Virtual economy

Living in a "virtual world" is a fact that has contributed to what is incorrectly (shortsightedly) called "economic or financial global crisis." For this reason a discussion on virtual economy and knowledge based economy seems both necessary and pertinent.

Might it help to answer the BIG question: "How is knowledge created" ?
Hopefully, but that is a totally different story. Probably more important since it is related to the inherent limits of the human mind and the GREAT difference between MIND and BRAIN...

Anyway, let me open the discussion and invite you to comment, if interested.

I have chosen a brief explanation of "virtual economy" as a good starting point.



A virtual economy (or sometimes synthetic economy) is an emergent economy existing in a virtual persistent world, usually exchanging virtual goods in the context of an Internet game. People enter these virtual economies for recreation and entertainment rather than necessity, which means that virtual economies lack the aspects of a real economy that are not considered to be "fun" (for instance, players in a virtual economy do not need to buy food in order to survive, and usually do not have any biological needs at all). However, some people do interact with virtual economies for "real" economic benefit.

Overview

Virtual economies are observed in MUDs and massively multi player online role-playing games (MMORPGs). The largest virtual economies are currently found in MMORPGs. Virtual economies also exist in life simulation games which may have taken the most radical steps toward linking a virtual economy with the real world. This can be seen, for example, in Second Life's recognisation of intellectual property rights for assets created "in-world" by subscribers, and its laissez-faire policy on the buying and selling of Linden Dollars (the world's official currency) for real money on third party websites. Virtual economies can also exist in browser-based internet games where "real" money can be spent and user-created shops opened, or as a kind of Emergent gameplay.

Virtual property can refer to any resource that is controlled by the powers-that-be, which includes virtual objects as well as avatars or user accounts in their entirety. The following characteristics are commonly found in virtual property. Note however that it is possible for virtual property to lack one or more of these characteristics, and they should be interpreted with reasonable flexibility.

1. Rivalry: ­Possession of property is limited to one person or a small number of persons.
2. Persistence: ­Possession is maintained even when the property is not in use. Users expect property to remain in their possession between sessions.
3. Interconnectivity: ­Property may affect or be affected by other people and other property. The value of property varies according to a person's ability to use it for creating or experiencing some effect.
4. Secondary markets: Virtual property may be created, traded, bought, and sold. Real assets (typically money) may be at stake.
5. Value added by users: Users may enhance the value of virtual property by customizing and improving upon the property.

The existence of these conditions create an economic system with properties similar to those seen in contemporary economies. Therefore, economic theory can often be used to study these virtual worlds.

Within the virtual worlds they inhabit, synthetic economies allow in-game items to be priced according to supply and demand rather than by the developer's estimate of the item's utility. These emergent economies are considered by most players to be an asset of the game, giving an extra dimension of reality to play. In classical synthetic economies, these goods were charged only for in-game currencies. These currencies are often sold for real world profit.

Marketplace

The release of Blizzards' World of Warcraft in 2004 and its subsequent huge success across the globe has forced both MMORPG and their secondary markets into mainstream consciousness, and many new market places have opened up during this time. A quick search for WoW Gold on Google will show a multitude of sites (90+ sponsored results as of June 2006) from which Gold can be purchased. Real money commerce in a virtual market has grown to become a multi billion dollar industry. EverQuest players Brock Pierce and Alan Debonneville founded Internet Gaming Entertainment Ltd (IGE), a company that offered not only the virtual commodities in exchange for real money but also provided professional customer service. IGE had a trained staff that would handle financial issues, customer inquiries and technical support to ensure that gamers are satisfied with each real money purchase. It also took advantage of the global reach of synthetic worlds by setting up a shop in Hong Kong where a small army of technically savvy but low wage workers could field orders, load up avatars, retrieve store goods and deliver them wherever necessary. This lucrative market has opened a whole new type of economy where the border between the real and the virtual is obscure.

Hundreds of companies are enormously successful in this new found market, with some virtual items being sold for hundreds or even thousands of dollars. Virtual real estate is earning real world money, with people like 43-year old Wonder Bread deliveryman, John Dugger, purchasing a virtual real estate for $750, setting him back more than a weeks wages. This virtual property includes nine rooms, three stories, rooftop patio, wall of solid stonework in a prime location, nestled at the foot of a quiet coastal hillside. Dugger represents a group of gamers that are not in the market for a real house but instead to own a small piece of the vast computer database that was Britannia, the mythical world in which the venerable MMO Ultima Online unfolds. Such trading of real money for virtual goods simply represents the development of virtual economies where people come together where the real and the synthetic worlds are meeting within an economic sphere.

Although virtual markets may represent a growth area, it is unclear to what extent they can scale to supporting large numbers of businesses, due to the inherent substitutability of goods on these markets plus the lack of factors such as location to dispense demand. In spite of numerous famed examples of the economic growth of Second Life an amateur analyst in 2008 estimated the income inequity in Second Life's economy as worse than has ever been recorded in any real economy: a Gini coefficient of 90.2, a Hoover index of 77.8, and a Theil index of 91%. However, it is not clear if application of these real measures is appropriate to a virtual world where (for example) income is not necessary to survive.

full story

Question: can you trade, exchange and protect "virtual property" as intellectual property, if it does not belong to you?

Your comments ?