Thought Leaders: Technology
Virtually Vital
Edward Castronova
03/01/2007

The virtual world of online multiplayer games now boasts several million inhabitants. These participants have set up accounts and invented online alter egos, known as avatars, to partake in games that have become a persistent fantasy. Millions of real humans have already stood on the border between virtual worlds and the real world—and some have chosen the former, a world where they engage in battles, start businesses, buy various items and earn real money. These games hold an untapped power to change the real world.

Virtual worlds are now big enough to begin competing with the real world for humanity’s time and interest, just as the geographical New World once competed with the Old World. Most people can acknowledge that when Englishmen came to Boston, Boston changed. What many do not see is that when Englishmen went to Boston, England also changed. When people migrate en masse, the old place has to respond to that group’s absence—and might possibly be drawn into a societal-level competition that forces evolution, adaptation and innovation.

We can get a sense of what changes might occur if we examine the million-person societies that already exist in virtual worlds. Take, for example, the concept of economic inequality. In the real world, we debate and argue for—or against—the redistribution of wealth. In the virtual world, no one cares if Galadriel’s sword is 10 times larger and more effective than Osgood’s, because the rules of the game enforce a level economic playing field from the start.

These are two hypothetical game avatars, but typical of a virtual world in which players create characters that enter the game with zero wealth and zero skills. Both have the same access to character improvement technologies and resources (avatar capital) throughout the entire game (which can last for years). If Galadriel becomes more powerful, it is because her owner has spent more time playing the game, accessing those technologies and resources. Maybe Osgood’s owner likes to spend more time reading magazines and less time in the game. The opportunity for wealth is equally distributed, so any ex post facto inequality of wealth is not controversial; Osgood does not begrudge Galadriel’s success.

Virtual worlds are now big enough to begin competing with the real world for humanity’s time and interest.

Of course, reality could prove that the characters’ opportunities are not so equal after all if, for example, Galadriel’s owner has the luxury of playing games all day while Osgood’s has to go to work. The point is that individuals who spend a large amount of time playing in the virtual world might look around the real one and conclude that the economic policies out here should institute some measures to create a more equal distribution of start-up capital—through taxes on assets and estates, more educational entitlements and so forth.

In fact, we might try economic policies in the game world before releasing them into the real world—to see how players react. Here at Indiana University, we are doing just that: developing a virtual world to use as a social science petri dish. We are setting up two parallel worlds with comparable populations. To begin this kind of experiment, we first give each world a reasonably sophisticated economic and political system. Then we treat one world as the control and the other world as the experiment. In the experimental world, we might increase the money supply to measure its effect on productivity. We might change the way judges are appointed to see whether criminals are released more often. We could alter the tax laws to see whether that modifies the number of self-employed citizens. We could lower income tax while raising wealth taxes to see how that affects inequity and economic growth.

Virtual worlds can provide a vital key to understanding how societies work and how public policy can make them better. Had virtual worlds existed in 1870, we could have given communism a trial run. What really happens when the "workers" control society? Think of the misery that could have been avoided. The 21st century and its technologies will pose challenges and opportunities just as difficult to assess. But they also provide nifty tools for making better social and policy assessments.

Illustration by Matt Mahurin.

Edward Castronova has a PhD in economics and is an associate professor and director of graduate studies in the Department of Telecommunications, Indiana University, Bloomington.