February 2021

Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
Blog powered by Typepad

« Call for Papers: "Orders and Borders" | Main | GEM Latest Vintage: More Institutional Analysis »


Feed You can follow this conversation by subscribing to the comment feed for this post.

This confirms what I suspected all along.

You people are crazy.

Go with selection bias. I've been a resident of quite a few virtual worlds spending far too much time in a couple of them.

"Indeed Castronova argues that because everyone starts on an equal footing in terms of distribution of physical assets (i.e. zero), people seem to accept the distribution of incomes and the allocation of property that result."

Wrong. Out of virtual world resources can easily be funneled in game via paying other people real money to do stuff for you in the virtual world. And what about time? Is it even possible for a guy with a job and kids to even complete with a teenager who has no responsibilities in these virtual worlds (aside from paying other people)?

"Game participants are not envious of each other. Some people choose to work and invest more than others, some people are smarter than others, but nobody cares whether this makes the end result more “unequal.”"

This is just really absurd. People are not envious? Nobody cares? People constantly complain about how "unfair" (which often times roots from envy) things are in these virtual worlds and appeal to the game developers to do something about it, and sometimes they do.

My vote for best Sautet post ever.

I'm skeptical about the supposed migration to the virtual world en total, but what about just ordinary trades and transactions that used to take place through physical face to face contact that have since been shifted over to the internet trade. In a world where goods and services will transcend physical borders at the click of a button will people be culturally willing to accept taxation and regulation that arbitrarily adheres to physical national boundaries? If not what is that likely tipping point? What percentage of the global economy would have to go online?

I don't think the lack of envy is so much from distribution of equal resources as much as an understanding of how the person became a high level orc/wizard or whatever.

The assumption in the real world is always that a rich person is just given something or they don't work as hard as a union guy or they're just lucky. The average Joe makes a million and one excuses why that person is rich and he is not.

However in a virtual world with set rules, every player knows the progression it requires to become some sort of high level character. No one can say the person cheated, got lucky, or were endowed anything. They played the game a lot and "worked" hard and got to that stage. Everyone knows it.

In summation, envy in society is more than endowment. It's almost always tied with a belief that someone else is lucky and you're not and that's the real difference which surely isn't fair.

One more note,

Some of the most envious people are from poor neighborhoods who see people from their own neighborhood succeed in life while they did not. The fact that they came from the same endowment actually makes a person twice as angry and envious.

In the online world, everyone knows how to play the game and what the rules are. In real world, unfortunately, a lot of people have not figured it out. Hence without knowing the rules to succeeding, there will always be frustration

Chris is right, many of these worlds are fraught with envy. However, for the most part prohibitions on PvP (player vs. player conflict) tend to curb envy. That is, without the ability for the strong to steal from the weak, people don't care nearly as much.

I'm going to have to side with Mises on this. People are naturally selfish and will steal whatever they can get away with. It is gains from trade and the costs of violence which compel people to cooperate and take on libertarian ethics.


While I think you make a very valid point regarding the the importance of Player vs. Player conflict being prohibited as something of importance, I don't quite understand your connection between envy and stealing.

If no one could steal in the real world, people would still be envious of those with more goods. Are you implying that people are envious of specifically power or the ability to control? That is surely one aspect but there's more to envy than that. The P vs. P prohibitions would eliminate part of the equation but certainly not all.


My explanation was very incomplete. Most of these games focus a lot on combat, and "powerful" players are generally those who are better at violence than others. In my experience, when PvP conflict exists in a form which isn't consensual*, players better a combat suddenly possess the ability coerce their peers. This usually manifests itself by the powerful player killing less powerful players either for the fun of it, or to take their stuff. The penalties of dying typically mean the powerful character is even more powerful relative to his victim than he was before. I think people envy this power, as well as whatever the killer gains from it.

If this sort of behavior is possible, the existence of character combat power becomes much more important, and hence something to be envied more than it might otherwise be. In my experience, combat power is valued much less in settings of relative safety, where people can enjoy many other aspects of the game (such as social interaction, crafting, etc). Without the possibility for unwanted conflict, the "leveling treadmill" as its called becomes much less important and (I think this is the critical difference) optional to the enjoyment of the game.

Just like most rich people in real life don't live in Beverly Hills or Palm Beach and compete to have the biggest mansions, I don't think most players in online games are looking to have the most powerful characters. I think people choose their "games", in the real world and virtual ones.

Anyways, the typical answer to problems of envy (which manifest themselves as people complaining about fairness) is to "nerf" (i.e., make weaker) the most powerful characters. Usually this is a straight cap on character power, or a "soft" cap where the marginal returns to power-seeking behavior drop drastically at higher levels. In my experience, the later improves the gaming experience immensely, but then I've never been one to put a ton of hours into those sorts of games (which can be necissary for competitive play when the caps are set very high, which I believe they are in games like WoW).

I've never heard anyone clamor for a redistributive scheme. All of the fairness schemes I've read of involve restricting power, and almost all are rules-based and not results-based (i.e., the developers reduce the wealth of the rich characters specifically, but the perceived unbalanced methods by which they acquired their wealth).

The one results-based power cap I've heard of one was one I implemented as a developer on a family of gaming serves. It was a very special case, because on these servers power was rewarded by human administrators who refused to coordinate and arrive at any sort of consensus on what awards were appropriate in what situations. The results-based cap was a "fix" for this problem, and a highly contentious one (with many players leaving over it). Everyone agreed that without the possibility of PvP conflict, it would not have been necissary.

Overall, I think its really hard to judge how "libertarian" online worlds are, since most focus on violence. We'd first have to define coercion in that context. If we took a Hayekian definition of it, I think the answer is "yes".

* This does not necessarily imply artificial PvP constraints or the lack thereof, but just a setting where people's implicit expectations of PvP conflict are more or less upheld. When in-game bugs can be exploited to the detriment of others, coercion can exist even in an environment where the game's code attempts to prohibit it.

Is this "virtual world" supposed to serve any purpose in economics, or is it simply an innocent diversion, like a pick-up basketball game?

Interesting comments Grant. One could argue that restricting power is a form of redistribution. The player who is restricted cannot fully exercise her power and the others benefit from this limitation by having more of something (life or whatever). So rules that restrict power are to some extent redistributive *and* they are compatible with a deontological approach (even if they are implemented half-way through, in which case one could argue that they are also result-based since they were implemented because people wanted a different outcome).

I read this, but I don't believe what I'm reading.

Is this really what the Austrian School has come to?

We can't talk about redistribution in the real world, but it's alright in schizoland.

dg lesvic,

I think the virtual worlds are useful tools in analyzing some things in economics (but perhaps not envy). For example, check out Alexander Villcampa's article on cult website LewRockwell.com:


I have also heard that some academic work has been done on virtual worlds but I have not specifically read it myself. Perhaps it's worth a search

I find this conversation far more thrilling than arguing over what Kirzner or Hayek said on such and such page of such and such book. Complete waste of time...


You wrote: "I think the virtual worlds are useful tools in analyzing some things in economics (but perhaps not envy). For example, check out Alexander Villcampa's article on cult website LewRockwell.com:"

I did check it out, and I think you got it backward. The point was that economics was useful in the virtual world, not vice versa.

You wrote: "I find this conversation far more thrilling than arguing over what Kirzner or Hayek said on such and such page of such and such book. Complete waste of time..."

This is the pot calling the kettle black. Your virtual world is just like the minute differences between Hayek and Kirzner, a relief from the heavy lifting of economics.

From John Stuart Mill down to Hayek and Mises, "distribution" was "the real battle-ground of economics."

But they don't make economists like that any more.

What I found amazing in the article was that economic principles could be traced in the virtual worlds. Under the right person's supervision one of these worlds could be used as a giant experimental economics instrument and could be used to separate different elements of trade and even growth.

Let's analyze a world where property is safe. What about one where people can attack other players. Increase the money supply in the economy. Tighten supplies of certain items. See if you can develop speculation markets. The possibilities are infinite. Make options for entrepreneurship open as in WoW, follow trends.

You completely misunderstood what I meant by "virtual worlds are useful tools in analyzing some things in economics"


When power over other players is highly desired, then I'd agree restricting that power is a form of redistribution, because its relative standing that matters more than anything else. I think looking at these sorts of things as results-based might be a bit tricky. Game are designed and marketed towards gamers who expect some sort of a result from their purchase. However, complex rules, bugs, and the adaptive, emergent behavior of the player base make it nigh-impossible for the game designers to "get it right" the first time. They must look at the results and adjust the rules of the game accordingly. I think they make adjustments depending on how the results of the game world differed from the design they were shooting for, but for the individual player this manifests as rules-based changes.

I think there might be an application for economics in games like this. Its tricky to build a world which actually turns out the way you want it (and therefore the way the players who it was marketed towards want it) once its filled with players who each pursue their own self-interest. Since the game worlds are purely the product of conscious design, I don't think the designers face any sort of "knowledge problem" because they have perfect knowledge about the game world. In practice however, I think its very difficult to apply that knowledge in a meaningful way without trial and error. I wonder if economic tools such as game theory and mechanism design might help here.

But then I've always wondered why economics seems so geared towards influencing government policy. It seems like it has so much more potential dealing with market failures and coordination problems via the private sector.

Is this new virtual world supposed to be a new kind of real world or a new kind of imaginary construction?

If a real world, how does it free you from the old one?

If an imaginary construction, how does it improve upon those already in our minds?

dg lesvic,

In the real world, doing econometric studies is in my opinion always problematic especially regarding casual relationships. There is too much going on at once.

In a virtual world, you could change rules around to see how they effect the game considering the players act like real economic agents in regards to many things and even compare them to the same game.

Further, imagine the data! Considering everyone's gold, hours, skill level is recorded, you would have perfect data about your entire world at any point in time. Something which is impossible to do in the real world.

As Grant just mentioned. you would have "perfect Knowledge" of the game world which opens whole new avenues since we never have it in the real world.


Since you haven't answered my question, I'll answer it for you.

Your virtual world is not a real world, nor a new, improved imaginary construction.

It is not economics. It is just a game. Period.

dg lesvic,

If real people are taking real human action. It's real. And we can observe how they make those actions under prescribed circumstances in a virtual world. When people play WoW, trust me they don't teleport to a different dimension. They're still on earth trying to achieve ends in a game using human action.

People in the real world are playing the game and achieving ends in the game facing constraints of resources. Period.

Now whether this can tell us something about our daily lives is a different question? And that really depends on the research as well as a good bit of discussion. But to say, well it's a computer world it doesn't matter at all is being very close minded. Second Life recently had a virtual bank run. Don't you find events like that interesting?


A dreamworld is real too, for it's a real dream.

But isn't that different from the real world, in the usual sense of the term?

If your world is real in the usual sense, why call it a virtual world? Isn't that an admission that it's not the real world, in the usual sense?

And if it's an imaginary construct, how does it improve upon those that we already employ in economics?

virtual world....call it whatever you like. Why not say people playing games at their computer making choices in a game with constraints to their ends.... very real. Let's call it online games instead. Not an admission of anything. Problem solved. What's the difference in me trading goods in with a person in my city and then going online and making trades of data to which you place a subjective valuation with other people online?

There is nothing imaginary going on. The game is real, people play it. Valuations are set to different pieces of data and people spend hours trying to get the data and trade it. If these games are not real and do not account for real subjective valuations of data, then explain to me why people spend hours upon hours attempting to get certain data?

You are ultimately committing a logical fallacy of parts. Because some aspects or even most aspects of the online games do not apply to economics, then none of it must apply.

Dream worlds are different. In a dream world, you are not making choices based on a constraint of resources. and You are correct hence it is greatly different and not at all useful. Nor do dreams constitute purposeful human action. They just happen

you whole argument has been "it's not the real world" so it doesn't apply to economics. You should instead tell me HOW it is not like the real world.

Start with the scenario that I suggested in the last post. I have data that I played the game for hours to get and (let's say a magical sword) I place a valuation on it as the sword makes my game playing more enjoyable. Someone wants to buy it with their data (gold coins). We have to come to some sort of agreement if we are to trade.

I own a bike that brings me enjoyment and which I worked hours for. Someone wants to buy it for cash. If there is to be trade we have to come to an agreement.

How are these two things not the same?

Saying "it's not real" does not prove or disprove anything. You must instead PROVE logically why these two forms of trade are different


Since the specific method of economics is that of imaginary constructions, your games cannot be both reality and economics. So far as they are reality, they are not economics. And so far as they economics, they are not reality, but imaginary constructions.

If so, how are they better than those already in use?



dg lesvic,

I believe that I've made my case rather clear. If you don't see my point of view by now, then we will have to simply agree to disagree

I don't agree.

That's an interesting thought. Reminds me of the matrix, where the one "freedom fighter" as it were turned traitor and wanted to be plugged back in to the make believe reality of the matrix. In some ways the attraction may be that it is make believe. Anybody can appear to be anything they want online. In these virtual worlds, second life etc. people can act freely without fear of how friends and relatives will interpret them. Also, there is no real risk in virtual worlds. If you go broke, you still get to eat dinner... hopefully.

The comments to this entry are closed.

Our Books