Towards A Healthy Economy

When Arbitrage Wise posted Stop Killing Second Life yesterday, I wanted to write something. I really did. My observations have lead me to similar thoughts.

Someone described the SL economy as being in a depression, but that is far from true. While this has been what some call a slow summer in Second Life, the numbers are just numbers and annual comparisons are flawed given the very short time that Second Life has been around. And what is Second Life? A virtual world? A synthetic world? Maybe.

But in it's own way it is a [w:micronation]. That may be a stretch for some people, but in some ways it is true. And because of that - we're watching a developing economy which is built around a governing body which is not transparent. And this governing body governs the economy as well. Just as any nation, the policies and influence of the government have profound impacts on the economy. More concretely, Linden Lab's structure of policy and regulation is not only unpredictable, it breeds unpredictability. It breeds a lack of transparency through it's own ambiguity, and while we often hear that they would love for residents to handle things themselves - they do not give them the tools to do so. Residents need teeth, and the legal framework which Linden Lab believes that it exists in does not allow much in the way of teeth. This belief is being challenged now in Bragg v. Linden in some ways.

Because of the instability of the legal framework, the core traded product of Second Life is dubiously protected. Some may think I am referring to the Linden dollar, but what I am referring to is [w:copyright] license. The scale of cost for defending a copyright around the world varies, but it is generally acceptable to say that the microtransactions within Second Life rarely qualify for a lawsuit - and even when this happens, it is questionable that the entire affair would be worthwhile. What good is a nation that does not protect it's own goods? Further, what good is a nation whose residents don't understand the implications of copyright law around the world, where the micronation exists? Legal precedents related to the internet have demonstrated that the information is not just on a server - it is where it is viewed as well. Negotiating that by itself is dangerous; we bring in the baggage of [w:TRIPs] and [w:GATT], and even the [w:WTO]. While this is not optimal, it is good for 2 different reasons:

• There are some precedents and guidelines
• The precedents and guidelines may eventually be forced to change such that they reflect the present and future needs

So now, I'll talk about the traded product which is now surrounded by the most controversy. It is the Linden dollar, and even as WSE attempts to right itself - literally and figuratively - and even as Ginko Financial pays a price for the WSE as well as it's own myopia - there is a core issue of many things being unregulated. Certainly, in the real world there are regulated exchanges and rules that come with them - but only now are a few fledglings out there trying to do things without regulation - or through strange forms of self-regulation. Yet they forget that markets are not dictatorships - they are participative democracies - and while some wish to grow rich on other people's investments, people want to invest in things which they can trust. And trust is the basis for many Laws. Where there is a need for Trust, Laws pop up - be they through a governing body or a community. Yet we know that the community has no teeth.

The other issue, which I am not certain has a profound effect, is that there is a distinct difference between cost and value. You can talk about markets until everyone's eyes cross, but markets are based on perceived value. Perceived value, itself, is not cost. Yet the markets and the businesses in them seeking investment seem to think that the cost itself is a value - something with some limited truth, but it is the Return on Investment which also matters. And even then, it is not only that return - somewhere along the way, for something to be sustained, the company has to produce something of value. A product or service which someone wants. And still, it comes to trust.

Businesses should produce more than profits; any business which only produces profits is not going to last long. Why? Because that profit has to come from a value somewhere. In schools and in books, they write about costs. In life, we learn about value. Perhaps the problem is that there is more academic knowledge on these things involved than world knowledge. I do not know, but I suspect that this is part of the problem.

For a healthy economy, we need an economy based on Trust and Value - not just profit and the shuffling of numbers. And while Trust may require Law, that does not mean that we must import Law: it can mean that we create our own. But we need the tools to do that, and we need a governing body which allows us not only the tools but a stable and transparent policy infrastructure which permits for self-regulation to happen. And in that, perhaps Linden Lab itself needs to adjust itself to an economy of Trust and Value.

I'd like to see that. The benefits to Second Life are in that direction - and the benefits to the rest of our lives are as well.