News, research and discussion on virtual goods, currencies and economies globally.

The development aspects of gold farming

The Hindu Gold Dubloon -- photo by Swamibu

Professor Richard Heeks from University of Manchester recently made available a working paper titled Current Analysis and Future Research Agenda on “Gold Farming”: Real-World Production in Developing Countries for the Virtual Economies of Online Games. Heeks summarizes pretty much everything that is currently known on gold farming. The approach is systematic and includes meticulously going through e.g. the estimates on on RMT market volume and aggregate spending on gold farming products, trends of RMT market prices and their effect on gold farming, the stakeholders in the gold farming industry, and the virtual world operators’ incentives in reacting to gold farmers.

The paper can be found via the VERN bibliography. Instead of listing more of its contents here, I’d like to point out the viewpoint of development studies, which is novel in these circles at least to myself, and which is interestingly visible in many parts of the paper.

According to the sources referred to by Heeks, there are probably something like 400,000 gold farmers in 2008, serving something like 5-10 million customers and earning around USD 145 per month. By far most of the farmers are located in China. The gold farming enterprises share many features with typical developing country enterprises: the gold farms are mainly micro-enterprise-sized and based on the informal sector. They are, however, run by more entrepreneurial individuals than the norm, pulled to the market by available input factors and profits rather than pushed by the unavailability of options.

From the development studies point of view, the interesting question is, what is the socioeconomic effect of all this? Heeks seems to believe it has been positive: compared to the alternatives the gold farmers face, the pay, working conditions and prospects seem as good as or better. On the macro level, the impact is likely positive: instead of substituting one form of employment for another, the gold farms seem to create new employment, increasing national income. Since much of the gold farming products and services are bought by foreigners, the gold farms also affect the balance of trade positively.

As one of the possible future research area, Heeks mentions the further investigation of socioeconomic consequences of gold farming and, if there turn out to be developmental benefits, the strategies that countries interested in developing a gold farming sub-sector should employ. I believe this to be a fresh point of view, and one that may be shunned by many of the anti-RMT folk out there.

The paper offers a good summary to anyone interested in to RMT and related phenomena, regardless of attitude towards gold farming.

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