MMORPG's, a great way to see a free market in action

[Lord T Hawkeye]

I don't know if anyone here plays them but I do play World of Warcraft myself and I find it truly amazing how even though it's all just simulated, the laws of supply and demand and all the rest of economics still apply just as well as in reality.

How it works: There's an auction house where you can sell items that uses a bid/buyout system much like Ebay.  The auction house takes a small cut of your sale if the item is sold successfully.  You don't have to use it though.  There's other ways to sell your items but the auction house is where the most potential customers will see your sale so most consider it worth it.

There's no tax on what you earn and there's no government trying to regulate prices or how you do business or who you do business with.  Only outright cheaters get authorities called down on them.

Are people getting gouged, trampled and ruined by the greedy?  Are there needed services not being supplied?  Is everything falling into disaray because there's no one regulating and maintaining order?  No, plenty for everyone with no central planning behind it whatsoever.  Everything has relatively established price that it typically goes for.  These can fluctuate depending on circumstances but they all in all remain relatively stable.

A few examples of supply and demand at work I've seen...

There was a post by someone who is an enchanter, this is someone with a trade skill that lets him improve people's equipment.  When a new series of arena gear came out, he cashed in big time because a whole bunch of people all had new gear that needed enchantments and he was clever enough to make a ton of money off it.

Gems that used to fetch a good price have now devalued greatly because of a better set that's come out, much like how old computer models drop in price when they bring out new ones no?

My own character is an engineer and I've found I can make nice money making bullets since people who play the hunter class are always in need of ammo and engineers can make the best ones.  Despite this unavoidable need, they're not being ripped off because I have other engineers I have to compete with and if the hunters don't like the price we're all charging, they can settle for lower quality bullets instead or maybe contact me or another engineer and try to make a deal.  There's always a solution.


In another game, I've even seen inflation at work too.  In World of Warcraft, money gets "created" from killing certain monsters and from quest rewards and some other things but it also gets "destroyed" when you buy services from computer controlled vendors such as repairing gear or buying simple items from them.  Same with goods.  Once most equipment is put on your character, you cannot trade it to someone else, effectively removing it from the economy.  Great pains are taken to make sure that the money in the game remains stable so that it is created and destroyed at about the same rate.

Final Fantasy XI was a game that didn't follow this rule.  There were mechanics creating money in the game but almost none that were taking it out.  The result: Everything shot up in price over time like crazy.  It got so out of control that it became almost impossible to buy anything for new players.  So, create money endlessly and prices go up, sound familiar?

It's quite fun to work with the system and find out what's making money and what isn't.  Best of all, the wisdom of crowds works here too.  We're not all a bunch of economists.  We're just all average joes for the most part.  Yet it still works, again, no central planning or intervention whatsoever beyond dealing with cheaters which are exceedingly rare.  The system makes it very hard to cheat people and few would do it even if they could.  Word travels fast and having a bad reputation can hurt you badly in the game.

Naturally, the nay sayers would just say "It's a game!  It's not real life!" to all this.

To which I'd just reply "Your dogmatist view of economics has no basis in reality either.  That didn't stop you did it?"  :p

[MrBogosity]

I've heard a lot about Second Life and how the anarchistic economy there has even resulted in an ever-fluctuating exchange rate between their fictional dollars and US dollars.

[Lord T Hawkeye]

Sorta happens with WoW too though selling the game currency for real money is against the terms of service.  You will get suspended or banned if you're caught doing it.

[Travis Retriever]

I've heard a lot about Second Life and how the anarchistic economy there has even resulted in an ever-fluctuating exchange rate between their fictional dollars and US dollars.

Oh, god, I can't stand SL. >_<
It's just...so...boring. X_X

@LTHE:  Outstanding explanation.

[IceSage]

SecondLife can actually be quite fun if you know where to look, or if you're into certain hobbies.

If you just jump right into it though, all you basically see is boring avatars standing around... either that or Furries.

And actually, World of Warcraft has some large economical problems, even in it's fictional universe.

[Travis Retriever]

And actually, World of Warcraft has some large economical problems, even in it's fictional universe.

explain