Virtual Economy Research Network

About a year ago, there was a story ricocheting on some news sites about Sweden planning to impose taxes on virtual property sales. It turned out to be a bit of a dud: all they wanted to tax was real-money income, not in-game transactions. Real income, regardless of its source, is supposed to be reported to the taxman anyway. Swedish WoW players would not have to include epic drops on their tax statements, nor would Second Life entrepreneurs be required to report their profits — unless they convert the virtual income to real money, I deduced.

However, nine days ago the Swedish Tax Agency posted a statement/ruling on their website, titled "Virtual worlds — value-added tax" ("Virtuella världar — mervärdesskatt"). In it, the agency states that in-game transactions may incur liability for both value-added tax as well as income tax under Swedish law. Below is my translation of the summary part of the statement interspersed with some analysis.

My virtual economy -related Master's thesis (University of Helsinki, economics), titled Macroeconomic Indicators in a Virtual Economy, is now publicly available. As the name of the thesis implies, I ended up concentrating on the macro approach to virtual economies. I developed a measure of aggregate production for a virtual economy, and identified a suitable measure of inflation. A previous blog entry briefly described the idea behind the aggregate production measure, which I call the Gross User Product (GUP). To add some flesh to theory, the thesis also includes measures of GUP and inflation in EVE Online. I'll probably be blogging on some of the findings in more detail later on.

The abstract and the whole thesis are available in the bibliography.

I'm writing this at Breaking the Magic Circle, a seminar at the Game Research Lab at University of Tampere, Finland. Overall, it's been an interesting seminar. As is typical of game studies gatherings, we've heard a mixed bag of presentations on diverse topics and from distinct angles. This can be both stimulating and frustrating at the same time.

My own contribution was a working paper titled Virtual Worlds Don't Exist. I got some useful feedback, for which I am thankful. Feel free to drop your own feedback either as a comment on this blog or via email. I'll paste the abstract below. Updated: you can find my presentation slides here.

On Monday, 2nd June, the AVEA project at Helsinki Institute for Information Technology (HIIT) organizes an open research seminar on so-called virtual economies.

In the seminar we focus on the following question: "Why should economists and social scientists be interested in virtual economies?" Through discussion and presentations by academic researchers and industry representatives, we investigate the potential of conducting quantitative research on virtual economies that is of interest to mainstream, "serious" researchers.

Savvas Papagiannidis of Newcastle University would like to remind us that the deadline for the virtual worlds special issue of Electronic Commerce Research, a Springer journal, has been extended to 31 May 2008. The special issue call can be found here. I blogged about the original call here.

Also, Edward M. Roche wishes to convey that IARPA, a special research division of the U.S. Office of the Director of National Intelligence, will be publishing a book on virtual worlds. According to the call for chapter authors, the deadline for proposals consisting of chapter title and abstract is on Monday (31 March) already.

Greg Lastowka at Terra Nova has put together a wonderful bibliography on virtual world related articles in law journals. Several of them deal with virtual property and virtual economies.

In the latest EVE Online Quarterly Economic Newsletter, published yesterday, there is a section that is based on my work done at the Helsinki Institute for Information Technology (HIIT). The section in question is the one called Gross User Product, and is the first outcome of the research cooperation between HIIT and CCP that was announced earlier this year.

Gross User Product, or GUP, is a concept upon which I arrived when transferring the concepts of the UN System of National Accounts (SNA) to a virtual economy. SNA is a standard guideline according to which national accounting is performed for real-world national economies. In the very short, SNA tells the statisticians how to measure the national accounting aggregates, such as GDP.

GDP, GUP – what’s the story here? That’s what I try to explain in this blog article.

Digital Game Research Association DiGRA is the main global organisation for ludologists and other scholars studying digital games. Last September I attended the DiGRA 2007: Situated Play conference in Tokyo. It was a surprisingly large and well-organised conference, and featured over a hundred paper presentations on a very diverse set of topics, including some related to virtual economies. The papers are now available in DiGRA's free digital library. I've added the relevant ones to VERN's online bibliography and written an introduction below.

I am happy to announce that we are starting a new virtual economy research project at HIIT. The project has an excellent lineup of collaborators from the industry: Nokia Research Center, Finnish digital media company SWelcom, casual game community Playdo, and MMORPG company CCP Games. Below is the press release.

There are two main types of social science experiments that can, in principle, be conducted in virtual worlds. First, with access to necessary logs of an existing virtual world, one could conduct natural experiments, observing e.g. the effects of the introduction of a new feature. Second, with the necessary influence in some virtual world, one could set up and conduct controlled experiments, that is, tweak some property or rule of the world and observe how it affects the behavior of the participants.