April 3, 2008
More on virtual world economics
A longer piece from Scientific American on Eyjólfur Guðmundsson, virtual world economist:
Just as in real-world markets, in-game prices are sensitive to the law of supply and demand. Prior to Guðmundsson’s arrival, a new asteroid belt was seeded with an abnormally high level of the usually rare mineral zydrine. Prices dropped for six months until the ore sold for half its normal cost. The developers then updated the game so that less zydrine could be refined from other compounds. In the meantime, players began to stockpile the mineral until the price leveled out, which Guðmundsson points to as proof of a working economy.
Tyler Cowen of Marginal Revolution is quoted as a sceptic in the article:
“What makes experimental economics work is that you truly have a controlled experiment. When you have these virtual worlds, as I understand, people are not conducting controlled experiments. They’re running these onetime simulations. Whatever result you get is interesting, but you don’t know what to make of it. You’re stuck.”
That seems to be true of Guðmundsson’s work, at least. It is doesn’t have to be true - see my discussion of Ted Castronova’s virtual world experiments.
Picture: CCP Games
Tyler Cowen’s objection seems not to matter much if one approaches these worlds as a scientist. If economic models are used to make a falsifiable prediction and the prediction holds then surely our confidence in the model increases whether or not the experimental conditions were under our control?
Posted by: Dom Camus | April 3rd, 2008 at 9:19 am | Report this commentI’d like to see what virtual world simulations could teach us about price (and wage) rigidity, where price setters just get to see input prices move, and demand (at nominal prices) move, but don’t know whether the shifts reflect real changes or inflation. How would they behave?
Posted by: Luis Enrique | April 3rd, 2008 at 9:33 am | Report this commentIs there an interventionist government in the world simulated?
Greetings from Seville in Spain, we love ‘El economista camulfado’.
Posted by: guangle | April 4th, 2008 at 8:58 pm | Report this comment