Virtual Economy Research Network

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.

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.

The fourth EVE Fanfest, an event giving the EVE Online players an opportunity to meet each other and the game developers, was held in Reykjavik 1. - 3. November. There were two interesting revelations in the event, which also sparked discussion in panels and roundtables, a part of which I’ll try to summarize here. The first one had to with a soon-to-be-published white paper on the EVE player democracy, and why it actually might not be wise to call it democracy after all. The second was about the soon-to-be-published EVE Online Quarterly Economics Newsletter, Vol.1, No.1.

In addition to these two interesting matters, there’s also the reason why a representative of Helsinki Institute of Information Technology (HIIT) was present at EVE Fanfest this year, namely, a recently formed agreement of research co-operation between HIIT and CCP, the operator of EVE Online.

I am not intensely interested in MMORPG secondary markets that exist despite the operator's wishes, and I certainly don't have any agenda of legitimising them. But after the last SoP V workshops yesterday there was a rather lively coffee table debate on RMT in MMORPGs that resulted in a neatly economistic re-telling of that story. I'll try to convey the tale without misrepresenting the particpants too much.

Already during one of the panels Joshua Fairfield reminded us of the positive aspect of RMT: trade creates welfare gains ("Every time you stop someone from trading, God kills a kitten", as he politely put it). Richard Bartle obviously wouldn't have any of that and brought up the negative aspects, centering on the violation of the achievement hierarchy associated with character levels.

The Ludvig von Mises institute, an advocate for the Austrian line of economic thought, recently published an article in which Matthew Beller analyzes the Second Life (SL) economy. I’m happy to see such work done on virtual economies, and published on a forum that I suppose also some mainstream economists read.

There are also some other analyses of the SL economy available. Randolph Harrison has previously written an article that’s somewhat related to the Beller’s article, both of them dealing with Linden Lab’s tendency to intervene in the “foreign exchange” markets of Linden Dollars, the internal currency of SL.