Introduction

Although economists have many theories about macroeconomic phenomena, they do not generally have the means to perform experiments in the real world. The only courses of action available are to construct theories and models or to wait for major events or policy shifts that can serve as a natural experiment. The latter are fairly rare and generally dictate what can be studied, while the former are only as useful as their assumptions.

The virtual economies present in Massively Multiplayer Online Games present a perfect opportunity to study economic interactions on a relatively large scale, which might be difficult to model. Many new ones are created every year, and most feature at least some form of rudimentary economy. Not only does the multitude and variety of game designs and player populations allow one to learn about the functioning of economies, but the detail and completeness of data one could collect in an online game where every exchange and most interactions between players can be recorded is simply unmatched in the real world.

While there also exist a number of single player games that contain simulated economies and multiplayer games which have currencies that can be earned and spent only on non-tradable items, this blog will primarily concern itself with games that feature at least some basic form of an inter-player economy.

There are, of course some caveats. Care will have to be taken in each situation to determine the applicability of the observations. Multiple experiments and complementary real world observations may be needed to truly validate findings.

Some situations have no real-world analogues or are at best similar to very rare occurrences and thus have few practical applications beyond the realm of game design. Some players will almost certainly behave differently in a game than they would in the real world, and sometimes behavior learned in similar previous games or real life may influence interactions in new games. Finally, unintended consequences of changes to the game world might disrupt the economy in ways in which while potentially interesting in and of themselves may complicate the answering the original question being studied.

In the following posts, I will attempt to offer a primer on the similarities  and differences between online and virtual economies, speculate on some past observed events, and offer some theories that could be tested if similar situations arise in the future and data is collected about them.