Let’s get a few things straight right off the bat. I’m certainly no economist (truth be told, I’m currently an undergraduate student with a major in journalism) and I’m certain I’m missing several things here. I also understand that a video game certainly doesn’t mimic the nuances of the real-world market or the forces that drive it. That said, I believe the case can be made that massively multiplayer online games (MMORPGs) such as World of WarCraft™ offer a unique glimpse into a totally unfettered, unregulated free market system and show just how potentially dangerous it really is, even in a virtual setting.
This is Bumburr, a dwarven hunter in the popular PC game World of WarCraft™.
As in any game the object in World of WarCraft™ is ultimately to have fun, but MMORPGs generally have a more focused approach than that. The most common activities in a game like World of Warcraft involve the acquisition of riches and equipment. Players are constantly fighting to increase their standing in the world and the wealth of their characters, which is why I feel MMORPGs make a perfect microcosm for economic study.
Money in World of WarCraft™ is fairly simple. Copper is the lowest form of currency, silver the middle, and gold the highest. 100 copper coins = 1 silver, and 100 silver = 1 gold.
In World of Warcraft™ if a player is in need of money the two most common ways to acquire it are to kill monsters for loot or to harvest resources. Each character is also allowed two trade skills. Often these take the form of one gathering skill and one finishing skill. In Bumburr’s case, his gathering skill is mining and his finishing skill is engineering. Other gathering skills include herbalism, skinning and fishing.
World of WarCraft™ takes one of the basic pitfalls of the unfettered free market mindset and makes it a reality: Resources are infinite in this virtual world. There are an infinite number of monsters in World of Warcraft to kill (and skin), an infinite number of ore nodes to mine, an infinite number of herbs to gather. When it comes to accumulating wealth, Bumburr is only limited in the amount of time I choose to invest in the slaughter/harvest, and the respawn rate of the chosen prey.
In addition there are quests a player may undertake on a daily basis to provide an influx of money. These quests are designed to be completed by a player of maximum level (70) and often have the player performing fairly quirky tasks. Generally speaking, a player may expect to make roughly 250-300 gold on a daily basis just by performing these quests alone. Obviously, any player who spends more time playing the game is accumulating more wealth over time than a "casual" player.
Once a player attains level 70 the floodgates of wealth draw open and it is possible to acquire thousands of gold every week with only a modicum of effort. Conversely, a player would have to be frugal and somewhat lucky to accumulate even 1000 gold between levels 1-69.
This is the Auction House. As you can see, it’s rather busy. At any given point in time, thousands of auctions are taking place for any and every item that can be found in the game: weapons, armor, potions, trade skill components and anything else that can make a copper. This is an entirely unfettered free market. There are no price limits, no limit on what can be bought or sold, and no regulation of any sort save what the market will bear.
When the game was first launched, it was rare to see almost anything in the Auction House, simply due to the scarcity of resources. People used what they found or bartered them to their friends and guild mates. Prices were kept low, as well, because people didn’t have money to burn. Supply was low, demand was low, prices were low. Textbook deflation.
As the game aged, the market began to grow. Goods and money became more plentiful. A simple class structure began to emerge as groups of people began to cooperate to produce or harvest goods and sell them on the market. The first market speculation began as people would purchase all the goods they could at a low price and resell at a higher price to those who needed them. Undercutting prices was iffy at best, because resellers would immediately purchase the newly-offered goods and put them back up at the higher price. Obviously, this is basic Economics 101 stuff, but here it was being put into practice.
This practice continued unfettered and without penalty. People began to complain loudly on the game forums about monopolization of goods and the need for some sort of price fixing or market regulation. Ultimately a number of characters were blacklisted for their punitive reselling habits.
The damage had already been done. The average price for goods had almost doubled as people began to accept the higher price as the norm. The market was now experiencing a high amount of inflation. Lower-level characters found that they could no longer afford to purchase goods at a reasonable price and many suffered for it. In response, people began to harvest massive amounts of raw goods and flooded the market, temporarily driving prices down once more.
It wouldn’t last. By now a conglomerate of guilds had managed to separate from the pack. This power elite became widely acknowledged as the major players within the game and within the market. This may have been the heyday of the old economic system, as relatively new players were able to place the fruits of their labor on the market and expect a fairly hefty price from the established elite.
Unfortunately, the ability of the elite to purchase the offered goods at higher prices did not alleviate the problem of the lower-level people being unable to purchase the goods themselves. Thus, lower-level people became almost entirely dependent on the patronage of the elite to make any money on the market at all, and the elite continued to expand their wealth. Class stratification was quickly becoming apparent.
Now, as described earlier, money is extremely easy to obtain for everyone, assuming that you’re level 70. It’s easy to see that this only exacerbates the problem: The elite continue to use the market as their playground, the poor and the new are completely unable to take part save to sell, and prices have become hideously overinflated. As a result, newer players are finding it difficult to get the materials they need to craft items and trade skills are suffering. Without some sort of viable resource dump in the game, the problem only threatens to worsen as more and more money is introduced into the economy.
This is by no means an isolated case. In almost every MMORPG a similar problem with the game's economy has occurred. Obviously, things aren’t quite the same in the real world, and now we’ll take a look at some of the major differences.
For starters, neither money nor resources are infinite in the real world. The buying power of the wealthy elite, however, has panned out and has become a reality. In World of WarCraft™ everyone with a pick and a dream can become a miner extraordinaire. In the real world, it doesn’t work that way. Starting any new business requires a significant investment of time and money, as well as the availability of resources. This lowers the chance for new entries into the market and helps to ensure that the entrenched power stays entrenched.
Second, because not everyone is able to reach a threshold where earning potential is limitless (in real life there is no level 70 for everyone), the potential amount of buying power that a person can ever realistically hope for is limited. Once again, this prevents individuals and smaller companies from ever hoping to have a real piece of the pie.
Third, the level of economic stratification in the real world is far greater than that in World of WarCraft™. The poorest live in wretched misery and the richest live in insanely opulent splendor. Contrast that with the relatively egalitarian society in World of WarCraft™ where money is never more than a few minutes and a bit of effort away. Because of this, the situation in games can never truly spiral out of control. No matter how rich the richest become, they ultimately cannot have the same power and influence over others because of the abundance of resources and the ease of acquiring them.
Fourth, of course, we have some level of regulation on prices and on our own markets. Granted, this has been greatly eroded over the last twenty years, but without even these regulations I believe that the disparate distribution of wealth would have been far more pronounced and would have already ushered in a society that might well have resembled feudalism (some might say we’re already there).
So what am I getting at here? The problem is that we’ve been running our economy as if it were an MMORPG, without the requisite safeguards that prevent economic crash. We’ve been increasing inflation, increasing spending, and putting an increasingly higher amount of purchasing power and economic influence in the hands of the very few.
Unfortunately, I don’t have the same guarantees against that inflation that I do in the game. If I’m hungry and out of cash I can’t just step outside the door and beat up on some gnolls. I can’t grab a pick and hop down to the local quarry to dig up some gold. I can’t talk to my neighbor and mow their lawn every day for $50 a pop. It just doesn’t work that way.
Why do we allow our economic elite to play games with our future?