The Washington Post Wonk Blog by Brad Plumer contains an interesting revelation. Like other journalists, he's fascinated with the idea that Gabe Newell has hired an economist to work at his game network Steam full time. What is this economist going to do? Well, here's the answer that has been elusive to us plebes until now:
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.”
Who is "we"? And which two virtual environments? Is this just two games in Steam that might be roughly comparable in their values and economic features?
Or is Second Life in this mix?
I can't believe it's not.
Here's what I wrote on the Washington Post comments section:
Ah. Your article has just inadvertently
indicated what some of us have suspected -- that once the virtual world
of Second Life is listed on the powerful gaming network of Steam (owned
by Valve), there may be pressure by Valve's CEO Gabe Newell (or may be a
deal already in the workds) to take over the LindEx, which is the
virtual exchange for the Linden dollar (worth about 248 to US $1.00).
There have been discussions before about whether the Metaverse (the
alternative universe of worlds, games, social networks, etc.) should
have a currency like the old Gaming Open Market (which Linden Lab, the
makers of Second Life, helped shut down as a competitor to their own
exchange but which traded the Linden at a higher value because it didn't
print and sell money the way Linden Lab does).
This would be a bad idea regarding the mixture of the virtual world of Second Life and games on Steam because Second Life's economy largely rests on land, i.e. re-rental of server space, and content related to land (houses, gardening supplies, etc.) Linden itself isn't happy with this labor- and cost-intensive solution to how to profit from virtuality, but it is what gives them $75 million in profits annually currently. They, like other game makers such as the recently revived There.com, hope to make profits in digital content sales, through commissions on the sales themselves and/or through commissions on currency exchange. That's less server-intensive to manage, although risk and fraud mean it is still staff-intensive. In any event. These markets are fragile -- I remember once when the company announced that it might start a new flat rate for island sales rather than putting them on an auction, it crashed the currency market.
You're absolutely right about how the gambling law in the US led to a run on the banks, very much helped along by a wannabee anti-crime crusader who helped the stampede by talking to media. While no one wants to endorse fraud, this prevented an orderly management of the wind-down. Foreign bankers and stock market exchanges in SL who invested in gambling joints hadn't counted on a US law affecting them. But then the credit card companies told Linden that if they didn't ban gambling, they would lose their services. Then it was all over.
I find it very disturbing that Valve would hire a Greek socialist who advised a failed government to organize a virtual economy. It's part of that "better world" philosophy that Silicon Valley giants who themselves are capitalists think up for the rest of us in the form of technocommunism. The Lindens, in printing money and controlling currency exchange, frankly acknowledge that China was their model. The oligarchs who control the Metaverse want to make sure that virtual economies reward them first of all, as they do in Russia.
The Greek economist Yanis Varoufakis is as anti-American as they come, blaming America for the global recession. Oh, never Europe with its socialist economies, including Greece, where people wouldn't pay their taxes yet built swimming pools.
"Whom better to ask, Newell figured, than an expert on the difficulties that Germany and Greece faced after joining the euro?," reports Plumer.
An expert who advised a failed government that had to get a Euro handout? I look at this with frank disbelief.
As I noted, what really happens with these geeks and game-god gankers that want to tinker with virtual economies -- i.e. the lives of real people online -- is a deep-seated desire to create that utopian "Better World" that all people untethered to real life business outside the gaming world seem to acquire, especially in Silicon Valley. And what they want to put into effect are things that usually turn out to be socialist if not communist in nature. I remember how furious Richard Bartle got when I called him on game-god socialism. Yet he was frowning and fretting at the land for sale in Second Life. He'd be happy now, with the ministrations of our game gods, the land is now not even worth 0.2/meter for a bot to come pick up. Governor Linden now sells land for $1/m and holds the price up, glutting the market. Of course, the Lindens have always printed land -- and currency! -- like tinpot dictators or the Russian or Chinese governments (or the US government with food stamps!). They have to, to make revenue. They need land (server) sales/rentals and commissions on currency, not a viable economy that increasingly would likely have little to compensate rent-seekers.
Another bonus with this Washpo piece is the reappearance from post SL-boom obscurity of Beyers Selleers (Richard Bloom), and economist at Cornell University.
I'll never forget my shock when he put Intlibber and some of the other shadier characters of the SL banking and stock world on a Metanomics panel. Says Beyers:
“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.
Well, you do if you are installing socialist or game-god communism -- which is what these oligarchic companies wish to do. What is control? What is spinning? Is it the human desire for free enterprise that always overcomes even the most vigilant game-god oppression?
That's not to say that game/virtual economies don't need regulation:
“We’ve even seen large alliances trying to manipulate aspects of the market to control the supply and affect prices,” Guðmundsson says. “It’s a lot like OPEC.”
Indeed. Remember how Anshe cornered the market on all new prime beach waterfront on the Mainland? But the question is: how liberal and how democratic are these economies when a company runs them? EVE Online has the most player democracy in the Metaverse (supposedly).
Again, the question to ask about something like Ginko: was it a high-interest investment club? Or a pyramid scheme? Pyramid schemes that take five years to play out seem more like investment clubs.
Says Beyers again:
Some economists, however, are starting to observe intriguing phenomena. A 2010 study by Cornell’s Bloomfield looked at an unregulated stock exchange in Second Life, called SLCapex, which raised $145,000 from investors. He found that the market tended to favor large investors over small investors. And, he realized, existing economic theories could not explain why issuers continued to raise so much money in such a setting.
Truly, the companies that raised all that money were losers, many are gone from SL, including Intlibbers, and market theories couldn't explain these things -- only psychology and forensic criminology could.
The desire to play the role of a big CEO, build big buildings, collect money from your new friends that you flatter and give insider deals to, the mutuality of friending and business in SL, the role of griefing and mafias -- these all explain how "the stock market" worked in SL a lot more than an economic textbook.
One researcher delights in virtuality for experimentation because of the alleged transparency:
“In real life, if you want to know what’s happening with car sales, you might call up a handful of car dealerships and ask what their sales are like this month,” says Dmitri Williams, a researcher at the University of Southern California. “In a virtual world, you just know everything. There’s no sampling, there’s no error. It’s perfect information.”
But that "know everything" stuff is available *only to the game gods and their hired economists*. The publics -- the players -- are in the dark. Second Life's makers, Linden Lab, used to publish all kinds of economic statistics, including how many dollars Supply Linden was printing and selling on the LindEx, and the number of people who spent more than a dollar a month, and the statistics on revenue for avatars -- not to mention concurrency figures. All of this information is hidden now, as it is in most games. The consumer is not an informed player in a game-god's market -- it's more like a casino where the house has to win a good percentage of the time.
If virtual-world economists were ethical -- and they aren't -- they'd think about the ethical ramifications to experimenting on people. Instead, they see games and worlds with people and their savings tied up in them as a playground:
Virtual worlds offer one possible way forward. In his essay explaining why he took a job at Valve, Varoufakis noted that the field of econometrics is a “travesty,” in part because of “our inability to run experiments on a macroeconomy such as rewinding time to, say, 1932, in order to see whether the U.S. would have rebounded without the New Deal.” But, he added, in a digital economy, it was possible to alter values, rules and settings, and go “back to observe how the community responds, how relative prices change, the new behavioural patterns that evolve. An economist’s paradise indeed.”
It's bad enough when you're data-scraped by marketers on social media who take away your privacy. Do you want to be a pawn in somebody's "econometrics" experiment to test out their favourite socialist theory on you and see if you howl?