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- |Changes [Feb 26, 2009]
The camera
He told me proudly that his account was worth around US$1200. The four of us were in the internet café again. My brother and I were playing WarCaft III, a real-time strategy game, with a couple of friends through the internet server called Battle.net. I just died and so I had a minute or so to look around and see what other people were playing. I turned to my cousin who was playing Lineage and asked him- yo, do you have any good items? He didn’t notice I was talking to him because he was in the middle of fighting a monster. His dad said- no, we’ve started for several months now and I’m already level 52 where he’s only 35.
I turned to the other side and asked him- so what items do you have? He told me he had a couple of decent items and that his account was worth around US$1200. I was shocked by the amount. That amount could have paid for more than a few months of living expenses for their family- him, his son and his wife. I quickly asked him- so… why don’t you sell the account?
I knew that an account was worth money because I played Ragnarok. But for many people this is shocking. I gave a Japanese presentation (English | Japanese) a week ago and half of the class was surprised that people were willing to pay real money for something you can’t taste, can’t smell, and can’t touch. A simple way to think about it is where there are people there is need and where there is need there is money. Another way to think about it, perhaps a little easier, is that money is a way to buy something you want. In the online gaming world, players want good weapons, armor, and other rare items. That is what you get for your money.
There are many uses of real money in the virtual online gaming world. Some people use real dollars to buy virtual items, virtual accounts from retired players [link], or simply trade it for virtual currency if they can’t decide what to buy now. The purchasing power of currency is interesting especially when some game currency is worth more than the Japanese Yen. But what is even more interesting is taking this virtual world and analyze it as a real life situation- a real economy.
The pioneer and guru in the field of virtual economy is Mr. Edward Castronova. In Mr. Castronova’s famous thesis about “synthetic worlds”, a word he coined to refer to MMORPG worlds, he analyzes a virtual economy with many of the same indicators economists use to analyze, say China’s economy. Production, labor supply, income, inflation, foreign trade, currency exchange and GNP per capita are factors in our economy that take a role in a virtual economy.
Mr. Castronova calculated that the GNP per capita, Gross National Product per capita widely used as an indicator of how prosperous the citizens of the nation are, of Norrath, a country in the MMORPG EverQuest, is US$2,266 per capita. The following is an excerpt from Mr. Castronova’s paper:
“According to GNP data from the World Bank, Norrath is the 77th richest country in the world, roughly equal to Russia… By all measures, Norrath is richer than many important countries, including China and India.” (Source 5)
This means that a person in China will have a more prosperous life in Norrath via the Internet than in China itself. In other words, if that person went online everyday for a year and sold the account at the end of the year, he would be making more money than the average person in China. Because of this, many people make a living taking advantage of this arbitrage by excessively gold farming.
Farming is an everyday thing in MMORPGs. It is the act of collecting money and items by continually killing monsters within the game. But what happens is that because virtual money has real value and can be exchanged for US dollars, some players farm purely to exchange the gold into real world currency known as gold farmers. Together with many factors of a virtual world, the result is hyperinflation.
There are two key attributes to gold farmers. First is that they have no demand for in game commodities, since all they want is to trade it for real world money. In addition to that, gold farmers tend to play long hours thus, generating a large supply of in game commodities. These commodities, be it gold or weapons, thus create excess supply.
The in game players may not feel it initially because all the exchange takes place in online auction websites such as eBay and IGE. Since there is excess supply, you can buy more with each US Dollar. What is detrimental and frustrating to in game players is that then, players can simply buy their way into the game and win in game auctions for rare items. In addition, the excess supply generated by gold farmers increases the in game price of commodities, and thus inflation.
But perhaps the most important cause of inflation aside from a large number of gold farmers is that the in game items do not decay. Imagine yourself never having to buy new clothes and never having to replace anything you own- even food. This is a little exaggerated but somewhat true of online games. In that case, isn’t demand falling? Exactly, thus we have hyperinflation- supply rising and demand falling. Mr. Castronova studied inflation in Norrath and found the following:
“The rate was, in fact, 0.0133 in May but had slipped to 0.0098 by September, a decline of over 25% in a quarter.” (Source 5)
In other words, without doing anything, the worth of your in game account will decrease by 25% per quarter mainly due to gold farmers. It has been a big deal and many backlashes have happened. In my conversation with Henry, he told me that many players actively search and attack gold farmers, which I thought was comical.
Game developers have also recognized the problem of inflation and have done many steps to counteract it. The most basic is to keep creating new items. When a rare item is created, it creates demand along with it, thus constantly stimulating the economy. Other developers have taken a more direct approach at the problem- to regulate real currency and virtual currency exchange.
Sony, the developer of EverQuest and creator of Norrath, is scheduled to release their official secure marketplace for currency exchange in EverQuest II [link]. I recall in the original EverQuest, Sony banned the sell of virtual currency and items on the grounds that that property belonged to Sony. But clearly ineffective, Sony has now moved towards accommodating it. But the inherit inflation in online commodities will nonetheless, still be there.
When I told him to sell his account, he gave me a look as if I did not understand anything and told me that he would sell his account when it reaches NT$100,000 (~US$2800). I really wish he sold the account so he could take a break and look at the world around him. I also really wish he could see what I see- his wife working, his son slacking class in school, and himself playing Lineage. For now, perhaps all I can wish for is that the inflation slows down so he can reach his goal faster. But when he reaches NT$100,000 will he wish for more? Is this a never ending cycle? Every time I watch him play and chat with him about Lineage, I sigh in my heart. Hopefully, by the end of these journal entries, I can find some way to alleviate the situation.
