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Macroeconomic Indicators in a Virtual Economy

TitleMacroeconomic Indicators in a Virtual Economy
Publication TypeThesis
Year of Publication2008
AuthorsLehtiniemi, T.
Date Published03/2008
UniversityUniversity of Helsinki

In this thesis, I examine the economic systems revolving around production and exchange of virtual property. From my viewpoint, the central forms of virtual property include e.g. virtual items in community sites, and virtual goods and characters in online games. Production of virtual property often requires significant time inputs from the users, and the users also trade it for real money.I treat these economic systems, called virtual economies, as sufficiently separate economies whose macroeconomic properties can be discussed. Particularly, I focus on the question “Can meaningful macroeconomic indicators be computed for a virtual economy?” The macroeconomic indicators that are investigated in this study are aggregate production and inflation.
My approach is to identify relevant principles using which these indicators are computed for national economies, and then transfer the same principles to a virtual economy. The developed aggregate production measure, called Gross User Product (GUP), is defined based on the principles underlying the System of National Accounts (SNA). GUP measures the aggregate economic activities of the users of a virtual economy. The central feature of GUP is that it makes a distinction between production by the users and production by the service they use.
The possibility to log potentially all transactions in a virtual economy allows for flexible choice of an inflation measure. Measuring inflation for a virtual economy is, in this sense, easier than for e.g. a national economy. The employed inflation measure is a chained Fischer index, which is computed based on market transaction data of virtual final goods.
Both macroeconomic indicators are computed for the virtual economy of EVE Online. The economy of EVE Online consists of production and exchange activities of about 200,000 users, all of who potentially interact with each other. Transaction and production data from the logs of EVE Online is employed in the computations.
The previously published research on macroeconomic indicators for a virtual economy has focused on using data collected from real-money trading markets external to the virtual economy. This study shows that virtual economies can be regarded as separate economic systems, and that comprehensive macroeconomic indicators can be computed for them. The employed tools of economics transfer well to the analysis of a virtual economy. The results can be used for e.g. tracking the state of a virtual economy and macroeconomic modeling.