The current credit crisis has caught monetary policy experts by surprise, from the governor of the Bank of England to executives in financial institutions around the world.

But would they have been better prepared if the contributing factors had already been rehearsed in a virtual world economy?

It’s a possibility that would intrigue Michael Boskin, former chairman of the Council of Economic Advisers under the first President Bush.

Now a professor of economics at Stanford University’s Hoover Institution, he was this week appointed chair of the newly created Council of Economic Advisers in the virtual world Gaia Online.

He is the latest in a long line of economists studying virtual worlds, dating back to Edward Castronova’s influential paper on Everquest in 2001.

Mr Boskin told me one thing he would be looking at would be whether there was a need for a central bank in Gaia Online.

“Historically, various institutions have grown up to facilitate banking – we did not have the Federal Reserve till 1913, so central banks can be a fairly recent phenomenon. Seven virtual banks have opened up in Gaia, their interest rates can be different so we may be able to provide more transparency and give users advice on that.”

Gaia does not allow its gold to be converted into real-world currency, unlike Second Life, where its creator Linden Lab, makes money on such currency exchanges.

Second Life avoided a currency crisis earlier this summer when exchanges halved from around 2m US dollars a day following a crackdown on gambling. John Zdanowski, the company’s chief financial officer, said a run on the Linden dollar was avoided through the strategy of managing the money supply so the exchange rate stayed fixed against the dollar – similar to China’s policy.

Economists from the University of Chicago have also been carrying out experiments in Second Life this summer, including a study of whether residents would give up some of their assets to a public fund in exchange for an undisclosed reward.

Eve Online, which enables intergalactic wars and alliances for its members, appointed Eyjolfur Gudmondsson, a resource economist, last month to monitor the transactions of its 200,000 players.

His main focus is currently on how to tackle inflation – one method is to open up new planets for mineral exploitation, reducing commodity prices.

Meanwhile, Edward Castronova has created his own Shakespearian virtual world called Arden, backed by the University of Indiana, where he and his students will carry out experiments testing basic economic principles.

As Shakespeare said: “O brave new world that has such people in it.”

The appeal of the iPhone, and by association the new iPod touch, is growing as developers come up with more native application icons to add to its screen.

There is everything from the ability to play the original Pong, to Doom, Blackjack, an eBook reader, Etch-a-Sketch and an aquarium.

But, despite Steve Jobs’ enthusiasm for the Safari browser, viewing full-featured web pages is still an unsatisfying experience given the size of the screen.

However, the number of sites that are offering iPhone versions with an app-like feel and format is growing – Facebook’s was shown off by Jobs at the recent iPod touch launch.

The latest site to get the iPhone treatment comes from Seeqpod, a music search engine that will allow you to listen to your favourite music for free rather than have to buy it from the new wireless iTunes store.

Seeqpod is impressive in its full-sized web iteration. I was given a demonstration by co-founders of the East Bay company, Kasian Franks and Shekhar Lodha.

Type in any favourite artist or track in the simple search box and Seeqpod compiles a list of complete songs it has found on the web, showing them on the left side of the screen. Clicking on them transfers them to the right side to form a playlist, where an audio player begins caching and playing the top track. Clicking on a TV-screen icon, opens up a player for the music video found for the song.

Seeqpod calls itself “playable search” but its algorithms originate in the Lawrence Berkeley National Laboratory where they matched genes with other genes in life sciences.

Kasian Franks worked there and got permission to take it out of the lab to try to commercialise the idea in 2005. He sees a number of possible verticals – from health and finance to zoology – but hit on music and video first.

The technology goes beyond keyword search to also tap into user recommendations. It has crawled 10m songs on the Web. The founders say they do not host any of them, so should escape scrutiny from the record companies.

BroadClip used a similar argument at the TechCrunch40 conference this week and earned a putdown from former Napster executive Don Dodge.

Seeqpod lacks Apple’s cover art, but the company thinks it could find and add that through its search techniques eventually.

“We’re like an iPod with 10m songs, so we’re bigger than Apple,” jokes Mr Franks.

It plans to make money through its own contextual advertising and will license the product – WFMU, a popular radio station is already using it to index its content and create another iPhone destination.

   Don’t fake it.

That’s the main lesson for corporate types who want to use video sites like YouTube to promote their message, according to researchers at the Cass Business School. Viewers apparently don’t like to be taken in.

This is based on preliminary research into the viewing statistics for a sample of YouTube videos. Caroline Wiertz, a senior lecturer in marketing at Cass, says they show that authenticity is a big issue. Viewers react badly if they think professional content is being passed off as something amateur. "It is a dangerous game to try to dupe them," she says.

The other early finding from this analysis of viewing habits: embarrassment works. Viewers like to squirm, and they go back more often to videos that offer this vicarious thrill.

For a conference that is all about wooing investors, panellists and the media, TechCrunch40 could really have benefited from the technology demonstrated by WooMe in the last session of the two-day start-up auditions.

WooMe brings speed dating online, allowing users to set up video chat sessions where they can meet five people in five minutes, or other combinations.

Judges, including 80s rap artist MC Hammer, were confronted with the sight of Skype co-founder Niklas Zennström posing on-screen as Nicole from West London. But he spent his minute talking about why he had invested in the company rather than trying to be a hot date from Sweden.

In a pre-TechCrunch demo at our offices, WooMe showed off the high-quality flash video conferencing within a browser and how users could add one-word tags of their impressions as they spoke to potential dates, creating tag clouds for that person.

After accelerating through all the dates, users select “I’m wooed” or “No thanks” for each one. If one of the dates matches their “I’m wooed”, they can connect for a $1 charge, with WooMe providing their email contact details.

In alpha testing, WooMe has encouraged college fraternities to compete with one another in “I’m wooed” league tables and has even used the technology itself to interview prospective staff, with its own team voting on whether they are wowed by the interviewee.

The Techcrunch panelists could equally have used WooMe to vote on the 40 start-ups they have speed-dated for the past two days.

It looks a promising service for everything from dating to finding flatmates or travelling companions, but it does have competition in SpeedDate.com.

Luckily, WooMe wooed the TechCrunch selection panel, who said “No thanks” to SpeedDate – condemning it to the DemoPit at the conference of 100 jilted also-rans.

Overall winner of hearts and minds over the two days, as well as the $50,000 cash prize, was Mint, a personal finance application.

Big Blue can still pack a punch in the Web 2.0 world. Silicon Valley’s eyes have been turned this week on the TechCrunch40 conference (see note below), a coming-out party for the Valley’s hottest new internet companies. How ironic, then, that some of the biggest news has come from an old tech giant that was conspicuously absent.

IBM has said it will distribute a version of Open Office, the open-source office productivity suite, to run with its Lotus Notes software. While Web 2.0 start-ups are racing to out-do each other with new online Office-type applications, IBM has just dusted off an old Microsoft competitor and given it a fresh coat of paint.

Of course, Open Office has failed to make any dent in Microsoft’s market until now, despite Sun Microsystems’ much-trumpeted support for the software. Thanks to the distribution muscle of Lotus and its reputation with corporate IT departments, though, Big Blue might well fare better.

Conspiracy theorists will have noticed that IBM’s declaration of support for Open Office comes the day after Microsoft was handed a humiliating defeat in its battle with European regulators. The IBM-backed trade group that lobbied hard against Microsoft in Europe is widely expected to try to persuade the EU to take aim next at the dominant market position of Microsoft’s Office software. IBM has also so far succeeded in preventing Microsoft from having its new Office formats declared an international standards (unlike the ODF formats in Open Office.)

This has even overshadowed news from Google today that it will add a Powerpoint-like presentation feature to its online applictions, putting the final element of its own Office-like suite in place.

So what hope is there for the new Web 2.0 wannabes? Like Zimbra, which just sold itself for $350m to Yahoo, the best ones can hope to find a buyer from among the handful of giants. The rest should enjoy their moment in the TechCrunch spotlight: a long obscurity beckons.

San Francisco is seething with tech start-ups even more feverishly than usual this week.

The TechCrunch40 event here features 40 of the most promising tech companies from around the world pitching for a $50,000 top prize.

They were chosen from 750 submissions and 100 more from these are competing in a “DemoPit” at the event. One of them will be chosen by delegates to join the 40 that are presenting to venture capitalists, the media and fellow companies.

The 40 are being questioned by some high-powered panels: Chris Anderson, author of The Long Tail, Marc Andreessen, founder of Netscape, Ryan Block, editor-in-chief of Engadget, blogger Om Malik and Marissa Mayer, head of search products at Google, were the first set of judges on Monday.

The focus was on search and discovery. Powerset showed off a natural-language search engine, Cognitive Code introduced SILVIA, a conversational AI female that could answer questions, Cast.tv demonstrated a more relevant video search engine, Faroo debuted a peer-to-peer search engine and Viewdle showed how it was using facial-recognition software to build the world’s largest people-in-video reference database.

Other sessions focus on start-ups exploring mobility, community, crowd sourcing, productivity, analytics, mash-ups and entertainment.

A price cut worked for Microsoft’s Xbox 360 in August, boosting its US sales, while the release of its Halo 3 game this month is likely to accelerate adoption of the next-generation console.

Sales figures for the video game industry released by the NPD research firm today showed 277,000 360s were sold in August, compared to 170,000 in July.

Microsoft cut the price of its most popular version, with a 20Gb hard drive, by $50 on August 8 to $349.

Halo 3 is released on September 25 and Microsoft is bringing out a special version of the console to mark the occasion.

Sony’s PlayStation 3, which saw sales rise from 98,000 in June to 159,000 in July after a price cut, recorded sales of 131,000 units in August. Nintendo’s Wii sold 404,000 units, compared to 425,000 in July.

Electronic Arts’ Madden NFL 08 football game was the best selling software for the month and the Xbox was the biggest-selling platform for the franchise for the first time. It sold 897,000 units on the 360, 644,000 on the PlayStation 2 and 336,000 on the PlayStation 3.

Software sales for consoles are up 21 per cent on last year in dollar terms, helped by higher prices being charged for next-generation versions. But they are almost flat in unit terms – growing just 1 per cent, although the arrival of the Madden and Halo 3 blockbusters should improve matters.

Apple’s talks with Volkswagen have created a frisson of excitement about a possible “iCar”, but Microsoft will be first to embed itself into auto entertainment through its partnership with Ford.

The two companies drove an SUV model and a Ford Focus into San Francisco this week to demonstrate their Sync system, which will debut in a Focus model next month.

Sync’s main strengths are its sophisticated phone functions and a USB connection on the dashboard that can turn any portable music player into an in-car entertainment system.

The in-car phone uses Bluetooth to tap a connection from the user’s cellphone and also drags contacts and “previous call” lists from it. Voice commands are recognised allowing users to speak contacts’ names and order calls, plus incoming text messages will be converted and read out by the system.

Any music stored on the phone can also be streamed via Bluetooth and one Microsoft engineer successfully managed to stream a UK internet radio station through the browser on his smartphone.

Anything containing music that has a USB connection can be played over the system, including a simple memory stick. Sync reads the metadata on the music files and displays titles on the dashboard. It also allows the driver to speak commands such as “Play Album Back to Black”, “Play Playlist Dancemix” and even “Play Genre Jazz” or “Play Similar Music.”

Sync’s software and connections will come as standard on all Ford’s Lincoln cars and a $395 option on other models. Ford has exclusive rights for 18 months to the software and sees it as giving it a big advantage over other systems such as Chrysler’s MyGIG.

The research firm iSuppli said today that the global auto infotainment market was worth $32bn last year and will grow to $52bn in 2012.

Despite a recent meeting between Apple CEO Steve Jobs and his Volkswagen counterpart Martin Winterkorn, it predicts any iCar would be three or four years away, going on the standard production timetable of the auto industry.

The latest rumour bouncing around Silicon Valley is that Facebook may be looking to raise another round of venture capital.

It’s an interesting idea, not least because any new funding round would force Facebook’s investors to put a valuation on the company. Peter Thiel, the site’s second-biggest investor, told us last month that Facebook and its founders think the site is worth $8bn to $10bn. It is unlikely that  VCs would be tempted by such a high valuation - far more likely that Mr Thiel was throwing the number out as a signal to potential acquirers. Still, even at a much lower valuation, the buzz around Facebook is such that it could probably raise a hundred million dollars or more for a relatively small dilution in ownership.

Peter Thiel, Jim Breyer, and a handful of other high-profile Valley luminaries have pumped more than $40m into the social networking site over the past two years, but with Mark Zuckerberg appearing increasingly intent on taking his company all the way to an IPO, a new venture round could make sense.

We sat down with Mr Zuckerberg at Facebook’s offices in downtown Palo Alto last week (article, transcript). While the subject of a new venture round didn’t come up, the Facebook founder did tell us that the company plans to expand its headcount from 300 to more than 500 this year. It is also hard at work on a new advertising system designed to take better advantage of the connections between the site’s users. Monetisation of the site has lagged behind audience growth. Making the investments necessary to turn that around is a top priority.

As a keen student of recent internet history, Mr Zuckerberg seems intent on nailing down Facebook’s revenue model ahead of any potential IPO - much like Google did before it announced plans to go public four years ago. Given what he and his team have accomplished so far, it’s not surprising that Mr Zuckerberg’s investors seem willing to give him more time to get it right.

OQO, who thought of the Ultra Mobile PC (UMPC) category before Microsoft, Intel and Samsung attempted to define it (remember the Origami Project), launched new versions today of the “world’s smallest fully functional Windows Vista PC.”

OQO gave a preview of the upgrade to its model 02 at a San Francisco warehouse party last week, where its new CEO was also unveiled.

Dennis Moore joins from SAP where he was head of its Emerging Solutions division, focusing on information workers and mobility.

He told me he would be shifting OQO’s focus more towards the enterprise – consumers are its main market at present.

Jory Bell, who co-founded OQO in 2000 after leaving Apple Product Design, said Apple renegades had been joined by former HP, Palm, Dell and Sony workers, boosting engineering, sales and marketing teams.

He said his emphasis was on making the 02 thinner and, although it uses a VIA processor, he was open to using other low-powered processors in the future such as Intel’s Silverthorne chip.

The UMPC has yet to become a mass-market product, with even its backers saying it needs to be priced below $500 and promise all-day battery life to achieve that objective.

OQO’s O2 has been praised for its design and solid construction but criticised for its high price and slow graphics performance – it does not run Vista’s 3-D “Aero” interface.

OQO announced an entry-level version would now cost $1,299 rather than $1,499 and more storage options would be available, including a 120Gb hard drive and a 32Gb solid-state flash one.

The changes are not likely to increase OQO’s fanbase by much, but it remains the coolest iteration of a category yet to find a significant audience.