http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/08/01/
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Economists to explore world of online games
Researchers could assess players' response to change
- Tom Abate, Chronicle Staff Writer
Monday, August 1, 2005
For roughly a decade, people have used role-playing online games to
conduct parallel lives. Raise another family. Start a new business.
Build your own city. It's all possible in these virtual worlds.
Now, some economists and social scientists say these Internet worlds
could be a new type of laboratory to study economic behavior, such as
how consumers respond to inflation.
"I think there's an incredible opportunity here to run controlled
experiments on economic questions," said Edward Castronova, an
economist at Indiana University at Bloomington.
Castronova co-founded Terra Nova, a group blog that explores the
technological, commercial and social dimensions of these virtual worlds.
Dimitri Williams, a communications professor at the University of
Illinois at Urbana-Champaign and fellow Terra Nova contributor, said
scientists could subtly alter the software that governs these worlds,
tweaking the rules of the games, then measuring how these changes
affect behavior.
One of the most sophisticated of these artificial worlds is Second
Life. Based in San Francisco, it is not so much a game as it is a
cross between an Internet chat room and an unscripted movie set.
The real people who play Second Life create proxy characters, called
avatars, that can mimic human behaviors like flirting, gossiping or
showing off. Some players, through their avatars, even make imaginary
goods that they sell -- sometimes for real money.
Virtual worlds like Second Life, for it is only one of hundreds of
such realms, began in the 1990s as places for Internet users to act
out dungeon-and- dragon fantasies with other people.
"This is a social science petri dish," Williams said. "You can see
everything, and they don't know you're watching"
If this virtual world stuff sounds like science fiction and the
scientists like mythic gods toying in human affairs, a little
background will help bring this online-play phenomenon into focus.
Online games emerged in the late 1980s and early 1990s as the
explosion of computer networks made it possible for many, widely
dispersed individuals to take part.
This genre of games is called MMOGs, or massively multiplayer online
games. More than 100 MMOGs exist today. The number of players has
been estimated at between 2 million and 10 million.
The best known of these fantasy worlds include Lineage, World of
Warcraft and EverQuest. Second Life is smaller and newer, more
lifelike and less gamelike. But as is the case with these other
online realms, Second Life has its own currency, the Linden, which
participants can use to buy and sell goods.
It was this trade in virtual goods that caught the attention of
economists, who were fascinated to discover several years ago that
much of the activity in these online worlds consists of commerce, not
fighting.
What's more, players are often willing to spend real dollars to
acquire the totems that confer status, power or bragging rights. In
the second quarter of 2005, for instance, Second Lifers exchanged
goods and services worth about $4.2 million in real money, according
to Linden Lab, the San Francisco company that created this virtual
world.
Ken Selden, a Los Angeles screenwriter, helped pioneer currency
exchanges between the real and virtual worlds in the mid-1990s when
he was playing an online game called Gemstone.
That game was more in the sword-and-sorcery tradition. Players
advanced by finding treasures, which they used to buy weapons, rising
in proficiency to gain rank in that feudal system. But some players
wanted to flatten the learning curve by paying real money to buy
artifacts that got them ahead. So Selden started buying these tokens
of the game and reselling them, using dollars.
"In my top year of operation, I probably made half a million dollars
in profit," he said. "I got to be king and J.P. Morgan and Alan
Greenspan all at the same time."
Selden has left the virtual trading business and instead helps design
games. But the trend he helped pioneer, selling virtual goods for
real cash, continues on a huge scale.
MMOG players spent an estimated $880 million for online goods and
services in 2004, said Steve Salyer, president of IGE, a Los Angeles
firm whose 250 employees help players buy, sell and trade across the
real and imaginary worlds.
"This is commerce in places that don't really exist, over items that
don't really exist, in tangible currency,'' Salyer said.
But that doesn't mean the goods aren't real to the players. Salyer
recalls how outraged he felt when his castle in the online realm Dark
Age of Camelot was ransacked by a hacker who looted all his virtual
possessions. "These cyber worlds are extensions of what we really
value,'' he said.
It was Castronova, the Indiana University professor, who focused
scientific attention on the economics of online worlds. In 2001, he
wrote a scholarly article about the commercial life of Norrath, the
online home world of the popular game EverQuest.
Castronova discovered that an unofficial trading network had grown in
which gamers traded platinum pieces -- the basic units of Norrathian
currency -- for dollars. Moreover, this funny money had a real world
exchange rate of a little more than a U.S. penny, which was "higher
than the yen and the lira." When players left Norrath and auctioned
off their avatars, these used personas fetched prices between $500
and $1,000.
When Castronova wrote his paper, Sony Online Entertainment, which
created EverQuest and its graphic-rich sequel EverQuest II, tried to
discourage this unsanctioned foreign exchange. But Chris Kramer,
spokesman for Sony Online in San Diego, said the company got so many
angry calls from gamers who went outside the game environment and got
fleeced in exchanges that it decided very recently to allow
sanctioned trading, for which it takes a cut.
"If you can't beat it, own it," Kramer said.
As the economic activity of these games continues to grow, Castronova
wants to do more than simply observe the commercial actions of
gamers, as he did when he first entered Norrath.
He wants to tinker with the economic rules of the game in a way that
would allow him to draw cause-and-effect relationships between
changes in rules and changes in behavior. This is possible, he said,
because of the way these virtual realms are embodied in server
computers.
Castronova explained that with most current games each server can
accommodate only a finite number of players. As more players join the
virtual world, the game host adds new servers and starts filling them
with players. The result is that a game with 400,000 players might
actually consist of 40 servers, each with 10,000 players -- 40
parallel worlds, each with the same economic rules.
What Castronova would like to do, but so far hasn't accomplished, is
gain access to the software that sits on those servers, changing some
while leaving others alone.
For instance, he could create a strong central bank to control
inflation in one set of servers. A second set could have a central
bank controlled by that world's political leader. A third set might
have no central bank. All the other rules of the game would be left
alone.
Assuming a random distribution of players to the various servers,
differences in economic outcomes and behaviors should be traceable
back to the changes, he said.
"Instead of theorizing about central banks, we could play out our
economic policy scenarios through these games,'' Castronova said.
His notion has elicited cautious interest but no ringing endorsements
from other economists. Harvard University's Alvin Roth is noted for
lab-based economic experiments. Subjects are recruited to take part
in carefully controlled scenarios designed to answer straightforward
questions such as what kinds of rules encourage or discourage last-
minute bidding in online auctions.
Roth said researchers must go to great pains to avoid prejudicing the
results of these experiments by the selection of subjects or design
of the tests. He called Castronova's proposal attractive because
players come to online games willingly and because the underlying
economics could be changed in invisible ways and therefore less
likely to alter behavior.
"But you have to worry about the fact that these are games, and not
everybody plays them," Roth said. In short, are the economic
behaviors of people who play online game the same as people who watch
television or engage in other diversions?
Meanwhile, on Second Life's servers in San Francisco, a different
sort of open-ended economic experiment is under way. Williams, the
communications professor from Illinois, said Second Life's underlying
software gives knowledgeable residents of this virtual world the
ability to create just about anything they can imagine.
"This is this single best suite of tools that have been given to
users to create content that the world has ever seen,'' he said.
The results are evident as Second Life's founder, Philip Rosedale,
shows off some of what the world's 39,000 residents have created
since the software started to take shape a little under three years
ago. There are flying cars, ray guns that sell for $5 each, clothing
that glitters and avatars who make and sell virtual pets to other
avatars who pay for these imaginary playthings.
"We're not going to be a game," Rosedale said. "We're literally going
to put people down on the 'land' and tell them they can build things."
He said some Second Lifers have ventured beyond the environment's
mainland to form semi-independent colonies with their own rules and
social structures. Some colonies have strong leaders, others are
based on languages, while others still are organized around lifestyle
choices -- such as the so- called furries who choose animals avatars.
Rosedale said so many social scientists have logged on to Second Life
to observe these virtual communities that it has provoked debate.
"People say they don't want to live inside a fishbowl, but of course
in a sense they do,'' he said. The compromise has been to set up
ethics guidelines, borrowed from the social scientists, to govern
what these observers can and can't do.
Where all this is heading, no one can say, but Rosedale says that
insofar as people have always learned by observing the behavior of
others, we may now have a social feedback system that moves faster
than the speed of history.
"What's happening with Second Life and systems like it is that people
are able to much more rapidly vary social systems and see the results
almost instantly,'' he said.
E-mail Tom Abate at [EMAIL PROTECTED]
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URL: http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/08/01/
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