Game Theories

Ultima programmers soon fixed the bug. But then they had a new problem: how do you drain all the excess gold out of the economy and bring prices back to normal? They hit upon the idea of creating a rare type of red hair dye and offering it for sale in small quantities. It had no real use but, because it was rare, it became instantly popular and commanded an enormous price—which leached so much gold out of the system that inflation subsided. But the programmers had to meditate for hours on what possible side effects their “fix” might have.

Game designers are, in a sense, the government of their worlds, continually tweaking the system to try and keep it from ruining the lives of their “citizens.” In essence, they face the political question that bedevils real-life politicians everywhere: How much should a government meddle in the marketplace?

In Ultima Online, players pick jobs and produce goods: blacksmiths make iron tools; tailors make shirts. In the early days, the players were forced to find other players to buy the stuff. They had to act like entrepreneurs and, as it turned out, few people really wanted to do that; they just wanted to do their jobs and get paid. So the game designers created “shopkeepers,” robot characters that would automatically buy whatever goods the players made. This forced the designers to behave like Soviet central planners, micromanaging every aspect of the marketplace with arcane algorithms of supply and demand. How much would a chair be worth, compared to a rabbit skin? If horseshoes were suddenly in low supply, how would that affect the price of magical healing potions? How much inflation is too little, or too much?

Citizens, too, began to complain that the economic system was bafflingly arbitrary. One irate player pointed out that a spool of thread could be bought for two gold pieces, then instantly transformed by a tailor into a shirt worth twenty gold pieces—a profit margin that massively overshot any other activity, for no apparent reason. Eventually the game designers mostly gave up, and built a system in which players could trade more easily among themselves.The Berlin Wall fell, and capitalism rushed in.

The free market made things more fluid, but also more unfair. Soon, rich players drove the price of basic goods so high that poor players became much poorer. Once again, the designers had to step in. They would “drop” objects in places where new players could easily scavenge them, giving them a chance to amass a bit of wealth. The designers also set up programs to buy the otherwise useless items generated by poor players (such as animal skins) to give them a chance to make money. In essence, they created handouts for the disadvantaged. Ultima Online had morphed into a modern welfare state, where a free market coexists uneasily with an activist government. “As a developer, I would love to leave it all as a free market,” says Anthony Castoro, one of Ultima Online’s first designers. “But people who are new to the game would have nothing, and the big players would have everything.”

A year after Castronova began his writings on the field, online games were sufficiently mainstream that he was a media celebrity, with cnn, National Public Radio, and endless newspapers calling him for comment. But economists at universities still weren’t impressed. Castronova submitted his original EverQuest paper to a few economics journals. They rejected it instantly. One reviewer wrote a snippy note saying he preferred “to stick with things that are real rather than virtual.”

One can appreciate the economists’ confusion. Even the most highly valued virtual goods do not seem, in some essential way, real. An Axe of the Heavens may be great for killing virtual orcs, but it cannot be enjoyed in the physical world. You can’t eat virtual food to stay alive. But that distinction shouldn’t matter—at least not in economics, which is, as Castronova never tires of pointing out, the study of the entirely arbitrary values that people ascribe to things. “Most of a diamond’s value is virtual, too,” he adds.

The ultimate proof of this idea is in the game world’s emerging merchant class—people who make their real-world income purely by “flipping” virtual goods. Much of their everyday jobs is conducted within the game.

One of these merchants is Robert Kiblinger, a thirty-three-year-old West Virginian. A commercial chemist by training, he worked for Febreze, the company that invented the popular cleaning agent, for which he still holds a couple of patents. (“I was basically selling perfumed water,” he jokes.) But then he started playing Ultima Online, where he ran into a player who was tired of the game and wanted to sell his entire account. The player owned two houses and towers and oodles of rare items, and only wanted $500, which Kiblinger figured was a steal. He drove to Cincinnati to close the deal. “I met him in a Taco Bell parking lot and I gave him a cheque,” he recalls. The next day, they met inside the game, and the seller handed over the virtual goods. Kiblinger turned around and re-sold the whole shebang a few days later to another player on eBay for $8,000, producing a tidy profit.

He was hooked. He began buying up items from anyone who was willing to sell, and set up a website—UOTreasures—to advertise his inventory. Today the site gets 35,000 visitors a week. Kiblinger employs 500 people inside the game, paying them a small stipend (in Ultima Gold and cash) to act as virtual couriers, scurrying around inside the game to deliver the goods to the players who’ve paid for them. A few elite customers have bought more than $20,000 of stuff from him. A couple of years ago, business was so good that Kiblinger quit his job as a research associate at Procter & Gamble to work full-time as a virtual vendor, though he won’t tell me his exact income. “It’s in the six figures,” he says. “It’s a decent living.”