Bigger Picture: Linden Economy (II)
A little over a week ago I wrote Bigger Picture: Linden Economy which referenced Matthew Beller's articleThe Coming Second Life Business Cycle. Some more though on these matters has come to light in Currency intervention in Second Life - Analyses and doomcasts (VERN) - it references both Beller's article as well as Randolph Harrison's The Linden Dollar Game.
Everything seems rather... pessimistic.
As the VERN author states at the end of the post:
...I think there’s good material in both of the analyses: they’re among the few transparent and analytical approaches to virtual economies I’ve seen so far. Both are quite pessimistic regarding the outcomes of currency intervention carried out by Linden Lab. If L$ starts to depreciate, according to one of the scenarios presented here or otherwise, I believe that Linden Lab will not start buying back L$ on a large scale – so an escalation to a major depreciation may actually take place quite easily.
All of that discussion had me think back to Aemilia Ballinger's comment:
...And when the average player leaves do they attempt to cash out or just forget about their money? I've found most average players in all games let their valuables sit unused when they quit a game. So, money is taken out of circulation when players quit, which should act as a counter to any inflationary impulses form Linden Labs so called deficit spending.
Revisiting what she wrote, I had doubts to my response. I looked at the economic statistics, and lo! Under 'L$ Sources and Sinks', 'Other' encompasses many things including money taken out of circulation from abandoned accounts.
So will Linden Lab have to buy back Linden dollars? Is that likely? It seems that even if they do, it may not work. It seems everyone agrees that there is a problem (other than Linden Lab), but... what's next?
1 I know Eloise Pasteur has been talking to Meta Linden and others about statistics, perhaps this is relevant.
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Wow, I got quoted!
Here is what I've learned from watching virtual currencies since the days of Ultima Online.
1. Money becomes less valuable over time. Just like a dollar today isn't worth what it was in 1950.
2. This is due to inflation (more currency entering circulation thanks to virtual fiscal policy) and due to a decline in demand for it. The decline in demand is when a game or virtual world ceases growing and begins to shrink. There is a VERY good curve to explain that trend. I can't find it now, but Raph Koster had it on his website. If you watch the curve, then you can predict when supply of a currency should outpace demand. Then the currency becomes less valuable because fewer new users and old users need it to outfit their avatars/toons/whatever.
3. Virtual worlds are games. No matter how we coat it by calling it virtual, most users find some enjoyment from the "game" whether it be sex or gambling or socializing or running a business. As long as there is fun, people will continue to visit the world and spend money. Many players don't consider the virtual currency to be that valuable. It is like a token at Six Flags—if you don't spend it before you leave, you aren't really thinking about it when you get home. You toss it in a drawer and forget about it. I'm not sure how many that would be; however, I suspect the average players don't even really think about selling their Linden $'s.
With that said, I fully expect the L$ to be worth less five years from now, but so what. In other virtual worlds, prices increased on valuable goods as more currency entered circulation. ie: the uber mages staff went from 10platinum to 50platinum. I'd expect the same to happen in Second Life. Other virtual economies survived, I'd expect this one will too! ;-)
Where I disagree with you is on 3.
And that's really the rub. Virtual worlds such as SecondLife, in my eyes, are little more than extensions of the real world. I'm in good company with that thought, so I'll maintain it.
Where you are right is that some people do treat virtual worlds as games. Whether that is appropriate is yet to be seen; I do not think it is. That's my thought.
and... of course I quoted you. Who else would I quote? I always try to acknowledge people where I can. If I considered this all a game, I might think differently. :-)
Virtual Worlds are entertainment
I think virtual worlds are extensions of the real world. But I'd still suggest it is entertainment.
Whether it is an online chatroom or attending a lecture, there is some type of enjoyment for the masses. And it is the behavior of the masses that matter.
But back to the word game, I think football is an extension of the real world. When a game is played, it has its own rules in a manufactured environment. People attend the game because it is entertainment. People play the game because it is both fun, and you can get paid doing it. I think of Second Life in a similar way. You have lots of user created content that rewards the creators with compensation. And as long as you have the masses enjoying the "game" it benefits everyone concerned.
Well then...
If we want to get technical, you could say that virtual worlds are entertainment, and entertainment is... real. So if entertainment is real, isn't the money that pays for it real? The RIAA, MPAA and BSA may be interested in your response. :-)
I've argued...
I've argued for years that game companies (Mythic) who argued their currencies weren't real missed the point. Anytime someone values something enough to spend real dollars on it, then it has some real world value and no TOS or arguments otherwise hold up. But what is the source of the value? I'd say entertainment derived from it. And entertainment value isn't constant.
The critical point for a virtual world is that once there is no enjoyment, the player (or resident) leaves. Think of a virtual world like a TV episode. It was fun the first 1,000 times you saw it.
Heh.
Maybe you're right, but I've heard this before. I think that as virtual worlds become more prevalent, the value of virtual worlds themselves may become more stable.
At the end of the day, I don't really know what the future holds. I know what I would like it to hold, and unfortunately that cannot fit within this comment.
So we disagree. So what? :-)
Just a little...
But we probably don't disagree that much. ;-)