms of hunting, where you hunt monsters instead of animals. Though sometimes you do hunt animals as well.

Pete Canning January 7, 2006 at 3:24 pm

I guess I was equating the monster’s with people. I guess this was not a valid metaphor. I don’t really know anything about these games.

Andrew Johnson January 7, 2006 at 6:04 pm

I would be very curious to see how young teens and adults interpert online game inflation. In fact, this could be a very useful tool to help teach Austrian economic principles.

Also, I believe its very important to add the effect physical money has on online games. In every single online game I’ve played or read about, there has always been a real-world market for items and in-game currency.

One specific game sold items and currency on their website leading to hyperinflation. The game was already producing an ever growing inventory of currency before this. When they got to the point of “give us $100 and we will give you 100,000 currency in-game” the price distortion went through the roof.

Game producers are constantly trying to keep the game enjoyable for new players. They do this by providing a virtually limitless supply of gold and items.

Certain online games have experienced a barrage of “gold farms” from China were entrepreneurs pay people to play the game all day long to feed players demands for instant gold and powerful characters (so that they don’t have to play 50 hours a week to get there themselves.)

Pete — “How does one model actual productive activity?” is a very good question. When people play games they play them for fun and enjoyment.

I’m not sure that there is any optimal way to keep a stable economy in a game. The reason is because both money and items are constantly being produced. In some rare cases, certain items may only produced once, or are produced extraordinarily slowly, perhaps on the same level real gold is introduced into the real world market. These items, like the “Stone of Jordan” mentioned above allow for players to properly hedge against hyper-inflation.

The question is, what is productive activity in an online game, where, at a click of a button, an “administrator” can create virtually unlimited money & resources. In the real world, the government can only print more money, they can’t print more gold, oil, computers, cars, etc. etc.

What I’ve learned from online game hyper-inflation is more about human psychology than economics. When both the game currency and goods increase, interest in the game begins to wane. Given everything they want players become disllusioned with the game and move onto something more challenging.

Bob Murphy January 7, 2006 at 8:23 pm

AJ said: I’m not sure that there is any optimal way to keep a stable economy in a game. The reason is because both money and items are constantly being produced.

Hey Pete, this is a job for Hayek! From my article on his scheme for privately issued fiat money:

Finally—and I admit this is quite fanciful—suppose that in the distant future, humans develop the Star Trek capacity to reproduce (within limits) any type of physical item. In that case, no commodity could serve as a useful medium of exchange, because people would simply mass produce it at virtually no cost. In such a world, money would probably become mere numbers on computers.

Yes, if governments were expected to responsibly run such a system, all would be lost. But it is at least worth exploring whether a system based on Hayek’s ideas could provide sound media of exchange in that futuristic environment.

In all seriousness, is there an MMORPG that would allow you to start issuing ducats?

perianwyr January 7, 2006 at 8:44 pm

A successful enough MMORPG currency is indistinguishable from a money-laundering system.

George Gaskell January 8, 2006 at 9:32 am

One of the limitations of using real-time strategy games and RPGs to model economic activity is the fact that they don’t allow for innovation. For example, manufacturing an inn or a castle always costs a pre-set amount of money.

Real economies (hence Austrian theory as well) depend on the development of new technologies — manufactured concrete blocks instead of cut stone, balloon framing instead of timber-framing, etc.

The game programmers would have to envision all of the potential innovations ahead of the players, and program the game to allow players to find and exploit them. This is obviously impossible for a single person (or a centralized group) to do.

RPM January 8, 2006 at 10:20 am

The game programmers would have to envision all of the potential innovations ahead of the players, and program the game to allow players to find and exploit them.

I don’t think that’d be a problem here. If Hayek’s plan would work in the real world, then I think it would work in the MMORPG world, too. (But maybe it works in neither!)

I keep track of the ducats (or Murphys) in an Excel file in the real world. Other players have their characters give my character food, weapons, etc. in exchange for me crediting their bank acct (which I keep track of in Excel). When one of my clients buys a dagger from another of my clients, they don’t exchange money in the game world; the one guy just gives a dagger to the buyer, and then I make the appropriate adjustment in their respective bank balances.

The problem is getting the whole thing off the ground initially, but that’s a problem with Hayek’s proposal in general, not the game implementation of it.

Pete, are you still reading? What do you think?

Pete Canning January 8, 2006 at 4:40 pm

Bob, I will have to think on this for a bit. I am not sure if my ignorance of these game economies might hamper my understanding of the problem.

How would you go about issuing these ducats?

ChristianBFast January 9, 2006 at 5:07 am

The game programmers would have to envision all of the potential innovations ahead of the players, and program the game to allow players to find and exploit them.

I don’t think that’d be a problem here. If Hayek’s plan would work in the real world, then I think it would work in the MMORPG world, too. (But maybe it works in neither!)

Looking at this from a programmers point of view, that would be the problem. There is no way to innovate in a game that has real products without preprogramming it all (ever play the Civ games?).

You could, however, use strings of bits to represent a ‘product’ and allow random agents to apply their own value to that product and be able to trade with eachother. Innovation comes when the strings are changed or mixed with other strings (higher order?) to represent new ‘products’…Of course, knowing what those strings are is impossible, they are just strings. It would allow you to study it though. And the fact that it’s a simulation and wouldn’t be very fun.

-Chris
p.s. It was from programming A.I., genetic algorithms, a. life, and agents that lead me to Austrian econ. :) Emergent behavior.

Ryan Fuller January 9, 2006 at 7:19 am

Sweet, I made the Mises blog! I wrote the quoted section, and right now I’m feeling pretty proud of myself. :) Anyway, a few more thoughts:

“The fact that the economies are based on killing likely prevents the possibility of them being successful as modeling a real economy.

How does one model actual productive activity?”

Not all MMORPG economies are based solely on killing. Most include resource gathering activities like mining, fishing, woodcutting and so on. These materials are then combined by a skilled character to create other items of value that are useful for the combat that makes up the bulk of the gameplay. This requires time on the part of the player, both to gather the necessary “crafting materials” and to develop the skill (through repeated use) needed to make the more powerful, more desirable items and equipment.

Unfortunately these too are subject to the efforts of botters. They also suffer rapid devaluation if the market is flooded with those resources or the items produced from them. An interesting side effect of a particular quality of item flooding the market is that every item that is inferior to it becomes quite worthless. (Unlike in real life, such a judgement may be made objectively in the simplistic world of online gaming… a 4 damage sword just isn’t as good as a 7 damage sword, ever)

“the ability to pay real money for special in-game abilities seems unfun to me.”

Some people view the accumulation of power as a journey, others see it as a destination. For those who don’t savor the prospect of becoming powerful [i]eventually[/i] they can save an enormous amount of time by paying to skip the more mundane early game and get straight to the higher-level endgame, where players invariably are able to explore more of the world, fight more types of monsters, and use more powerful and varied abilities. Games that require a particularly long time investment to become powerful (and which are particularly monotonous in the meantime) will usually develop player-driven services to “power level” a character beyond the monotony with little or no effort from the client. Either that, or player accounts with powerful characters on them will be sold entirely. Both activities are frowned upon by every game company that I am aware of.

Regarding the issue of hyperinflation, game designers are catching on to the problems that it poses in a game world and typically implement measures designed to slow it down. These are referred to as “gold sinks” and serve as exit points for the money and items that are constantly being generated. Equipment that degrades with use must be repaired, rent must be paid on player controlled housing, temporary magical boosts to the character’s power, and so forth. Ideally, these gold sinks would be things that players [i]want[/i] to buy instead of things that they just need to spend money on (item repairs aren’t exciting, but a pay-per-spell temporary magical enhancement to their character is a fun reward) but most designers seem indifferent to that particular distinction.

“In all seriousness, is there an MMORPG that would allow you to start issuing ducats?”

It’s more an issue of being able to create and distribute unique, unduplicatible items to serve as the new player-controlled currency. Player creativity in the creation of unique in game items is limited both by technical restraints (items need graphics, weight values, etc) and by matters of taste. To get straight to the point, if players are allowed to create or design their own items it’s only a matter of seconds before somebody makes something that looks like a penis and starts scattering it everywhere like some obscene Easter Bunny.

“How would you go about issuing these ducats?”
Not to step on Bob’s toes by answering this, but if a reputable dealer were established the issuer could keep track of it out of game, and the player could do the same. It’s a matter of getting a source that is reputable enough to get strangers to trust them, which is particularly difficult in online role playing games because of the enormous population of scam artists that inhabit them. Players quickly develop a strong sense of paranoia, as trusting players get ripped off early and often and there is typically no recourse for the scammed player.

Xellos January 10, 2006 at 2:21 pm

–”Finally—and I admit this is quite fanciful—suppose that in the distant future, humans develop the Star Trek capacity to reproduce (within limits) any type of physical item. In that case, no commodity could serve as a useful medium of exchange, because people would simply mass produce it at virtually no cost.”

There is a cost associated with such a thing, namely the amount of energy it takes to create the items. Which is not inconsiquential. Unless there’s a perpetual motion machine involved somewhere, the new currency would likely be energy-based in some manner.

–”Player creativity in the creation of unique in game items is limited both by technical restraints (items need graphics, weight values, etc) and by matters of taste.”

As far as this goes, the old text-based MUDs and so on were better in some ways. Since there was no need to get an art department, etc, involved, any of the admins could be persuaded to add new items.
I was a participant in a MUD for several years a few years back. One of the biggest gold-sinks they ever came up with was a guild system. Several characters were allowed to start guilds, and members could collect for things like new rooms to the guildhall and specialty equipment (larger backpacks, stronger healing potions, whatever). Not an ideal solution, but definitely in the “want to buy” category.

As far as ideal MMORPG economies go, why shouldn’t the admins just take a step back from the problem? Currency evolved in a free market to start with, so why not just skip the artificial definitions in the code and let the players work one out? Games like Ultima Online already have heavily crafts-based skill systems. If they dropped the middlemen, the NPC shopkeepers, they’d probably be on to something. Miners find and extract gold ore, refine and cast it, and trade it for goods. At the same time hunters take down animals for meat and hides (which can be used to make armor, etc), and so on.

Xellos

RPM January 11, 2006 at 8:38 pm

Not to step on Bob’s toes by answering this, but if a reputable dealer were established the issuer could keep track of it out of game, and the player could do the same. It’s a matter of getting a source that is reputable enough to get strangers to trust them, which is particularly difficult in online role playing games because of the enormous population of scam artists that inhabit them.

Ryan’s exactly right (though he’s just repeating what I’ve said above when I was apparently misunderstood :)). You don’t need to be able to create money tokens in the game; you just keep track of players’ acct balances in Excel in the real world. As Ryan notes, the only problem (and it is a huge one, admittedly) is to get people to trust you, the issuer of fiat currency.

Urizen February 9, 2006 at 5:07 pm

I think everyone here is looking at the wrong thing.
If you give a set of players a ladder, something to climb like diablo2, they will compete on a scale that will include exchanging real life currency for better items and virtual monetary. Its the human reaction to be in first place. If as you say the problem is then creating bots to kill things, or gain something from nothing this problem has long be solved by bot checks. Only humans can do certain things, ie. read basic cursive. Set this in random order in your MMORPG and you’ve solved the bot problem. For closed games like EQ you could never run a bot because you have to group with other humans to actually get anything of decent worth. Believe I’ve been playing these games for a couple of decades and almost all of the virtual cash exchanged for real life currency is truely earned with human hands.

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