Hey Look: We’ve got Economists!!

An interesting new title is starting to show up in game companies. Chief Economist.

Virtual economies are becoming a foundational component of game design. Like when Storytelling and Music where added to games, virtual economies are expanding the appeal of games to broader audiences.

Games make strange cubefellows

Ok, that was a terrible play on Charls Dudly Warner’s quote “Politics makes strange bedfellows”, The point I’d like to make is that modern games draw from a very wide verity of skills and backgrounds. In a game company boardroom, if you don’t see a fohawk in tattered denim next to a receding hairline in a finely pressed business suit something is wrong. The diversity allows for the creation of experiences that appeal to a broad audience. Sometimes through depth, sometimes through simplicity.

It’s not like we haven’t done this before

Every time the industry adds a discipline to the standard game development team, the market for games expands. The experiences provided by games become more engaging, and meaningful.
The first computer games where created mostly by programmers and games appealed to a base audience.

Then came Writers, authors, storytellers. Text stories where adaped easily to the primitive computer systems used to develop and play computer games. Games started telling compelling stories and their appeal expanded (Zork). People who enjoyed an engaging story found a new medium, and the market for games

Visual artists entered games, and we got graphics. Games became visually appealing, then as graphics got better, visually compelling. Musicians entered games and we got sound and music. Recently community, social networks, and sociologists, in the form of community managers, have entered the industry. Games are creating tight feedback systems between players and developers (many times erasing the lines between the two). Games are appealing to a very broad market base (farmville? zynga’s games)

Each time the games industry adds a new discipline, the appeal of games broadens.

Hot Game executive title: Chief Economist

Companies like imvu and linden labs live and die on their virtual economy, it just makes sense that they have economists on staff. Only these folks don’t (or shouldn’t) work for the CFO (although the CFO may be the only one on staff who can comprehend much of their jargon). A chief economist has a lot to contribute to game design (also an economist can talk to a VC in ways that will nearly guarantee extra funding

Wait, something is not right here

Games have constantly challenged every new entrant discipline: Challenged their fundamentals. [editors note: English just does not have a comfortable, or elegant, way of dealing with the relations between compound, nested, or unbounded sets. I site as examples of my frustration the invention of "all y'all" and the use of "dudes" in the US west or "y'all" in the US south]

Each time a discipline is added to games, a fundamental assumption about that discipline is discovered, sometimes painfully, to be invalid. Games are non-linear, temporal, real time, collaborative, experiences, often involving not just an individual but groups of people large and small.

Writers entering the game industry encountered interactivity. Players play games. They are players are not a reader, listener, or viewer. And, unfortunately for the screenwriter, players are not actors. Players (gleefully) refuse to respond to direction or do what they are told. Interaction, choices, break the linearity many storytelling mediums are based on.Writers have learned to break stories up into little bytes that can be broken up into “missions”, “quests” or “levels”. Writers have learned to let stories unfold out of order, from multiple viewpoints, and write several alternate sequences that go beyond simple branching. Story telling games have become rich, and can appeal to both broad and narrow audiences.

Some may argue that good story tellers jump back and forth in time, but the reader will still turn to page 56 when they finish page 55. The live theater goer will still see act 3 right after act 2. One of my favorite debates still rage: are games a story telling form or a sport (with no real story context). There are those that will argue that sports are a form of story telling. (personally: those folks need some mind expanding experiences)

Music encountered similar challenges when added to games. The time it takes a player to do something is unknown. “How many measures does that combat sequence take” is not a question a composer can ask in a game setting. For a composer this represents a huge challenge, how long do you know how long your score is supposed to be? When is it exciting? when is it contemplative? How much time to I have to transition? If I make loops, short loops become irritating, long loops never get heard and get cut off in awkward and jarring manners. Musicians have very little information up front, they don’t even known when the mood in a game is going to change. An exciting combat situation is often defined by the mood changing from dire to victorious in an instant.

Music systems have been created that can help dynamically compose and change the mood of music during game play. With the application of these technologies games became more fun, and music games became an audience expanding genre unto themselves. Games gained a richness and depth that added mood and tone.

Enter the Economists

So enter the dire breach my dear, the unsuspecting economists.

Lionel Robbins in his 1932 essay he defines economics as:

“the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”^[3] Scarcity means that available resources are insufficient to satisfy all wants and needs. The subject thus defined involves the study of choices as they are affected by incentives and resources.

In virtual economies there is no scarcity. Alternative uses are often a null concept. Lionel Robbins concludes that

Absent scarcity and alternative uses of available resources, there is no economic problem.

There is no relevant cost of goods within virtual economies. Virtual items do not “wear out” so there is no loss of value of an item over time due to diminished capacity. There is an excellent article in venture beat about this.

I find I must take issue with one point repeatedly brought up(this was also mentioned in the VGS09 summit). A point keeps being made that “real” economies do not have sinks and sources. I postulate that real economies DO have sinks and sources. In a real economy a source would be the controlled addition of new resources, or the ability to exchange currency. That is, if I go out and dig up some gold, I have a choice of exchanging that gold for US dollars, Euros, rupees or what have you. I am adding a new resource to that economy. If I play the part of a government, as such I have the ability to print money, and have the ability to take money out of circulation.

I learned at a very tender age that money is not real, it not even a measure, it is merely a means of standardizing units of work to allow for and easy and uniform exchange of goods and services. (there is a certain type of genius when a mother can make a concept like this obvious to a 5 year old. If your curious, ask and I’ll tell you the anecdote she used)

Most governments have fairly broad simple mechanisms to source and synch money into and out of the economy, and these mechanisms are balanced by some very subtle and complex mechanisms to measure and control the value of that money when compared to goods and services.

This exactly the role a game 0perator takes on when running their own virtual economy.

Real economists are green, with envy

A huge benefit economists have in virtual economies, as pointed out by Bill Grosso, is that virtual economists can see EVERYTHING. Every transaction in a virtual economy is known, and all the meta data about that transaction is also known. Bill calls it “perfect knowledge”. Virtual economists are the envy of “real” economists. In reality we can not know fundamental facts about what is being spent on what by whom, we can only really guess.

New shiny thing: same old shiny result

Now we have games that have virtual economies as a fundamental part of game play. What has the industry gained from it?

A whole lot.

Some of the fastest growing games of 2009, and some of the more profitable new game companies <zynga> use virtual economies.

Virtual economies are used to lower the barrier to entry into games, and to allow players, community members, to spend as much as they want.

So when games added Music, Physics, Graphics their appeal broadened to new audiences, economics in games is expanding the appeal and relevance of games to more and broader audiences.