Friday, March 5, 2010

Money matters in Eve Online game

Of all the economists in Iceland Dr Eyjolfur Gudmundsson has the most unlikely vantage point from which to observe the tribulations of the financial markets: deep space.

Dr Gudmundsson is the lead economist for CCPgames, the company responsible for Eve Online a sci-fi themed Massively Multiplayer Online Role Playing Game with more than 300,000 players.

It is similar in concept to the BBC micro classic Elite and puts trading of commodities and manufactured goods at the centre of the game.

From CCP's headquarters in Reykjavik, Dr Gudmundsson monitors Eve's in-game economy, watching the price of raw materials or the latest type of ship with the same rigour that other economists watch the price of copper or coffee.

He told the BBC that on the "markets of Eve there are about 1.2 to 1.4 million transactions each day".

There's even the Quarterly Economic Newsletter which records and analyses Eve's economy in the kind of detail more usually associated with a prospectus for an investment fund.

Economic aid

For Dr Gudmundsson, who enjoyed a successful career as an academic economist, watching the economy of Eve Online presents a unique opportunity.

"I said to myself I must do this. No economist has ever before been able to have such minuscule information about transactions, about the participants of that economy. I don't regret that. It's been one hell of a ride."

The virtual universe with its hundreds of thousands of players is an economic petri-dish in which the operation of markets can be observed with a clarity impossible in the real world.
Geyser in Iceland, BBC
Iceland's economy suffered in the global downturn

And having an in-game economist is useful for CCPgames as well.

"We assist the developers in evaluating changes to the game, as well as assisting customer support finding people who are not playing according to the rules", said Dr Gudmundsson.

When players discover exploits in the game allowing them to "cheat", it shows up in the price of in-game items. For example, a fall in the price of a product, may indicate that someone has found an exploit which allows them to produce it very cheaply.

"We go and research price changes, and sometimes they have shown us that players found an exploit and hence we have been able to plug the game," he said.

Dr Gudmundsson is, in effect, an early warning system for CCP.

Similarly the actions of bots and players interested in making real money out of trading Eve's virtual currency and goods can be analysed in economic terms.

By diagnosing issues like this, and offering solutions, he is able to use his economic skills to help maintain the integrity of game play.

However, unlike many real world economists, Dr Gudmundsson isn't concerned with ensuring the prosperity of players. Economic ups and downs, booms and busts, even skulduggery that would normally result in the attentions of the financial authorities are all perfectly acceptable.

Eve is a universe in which piracy is a viable way of making a living. Learning to deal with cut-throat business practices is part of the fun of the game.

Unfortunately the same can't be said of financial crises in the real world.

Iceland has been deeply affected by the troubles of the banking industry. In a small country, the affects have been impossible to for Dr Gudmundsson to ignore.

"It's been difficult times for Icelanders, to watch the unfolding saga."

Piracy please

Last December the number of people playing Eve exceeded 317,000 - the current population of Iceland.
Screenshot from Eve Online, Namco Bandai
Eve revolves around exploration and space combat

In Dr Gudmundsson's personal view, it's possible to discern lessons in how future global crises may be avoided, from the economic behaviour of the Eve population. His main belief is that greater transparency would help individuals make better economic decisions.

"We should trust people in making their own decisions. People do make the good choices when they have the right information. More transparency is definitely something we need in the real life."

Dr Gudmundsson illustrates his point by looking at how player-run banks work in Eve.

There have been some notable swindles with billions of ISK (Eve's game currency) going missing. Because Eve has no "lender of last resort" players are consequently very careful about who they trust with their in-game money and very wary of those who aren't open about their business.

He believes it's been a lack of information has been a problem in the current crisis.

Savers should have the information they need to be able to make their own decisions about who to trust with their money, instead of relying solely on regulators who may not be able to keep up with changes to the banking sector, he says.

But the harsh realities of space commerce have not lead Dr Gudmundsson to embrace Eve style laissez-faire economics in the real world.

"It has sharpened my view on neoclassical economics, at the same time I do see the faults of that system. Personally I am very fond of the Scandinavian model, a good combination of healthy competition whereas the government helps those in need."
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