Virtual World Tycoon



            So in this part of my series I will discuss how to become an economic and business master. Well not really, but there is some great research on teaching students economic fundamentals through virtual economies.

            The earliest study comes from a California State Professor named Edward Castronova. Now here is the real kicker. His paper on virtual markets and their relevance has outpaced every work of every Nobel laureate and is the fourth-most popular article on the entire Social Science Research Network.  This study encompassed about 12,000 respondents and was a landmark to help legitimize gaming as a great learning tool.

            Well being that I am not an economist my background in this is very limited. Having took Econ002 I can tell you I wish it had been taught through a game. The material was extremely dry and about the only thing I remember doing was drawing supply and demand graphs that I never really understood.


            Now every factor of a real money market exists in these virtual worlds. As I discussed in my previous blog we as humans learn best through failure. Now who wants to go out into the world, start a business and watch it fall apart so we can learn what worked and what didn't? Virtual worlds allow a person new to economics and markets in general to learn through trial and error with zero risk. Aside from forfeiting your time to gather things to sell you lose no real money. Supply and demand is what economics is founded on and this is what virtual markets thrive off. Virtual markets are however a modified zero sum economy. This means that new money is being created without an equal drainage. This causes inflation to be highly accelerated. This fast paced lifecycle is great for people attempting to study decades or centuries of economic markets in just a matter of months.

            Players also learn what a supply chain is. You have a character that may gather raw materials, but another character that will refine those materials into goods, and yet another character that will place those goods on the market. Here players get to see a very watered down and simple version of a supply chain. The concept sticks more readily because they are in fact building and maintaining this supply chain.

            The final topic I will cover is product pricing. Here players learn what sets prices. There are many things that affect market price. Virtual markets make it easier for a player to follow these trends and in turn be a competitive buyer and seller. With a small pool of items always being sold these players begin to see the patterns and in turn the concepts begin to stick once again.

            I know I said my last topic was my final topic, but I could not end virtual economies without touching on gold farmers. This is by far the most lucrative virtual currency to real currency business in existence. Independent research has said this is in the billions of dollars as far is revenue is concerned. While I was in the Air Force I actually met a guy that was doing this on the side. He would play the virtual market buying and selling items and then sell his extra gold for real money. Now to be fair he was an economics graduate student so I'm sure things like this where fairly basic for him. Still this type of business is beginning to take a legitimate foothold in the gaming world. Even Blizzard has begun to dabble in it with their release of Real Money Transaction Auction Houses. 

            Now as I discussed in my other paper these concepts are only reinforced and understood with some sort of supplemental help. If something like this were implemented in a class it would have to have some sort of lecture or classroom component. While players in these worlds have a better chance of understanding these concepts and how they work in the real world they still need to understand the science that governs therm.

In closing I leave you with this gem and my sources....

Gold Farming (watch it all and it will make sense)

Original Market Study

Slate Article

Personal MBA article

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