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Tuesday, June 17, 2014

Virtual Worlds, Real Economics

Video games rot your brain and teach you econ

Video games are playing an increasingly large role in pop culture. Whether you play or believe they are art, gaming will no doubt continue to be a major player in the entertainment industry. More importantly, libertarian ideas seem to be popping up everywhere in gaming. Criticism of government is on the rise, for example, and there is new emphasis on the importance of free thought and action.

To cite just two examples, Bioshock Infinite criticizes militarism and jingoism, while Assassin’s Creed 4: Black Flag is largely a celebration of pirate anarchy. Astute gamers may even notice that an animator for Gears of War 3 put Mises’s motto, Tu ne cede malis (“Do not give in to evil but proceed ever more boldly against it”) in the game’s credits sequence.

This is all good news not only for libertarian ideas generally, but also for economic education. Gaming culture is a vibrant new arena of action where sound economic ideas have a real chance to take hold. There is already discussion about how in-game economies emerge and evolve—particularly how they deal with money and inflation. But games incorporate economics at even more basic levels. Indeed, gamers are already using the economic way of thinking without even knowing it. Games are all about basic economic concepts: scarcity, choice, trade-offs, opportunity cost, trade, and entrepreneurship. If we think of games like this, we see how their virtual realities imitate real-world economic decisions.

For instance, essentially all resources in the gaming world are scarce—that’s where the challenge comes from. If resources or experience points or time were unlimited, there wouldn’t be much of a game to play. But because gamers routinely face these kinds of scarcity, they are already familiar with the limitations they impose and have taken a first step toward economic understanding.

Scarcity means we have to make choices, and in this area games are pushing boundaries. Improved production values in the gaming industry have increased the immersive qualities of gameplay, to be sure. But it’s the economic simulations that make the experiences so real. Consider games like The Walking Dead, which takes scarcity to an extreme by using the zombie apocalypse as a backdrop. Instead of combat, The Walking Dead game centers on difficult economic decisions, like how to ration dwindling food supplies among survivors. Players become emotionally involved in the story by confronting scarcity and tough choices every step of the way.

Players’ decisions in turn imply trade-offs and opportunity costs. Anyone who has ever played a role-playing game (RPG) knows this territory well; choosing to allocate money or experience to a certain skillset means forgoing other skills. And it’s a short step from there to realizing that the true cost of skills is not the resources you spend to obtain them, but the alternative abilities you could have acquired.

Because players have different opportunity costs, not everyone is equally suited to all tasks: Enter the importance of specialization and social cooperation. Cooperation on a grand scale features in many massively multiplayer online RPGs such as World of Warcraft and EVE Online, where the most important quests can only be completed if a large number of diverse character types work together. Each member of the party specializes in enhancing the strengths or offsetting the weaknesses of the others, producing intricate networks of interdependence.

Trade is another vital form of social cooperation, and through the interactions of hundreds of thousands (if not millions) of players, MMORPGs rapidly develop complex systems of barter and monetary exchange. The teaching moment comes when players get to experience the benefits of the division of labor; even better, the benefits of specialization and trade are more obvious than in some ordinary market exchanges, where economic logic might seem too abstract.

Lastly, gaming showcases some of the best of the entrepreneurial spirit. Being a gamer is about crafting and controlling virtual worlds while at the same time learning to think creatively to overcome obstacles. Entrepreneurs do the same thing when they control productive resources in the constant drive to satisfy consumers. It’s not a surprise then that the gaming industry is growing and innovating in ways similar to Silicon Valley and other focal points of entrepreneurial energy; the two go hand in hand.

The idea that gaming conventions are reflections of economic principles is just one example of the many opportunities for economic teaching presented by the mass appeal of gaming. We’re bound to see more as the industry continues to thrive, so let’s be ready to show gamers that the experience they crave is not just good fun, but good economics.

Find a Portuguese translation of this article here.

  • Matthew McCaffrey is assistant professor of enterprise at the University of Manchester and editor of Libertarian Papers.