Social gaming - MMO (Masiively-multi-player online) - and their internal economic systems face the "same" challenges as real economies. Evan Aiton has debated on Insidesocialgames.com about controlling inflation in mmos, leaning to the online games money supply white paper found here.

Both resources hit the brickwall of incomparability factors between real and "virtual" economy.

In general inflation or deflation, recession, stagflation, economic depression etc are all preety much obvious facts of life in real economy, though measuring (and mostly interpretation) of theese phenomena is not as firm area of science as might be thaught by the general public.

For instance, how many definitions (or totaly strange references to)  inflation have you heard in your lifetime (having or not any background in economical science)?

There are numeros missconceptions of the phenomena of inflation (holds true perticullary for misuse of the concept in political debate), one is that inflation occours when economies import too much, or something as silly as this.

The white paper mentioned goes and explains the basic concept of inflation (go ahead, write ti down):

P= MV/Q

Where

¨       P = the price level

¨       M = the amount of cash in circulation

¨       V= the velocity of money (how fast it changes hands)

¨       Q = quantity of goods

The agregated price level of an economy will grow if MV increases in relative to Q. Going in the M * V/Q direction can be useful or if you wish M/Q * V.

However  the really nice approach is to actualy make it simple:

Whenever

M > Y  (M: cash in cirrculation, Y: the GDP)

inflation tkaes place.(dot)

In real economies Y wold be measured as (X-M)+C+I+G; (export-import, consumption, investments, government spending)

The challenge for the "virtual" economy would be actualy finding a good way to define GDP. The P=MV/Q applies generally, but to put it straight - looking at inflation from the perspective of price level dynamics is a bad defined inflation. Prices can grow, but the GDP can grow faster, thus no inflation relly accours,...

(note: for macroeconomic gurus: cmon, prices actualy can grow slower than GDP,..)

So, the GDP. What is "virtual" GDP?

If developers are after finding a way to manage the phenomena of inflation in virtual economies, a GDP or its equivalent must be defined. A quick peek to Wikipedia:

"Austrian economists are critical of the basic idea of attempting to quantify national output. Shostak quotes eminent Austrian economist Ludwig von Mises:

The attempt to determine in money the wealth of a nation or the whole mankind are as childish as the mystic efforts to solve the riddles of the universe by worrying about the dimension of the pyramid of Cheops."

Why this qotation? The strongly printed text hits the jackpot! "The wealth of a nation ot the whole mankind".(note: GDP is strongly used to measure wealth of economies, but both must not be confused).

Now imagine, an MMO, an online game. Its economy is a closed system (lets stick to that shall we say), so measuring GDP would go in some sense in the direction of measuriing GDP for the whole mankind,... (again: GDP and walth are NOT the same, former is the measure of latter, and austirans argue that).

So, how can a game developer go about conceptualising a MMO`s GDP? Try and come across a system to define something like world wealth measure, or world real GDP measure.

Some experimetnation with MMO economy could be usefull for real world econometry. Imagine MMO as simulation - with active, human participants - supplying real data to the sim. We would like to have different concepts of GDP equivalents in MMO, tested, over and over again. By now some of you (if any :P) must have came to the most interesting conclusion: online MMO economies are the best macroeconomic theoretical concept experimetnation playgrounds. The other side of the "market" are developers, trying to simulate real economies, so that their games wouldnt be bugged in the sense, that almost all MMOS tend to convergate their economies to hyperinflation.

My best guess here was, that GDP must be conceptualised propperly, or better some equivalent of it, as GDP is merely a measure (disputably corrrect!) of another phenomena: economic activity.

So going through loops, trying to make sensible MMO economies, when cash supply doesnt hyperinflate the virtual economy(virtual goods and services produced) in almost an automated fashion can be interesting from the the theoretival macroeconomical experimentation aspect aswell.

Inflation being a phenomena of sloppy economy conceptualisations in MMO is thus a natural economical phenomena that kind of asks for itself to be better explored for purpose of simulating economy. Other economical factors like wealth might be explored better by MMO simulations, and adjustment. Of course, systematically, if simulating a real economy is the goal, the research value of such ecperimentation is limited, but the process can be reversed also: simulating other possible outcomes of an "economy" can apply some new concepts for the real econoies. Or the most interesting: some established paradigms, or even universaly accepted "founding truths" of macroeconomical sciences can be tested, and tested false,....

Of course it is not expected, that game developers will wish to contribute to the macroeconomical science, and even less expected that experimenting with game simulations would interest the average economists, but nontheless - it might.

Game admins reject, ban and sanction gold trading activities - very different from RL money traders. With all the intangible instruments for gold-sinking at their disposal - why all the hassle? Money is worth only as much as people/players estimate its value. It takes a LOT of WoW turtles before you earn that common +3 strength WideAxe. Is it the same in RL? Not quite, methinks ...

perhapse thats the way they fight hyperinflation? All MMOs have hyperinflation. Embedded. For Sure. That means you cant really trade MMO currency for real cash. That hurts game copyright owners.

bla

Does that make sense?