The Galactic Banks Refuse To Deal in Such Fiddling Small Change

From an economics nerd perspective, Brad Plumer’s piece over at Ezra’s joint on the team of Icelandic economists studying the inner workings of EVE Online’s player-based economy is a rather nifty read, as online massive multiplayer economies have gotten far more complex, and economics has gotten far more digital and networked, the crossroads of the two were destined to meet.

Eyjólfur Guðmundsson is just that economist. Working for the Icelandic company CCP Games, he oversees the virtual economy of the massively multiplayer video game Eve Online. Within this world, players build their own spaceships and traverse a galaxy of 7,500 star systems. They buy and sell raw materials, creating their own fluctuating markets. They speculate on commodities. They form trade coalitions and banks.

It’s a sprawling economy, with more than 400,000 players participating in its virtual market — more people, in fact, than live in Iceland. Inflation, deflation and even recessions can occur. Which is why, from his office in Reyjkjavik, Guðmundsson leads a team of eight analysts poring over reams of data to make sure everything in Eve Online is running smoothly. His job bears more than a passing resemblance to that of Ben Bernanke, who oversees the U.S. economy from the Federal Reserve.

“For all intents and purposes, this is an economy that has activity equal to a small country in real life,” Guðmundsson says. “There’s nothing ‘virtual’ about this world.”

And as these systems become more complex, they approach the scale necessary to serve as experiments in macroeconomics that model how the real world works, and these games are getting more and more academic study.  More than anything however, it’s insight into the heart of economics:  people.  And people do stupid things when money is involved, frankly.

“Just for example,” [IU-Bloomington Professor Edward] Castronova says, “Facebook has an entire currency system that isn’t taxed or regulated. At what point does that threaten what the Federal Reserve does?”

It’s still a pretty good read, despite the occasional eye-rolling Glibertarian Paradise “Bernanke’s coming for your space hauler” nonsense.  On a personal note, I liked EVE Online myself, but when the game turned into paying for a second career in long-distance trucking with lasers, I wandered off to do something else.  If that’s your cup of tea, cool.  Me, I play games to have fun, not to have a manifest.

Also, the “hell is other people” thing definitely applies.

75 replies
  1. 1
    whiskey says:

    I stole about $800 of shit back when I played EVE, good times

  2. 2
    burnspbesq says:

    Who’s more likely to be assassinated by a disgruntled citizen, Bernanke or Gudmondsson?

    Also too, completely unrelated: Happy tenth birthday to SCOTUSBlog.

  3. 3
    BGinCHI says:

    Doesn’t anyone masturbate anymore?

  4. 4
    DecidedFenceSitter says:

    @BGinCHI: Some of us just multitask.

    I remember hearing once that to be a geek all you needed to do is have found something better than sex to focus on.

  5. 5
    dmsilev says:

    @BGinCHI: …says the commenter on a blog.

    (yes, yes, glass houses, stones, etc.)

  6. 6
    Belafon (formerly anonevent) says:

    This is a good way to study economics, though, as with any model, it would be hard to incorporate every necessary detail. How do you incorporate that making too many bad decisions can kill you or your family, and you can’t come back (except for maybe reincarnation)?

  7. 7
    JoeShabadoo says:

    Here’s hoping they do an article on the economics of sending ship after ship to commit suicide in order to make something in EVE more scarce so people can make a ton of money selling it.

  8. 8
    BGinCHI says:

    @dmsilev: It’s true. Commenting on this blog has kept me from some of my most imaginative work.

    But I’d rather spend time with you people than with the most interesting people in the world.

  9. 9
    BGinCHI says:

    I just looked up EVE online and it looks fascinating.

    I’m afraid that if I get sucked into it I’m going to neglect my wife, my child, my career, and my fitness.

    It could even threaten my drinking.

  10. 10
    WarMunchkin says:

    Had the same feeling towards EVE myself. Though I’m not sure I have standing, because I’ve racked up the gaming hours with other MMOs and video games in general.

    When I played EVE, there was a a component involving “researching” technologies for your character, which meant selecting some option on a vast, vast tree and waiting some amount of real-life time before it completed. After seeing how much time it would take to get to the point where I could do anything, I just tuned out. It’s a pretty game though, I liked fighting pirates.

  11. 11
    NonyNony says:

    @BGinCHI:

    But I’d rather spend time with you people than with the most interesting people in the world.

    Aw that’s sweet.

    Waitaminute…

  12. 12
    Enhanced Mooching Techniques says:

    @burnspbesq:

    Who’s more likely to be assassinated by a disgruntled citizen, Bernanke or Gudmondsson?

    Knowing EVE players, Gudmondsson.

  13. 13

    On a personal note, I liked EVE Online myself, but when the game turned into paying for a second career in long-distance trucking with lasers, I wandered off to do something else.

    I am confused. At what point was EVE ever anything else? I’m guessing you got out of the newbie areas – like I did – and discovered that everything you’d considered positive about the game was there to help newbies settle in, and the negatives WERE the game?

    @BGinCHI:
    In theory, EVE is fascinating. In practice it is lots and lots of spreadsheets, hours of flying from place to place, and in 90% of the game you can be attacked at any time by anyone no matter how great the strength difference, and the penalties for dying are massive. As in, you lose your ship and everything on it, then have to spend hours of actual game time flying a life boat back to wherever you left your last spaceship, assuming you have a last spaceship. Oh, and the combat takes place at distances where you don’t get to see it. My experience with EVE was almost traumatically bad.

  14. 14
    Pen says:

    I mine the hell out of pretty much everything because it was a good way to zone, and when they brought wormholes online I bought a tier 3 gallente strategic cruiser (no offense, purely exploration). It was all fun and good, until I realized I’d have to participate in all the null sec zone politics crap. Life sucks enough, I just wanted to explore.

    I still miss it every once in a while, but then I remember the politics of it all.

  15. 15
    MikeJ says:

    I know I learned of it late, but it was only over the weekend that I learned that Glenn Beck is claiming the SA guild on Eve is actually a CIA front.

  16. 16
    Enhanced Mooching Techniques says:

    Oh and Glen Beck things EVE Online is a front for the CIA

  17. 17
    Christian Sieber says:

    Seeing space trucking with lasers mentioned on my favorite blog makes me happy.

  18. 18
    Zandar says:

    @Frankensteinbeck: It was really more of the time sink factor to me. It may be different now, dunno.

    Borderlands 2 is currently occupying my spare time, and soon XCOM Enemy Unknown. Played the XCOM demo, it’s everything I loved about the original game, definitely looking forward to it next week.

  19. 19
    Pen says:

    @MikeJ: And this raving fuckwad got a tv show how? Oh wait, it was Fox News. Never mind.

  20. 20
    gene108 says:

    The only down side with EVE as an economic model is if Corp A pisses off Corp B, Corp B will attack Corp A’s space station and blow it out of existence.

    This will form further retaliation by Corp A, in which Corp A blows up Corp B’s space station.

    The real appeal of this method of settling disputes is if Corp A could sneak a ‘spy’ into Corp B and the ‘spy’ could rob Corp B of resources, i.e. more than an actual spy, such as a high ranking member, who got bribed.

    Or alliances get formed by one corp to maul the other corp.

    The lack of a functioning judiciary in EVE necessitates this sort of action for corporations to settle disputes and probably weakens EVE as a real world economics model.

  21. 21
    BGinCHI says:

    @Frankensteinbeck: It sounds like the perfect game for the incarcerated.

  22. 22
    giltay says:

    One of the nice things about Elite and its direct descendents is that it’s relatively quick to go from space trucking with lasers to pirate hunting with lasers. But that doesn’t scale to multiplayer. And the world is considered to be too big for a single player to have any effect on the (laughably simple) economy.

  23. 23
    jwb says:

    @gene108: Sounds like libertarian utopia to me.

  24. 24
    PeakVT says:

    Today is the first day the Death Panels will be after Grandma. Okay, not really. But it is the first day for some cost controls at hospitals. They’re part of the hidden half of Obamacare, the one that needs to work if we’re going to keep health care costs from bankrupting the country.

  25. 25
    dmsilev says:

    @Zandar: XCOM looks like it’ll be a pretty darn good re-imagning of the original. Definitely looking forward to that next week, especially given how many hours I spent on the original back in the day.

  26. 26
    Dennis SGMM says:

    @Zandar:

    Looking forward to a review from you. I’m still playing the original XCOM via DOSbox. If the new version is as good as the original then I will definitely pony up for it.

  27. 27
    Daulnay says:

    EVE Online embodies the idea that people are bastards, out to take advantage of each other. The game is designed to provide conflict and opportunity for backstabbing. It’s a Libertarian paradise, where Caveat Emptor needs to be tattooed on the inside of your eyelids.

    There is a ‘safe zone’, where criminals get punished. Violent, combat criminals, that is. Grifters, scammers, and complex fraud flourishes there, unpunished, accepted even. It’s the zone of economic PvP.

  28. 28
    MikeJ says:

    @Daulnay:

    Grifters, scammers, and complex fraud flourishes there, unpunished, accepted even. It’s the zone of economic PvP.

    That’s after you turn your computer off, right?

  29. 29
    Dennis SGMM says:

    Although I’m a gamer I’m just not interested in MMORPGs. That’s likely because I’m more interested in strat sims (Civilization V, Total Annihilation) than other genres. Played Ultima Online back in the day and I played Diablo II online until the player killers infested the place. Those two were sufficient for me.

  30. 30
    Pen says:

    @Daulnay: and, if you just want to peacefully gather resources to wile away the time (as I’ve done in every MMO I’ve played since Ultima Online) they constantly restock the deck against you and tell you you’re “playing it wrong”. You’re right, it really is a libertarians playground.

  31. 31
    Redshift says:

    @Pen: Actually, it was CNN Headline News before that. (A time known in our house as “when we stopped watching Headline News.”)

  32. 32
    Xecky Gilchrist says:

    Also, the “hell is other people” thing definitely applies.

    If by that you mean you’ve avoided multiplayer online games because having asshole humans playing alongside you destroys the nifty fictional videogame ambience, me too. That’s about half of why I never started playing online games.

    The other half is I saw what the addiction did to people and I was worried it’d happen to me.

  33. 33
    Daulnay says:

    For people who loved Elite, Earth and Beyond looked pretty good, until Electronic Arts pulled the plug. Now it’s been resurrected by a non-profit fan group (Net-7.org).

  34. 34
    Redshift says:

    @JoeShabadoo: That phenomenon is pretty well understood. The real-world version usually involves colluding to corner the market and create artificial scarcity, and the only reason it doesn’t happen more often is that we have laws against it.

  35. 35
    rlrr says:

    @BGinCHI:

    Conservatives engage in intellectual masturbation all the time.

  36. 36
    BGinCHI says:

    @rlrr: That must be what they call “family values.”

  37. 37
    Tim P. says:

    Made a couple billion doing regional arbitrage and station trading in Jita, got bored, quit. Probably would have appealed more to my younger self who had the time to get into the politics and personalities that are the lifeblood of MMOs.

  38. 38
    piratedan says:

    @Dennis SGMM: agreed Dennis, kinda walked away from the MMORPG’s because no one could ever sufficiently rein in the asshole factor.

  39. 39
    Walker says:

    The GDC talks on this are pretty good, though the “monetary policy” in EVE is distinct from real world monetary policy. Most of the control the EVE economists have is over commodities (e.g. adjusting the mineral production of various planets) rather than loan rates.

  40. 40
    👽 Martin says:

    Wait, Bernacke is coming for my Space Hauler? Fuck. Don’t tell me Obama is coming for my Illudium Q-36 Explosive Space Modulator, too!

  41. 41
    👽 Martin says:

    @piratedan:

    agreed Dennis, kinda walked away from the MMORPG’s because no one could ever sufficiently rein in the asshole factor.

    Wow, so they really are like real economies!

    But I bailed out of online gaming for the same reason a while ago. I’ve got enough assholes in my real life to deal with – I didn’t need it there too.

  42. 42
    Just One More Canuck says:

    @MikeJ: wait a minute, Glenn Beck said something crazy?

  43. 43
    Ben Cisco says:

    OT, but Sproul’s Asshat Con got 86’d here in NC and is being eyeballed by state election officials.

  44. 44
    Raven says:

    This is one of those times I’m glad I’m old and don’t know what the fuck this is about.

  45. 45
    Dimmic Rat says:

    I’m more interested in Valve’s economist and seeing a breakdown of the Team Fortress 2 economy.

  46. 46
    Brachiator says:

    @DecidedFenceSitter:

    I remember hearing once that to be a geek all you needed to do is have found something better than sex to focus on.

    I think you may be a geek if you think that there is something better than sex.

  47. 47
    Corner Stone says:

    @BGinCHI:

    It could even threaten my drinking.

    It’s almost like I don’t even know you anymore.

  48. 48
    MikeJ says:

    @Dimmic Rat: Hats are where it’s at. Hats rule the world. The entire economy is based on hats.

  49. 49
    Villago Delenda Est says:

    One of the fun thing about MMORPG economies is that they are nifty models of the “free market”, but the catch of course is that there are rules that can be imposed arbitrarily by the game’s developers.

    One interesting phenomenon is when something new and shiny is introduced into the game, its market price soars. Then the novelty wears off, within hours, and prices stabilize. But there are always a few with a bunch of virtual money and the intense, burning desire to be “first”, which in an MMORPG is for some the most important status imaginable. And they’ll pay handsomely to be “first” and show off their “firstness” in the game. Some openly boast that they’re first, and accuse others who look at them and say “meh” as being envious or jealous.

    Does this sound familiar at all?

  50. 50
    Daulnay says:

    @Pen:
    What completely killed EVE for me was the realization that the game design worked against being able to trust people, and discovering that the designers intentionally build that into the game. EVE design reflects a Hobbesian view of people that’s at odds with reality and the result is a pretty unpleasant place to spend free time.

  51. 51
    a.j. says:

    Just spent the last week staring at my screen and clicking buttons to make EVE space-money (called ISK). (Whoring Faction Warfare LP in plexes in EVE lingo. We had the LP dump last night and I think I have around 6-7 billion for the first time ever since I’ve played.)

    Beats actually feeling any emotions.

    Or canvassing.

    Oh, wait. Shit.

  52. 52
    Corner Stone says:

    @Tim P.: It’s the arbitrage I find most interesting in alt-economies, whether virtual or in real life. The imbalance of information and relatively less sophisticated mass population always leads to a type of Milken-esque reaping of rewards until controls are put in place. But it seems there’s always a learning curve where some sharps have figured it out way before anyone else.

  53. 53
    Funkula says:

    @MikeJ: HREAM. Not quite as catchy.

  54. 54
    Villago Delenda Est says:

    @👽 Martin:

    The asshole factor is of course magnified by the anonymity factor. There are a great deal of people who would be assholes IRL if they could get away with it, but they can’t, because IRL they’d have their asses kicked. Since they don’t feel any shame, getting their asses kicked is the only way to control them…and that option is not available in an MMO.

  55. 55
    Steve says:

    @Villago Delenda Est: MMORPG economics, unlike something like Civ V, are mostly self-correcting. If you find a way to make a bunch of money, it’s only going to last a little while until other people find it too and the price goes down. (The exception is high-end stuff that only a few players have access to.) Whereas in Civ, if you find a trick to get cheap hammers or something, it’s going to be there until the next patch and probably forever.

    I enjoy the intricacy of games like Civ, but sometimes it seems like they’re all about experimenting until you find the exploit that makes the game trivial – at which point you have to voluntarily refrain from using it if you want a challenge.

  56. 56
    👽 Martin says:

    @Villago Delenda Est:

    One of the fun thing about MMORPG economies is that they are nifty models of the “free market”, but the catch of course is that there are rules that can be imposed arbitrarily by the game’s developers.

    It’d be a more useful model of a real free market if the consequences were more realistic. All game economies assume unbelievably fast GDP growth. There’s always a massive amount of regenerative wealth, and the reason is that if game economies really were like real economies, it’d be no fun unless you had Mitt Romney resources at your disposal. Nobody in game economies toils away for 40 years and then dies in complete poverty. Happens all the time in life.

    The missing part of the equation is that your subscription price – however it’s paid – isn’t outside of the game economy. It’s part of it. In order for those subscription resources to flow, the game creators need to keep monsters well equipped with magic swords or planets churning out valuable resources forever.

  57. 57

    @Daulnay:
    Oh, yes. I highly recommend Earth and Beyond! They’ve gotten most of it working again. It’s way more fun than EVE, and has the most interesting and useful crafting system in any MMO, ever. Player made is almost always better than looted or vendor bought, and most looting of exotic equipment is in done in the hopes of getting the recipe so a player can make more of them!

  58. 58
    jl says:

    “For all intents and purposes, this is an economy that has activity equal to a small country in real life,” Guðmundsson says. “There’s nothing ‘virtual’ about this world.”

    And economics is a virtual ‘science’.

    Sounds like a match made in heaven. Goofy fake world for a goofy fake science. I predict much pohbahism and hilarity will ensue.

    Edit: I am an economist. I say this in sorrow, not in anger. I assure you all.

  59. 59
    BGinCHI says:

    @jl: The “dismal science” indeed.

  60. 60
    BGinCHI says:

    @jl: The “dismal science” indeed.

  61. 61
    👽 Martin says:

    Oh, and OT, but can we get a positive shout-out for California? For all the fuckery going on in places like Texas and Ohio, we elected Democrats from top to bottom in 2010. Here’s what’s going on right now:

    * Online voter registration for the first time, and that will be extended to same day registration starting next year
    * Relatively independent redistricting which should net more Democrats, though possibly more moderate ones
    * Ban on pray-the-gay-away treatments in the state
    * Drivers licenses are now available for undocumented immigrants that are participating in Obama’s work permit program.

    On the ballot for November are (and which are polling favorably):

    * Tax increase to fund eduction
    * Mandatory GMO food labeling (which will effectively apply nationally for most foods because Kelloggs isn’t about to print two different boxes)
    * Repeal death penalty
    * Reform 3 strikes to only apply to violent crimes for the 3rd strike (baby steps)

    Only one onerous initiative which is polling negatively, is:

    * Forbid payroll deductions for being used for campaign contributions. Just a run of the mill union busting initiative.

    And our unemployment rate which was at 12.5% a year ago is down to 10.6% and dropping fast (.1 to .2 per month). If you want to know why the nations unemployment rate is where it is, look no further than CA because we’re the anchor on this ship.

    And further, we’re on pace to be 33% carbon free energy by 2020, the governor signed a bill to get 50 free digital undergraduate textbooks produced, and a host of new bills to make it easier for consumers to install residental solar, etc. and a program to give businesses loans to install water and power savings, which they pay back through the savings in their power bills, so they don’t need any up-front spending nor do they need additional revenue to pay off the loan.

    There’s good stuff happening out here. And we’re going to give Obama 55 safe EVs, two safe Democratic senators, and we’re expecting to flip 3-5 GOP seats to Dem in the House. That might be a third of what’s needed to retake the House.

  62. 62
    BGinCHI says:

    @👽 Martin: Yeah but traffic.

    Also, movies could be better.

  63. 63
    Barney says:

    Let’s hear it for triangular rubber coins six-thousand, eight-hundred miles long on each side. Any Hitch-Hiker’s Guide reference is always welcome. And the punchline – “From this basic premise it’s very simple to prove that the Galactic Banks are also the products of a deranged imagination” – is more relevant than ever.

  64. 64
    JimF says:

    Valve hired an economist to look at it’s hat trading economy among other things.

    http://blogs.valvesoftware.com/economics/

  65. 65
    gene108 says:

    @Daulnay:

    Wow, my reason for quitting EVE was a lot less profound.

    The corp I was in fell apart and I got bored without a corp doing stuff solo all the time.

  66. 66
    Ben Johannson says:

    Facebook has an entire currency system that isn’t taxed or regulated. At what point does that threaten what the Federal Reserve does?

    The answer is : Probably never.

  67. 67
    rea says:

    As usual, Charlie Stross thought of it first–see Halting State.

  68. 68
    Robert Sneddon says:

    @rea: Charlie’s new book, “Neptune’s Brood” out next year is an economics-driven space opera, a followup to “Saturn’s Children” although not a direct sequel. Interstellar finance and long-term debt meets confidence tricksters and space-pirate accountancy firms, hilarity ensues.

  69. 69
    MaxL says:

    So, I am an Eve player to this day. I found out about it in an article like this one awhile back (about econ game theory). And yeah, mining and hauling are boring beyond all description. kinda exactly like real life. The Romanians have bots doing most of that now, I think.

    Everything in the game that is for sale on the market is constructed by the players, which often means taking over and defending large areas of spce, creating self sustaining markets far away from the hubs, efficient resource gathering (not just pointing lasers at rocks), diplomacy, constant training of new pilots and replacing the ships those new players lose all the time, and, of course, blowing stuff up. Just get out of the bathtub and get to the cowboy space – the whole game pushes you to do it anyway.

    It is a really amazing experiment in self organization on a large scale. I have never seen anything like it and while I have never been able to stomach an MMORPG for more than a few days before, this one is, well, different.

    FWIW: they got rid of those awful training up to train skills.

  70. 70
    Sister Rail Gun of Warm Humanitarianism says:

    The only MMORPG community I’ve been able to stomach is City of Heroes which, sadly, is shutting down soon.

    EVE Online sounds a lot like Traveller. Hmm.

  71. 71
    Sister Rail Gun of Warm Humanitarianism says:

    The only MMORPG community I’ve been able to stomach is City of Heroes which, sadly, is shutting down soon.

    EVE Online sounds a lot like Traveller. Hmm.

  72. 72
    Sister Rail Gun of Warm Humanitarianism says:

    And another failed database connection. Cole needs better hamsters.

  73. 73
    MaxL says:

    if anyone is interested in playing the game, leave a reply here and I can send you an invite. Each accepted invite is worth a month of free game time…which can be sold for *lots of* in game money -just like everything else- and be split between us.

    Note that the game itself is a free download.

  74. 74
    The Sailor says:

    @Villago Delenda Est: “The asshole factor is of course magnified by the anonymity factor. There are a great deal of people who would be assholes IRL if they could get away with it, but they can’t, because IRL they’d have their asses kicked. ”

    O rly? Tell that to Wall Street. None of the people at the top have paid any price, and they are anonymous and they don’t think we are real people.
    ++++++++
    EVE sounds like Risk, except you aren’t playing with your friends.
    ++++++++
    I agree, games like this can be excellent modeling for actual econ behavior.

    So far, all that econ/ometrics is great at is predicting the past, if it was an actual science then they should be able to predict outcomes based on the hundreds of years of data. I get pretty sick of the hidden disclaimer before every econ paper “if all things were equal …”

  75. 75
    a.j. says:

    @MaxL how do I reach you in game? Would love to connect.

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