Game Economics Defined

Game Economics Defined

The purpose of this paper is to explain the following:

Classical Economies

In 1775 a brilliant and long lived mind collected all that he had learned over the course of advising British kings and his life's work became the foundational rules for the modern field of Economics. That tome was titled Wealth of Nations. His work was so valuable that it became the framework for how almost all the nations of the modern world are organized.

Of course the world changes over time and so the field of economics was developed to train future economists who would be able to tinker with the details to keep nations running at their peak. But what Adam was describing was an orderly system for creating and maintaining an asymmetrical distribution of power and wealth. Back then we might call this feudalism. What made his tome so powerful and useful was the brutal honesty with which he described this system for distributing labor and other resources and optimizing productivity. His writing is so brutally honest (he describes, without blinking, the process of optimizing labor supply by starving children to cause them to perish while preserving the productive adults) that I can't imagine it being used unedited as source material in any undergraduate economics program.

Over time the world changed and feudalism gave way to corporate oligarchies as the latter was a more efficient system of power distribution and productivity. Our ability to maintain asymmetrical distribution of power and wealth has improved remarkably thanks to advances in classical economics. There have been some economists that have “gone rogue” and tried to create systems that were more “fair”. The result is always a lot of shouting and dying and a redistribution of power and wealth until a new asymmetrical balance is established.

I am in no way attempting to make a political statement or take any sort of side in what happens in “real space” economics. I was born a serf and will die a serf. I serve the system knowingly and willingly. “Fairness” has been shown to improve productivity and health, but any optimizations in the system must be incremental in order for them to be successfully adopted.

Game Economics

Adam Smith treated humans as organic labor supply units and, to a lesser extent, consumers. But Adam didn't have access to modern sciences that explained how humans produce output or what they need to consume to operate optimally. Humans in his time lived to an average age of 35, making his age at death of 67 all the more remarkable. Most people had little or no education and if you ran low on workers it was pretty cheap to make more. Thus to Adam the care and feeding of his organic labor supply units received only the most cursory of discussion. It really was a non issue.

In 2018 I defined the two Core Consumer Needs (for games) as Power and Connectedness. This is because feelings of disconnection and powerlessness are side effects of the asymmetrical power distribution that classical economics create. The reasons for the disconnection are explained in my “I'm Not Addicted, I'm Connected!”. The powerlessness is a more intentional effect but disconnection is required to maintain it.

This wouldn't be a problem in classical economics except that we are putting our people under such high stress that they are starting to malfunction. In 2018 in the USA 90% of our productivity (not wealth) is created by 10% of the population. It isn't hard to imagine that as automation technologies advance, that split will become 1%/99% with robots doing almost everything that was done in Adam's time. As all but the most specialized humans become increasingly obsolete, they will experience ever increasing levels of mental and physical disease related to self-perception.

People need a space they can go to to “recharge”. The solution is, essentially, a modern day Coliseum. We can create New Realities where people feel Empowered and Connected. Game economies are the “social glue” rule sets that govern how players can interact in these NR's. Game economies can further be developed to generate revenue for their creators/administrators, or even labor output that affects real space as described in Third Tier of Game Development (2010).

Definition: The primary role of Game Economics is the design, maintenance, and protection of rules and systems governing the interactions and interdependencies that promote sensations of power and connectedness for participants in New Realities. The secondary role is the creation of methods that translate NR participation into “real space” currency or labor output.

A game economist, by inference, is someone that knows how to perform those duties.

Some History

When my team at UnknownPlayer defended Funcom's Anarchy Online and Mythic Entertainment's Dark Ages of Camelot against economic attack by Black Snow Interactive in 2001, we used active counter measures. This included publishing the home addresses and phone numbers of all their members. But soon IGE organized “gold farmers” to conduct economic raids on all known massively multiplayer worlds (early NR's). Blizzard's World of Warcraft was especially hard hit.

The result of such attacks is that the currency, resources, and items in the game economy become devalued and eventually worthless. The developer can try to buy time by adding new content but that new content only holds its value briefly. Seeking solutions, Blizzard was approached by various groups claiming they could solve the problem using automated active counter measures. All of these (expensive) ventures failed because the gold farmers looked too similar to hardcore players and false positives resulted in the banning of some of the most dedicated (and vocal) participants.

In theory it might have been possible to redesign these economies to passively eliminate economic attacks without disrupting normal game play. The problem was that no one understood how or why these economies worked well enough to figure that out. All the studio heads I talked to said it was impossible but I disagreed. In 2005 I stopped all design work in the industry and focused on this solution, hoping it could be done in one year. The good news is that it wasn't impossible, but the bad news is it took me 4.5 years. By then investors had lost so much money on these early NR's that the money for new development had dried up. Further, when Dr. Mike Zyda authenticated my work and attempted to alert major developers, their points of contact just did not understand what game economics was or how it could help them. Through 2017 that situation has not changed.

Classical Economics in NR

There have been some notable attempts to apply classical economics to NR development by tapping PhD level classical economists. The most obvious and successful example would be CCP's EVE Online. Despite some difficulties with UK speculators trying to attack the early game economy , I ended up being the richest player in the early EVE economy. While I was working with CCP to close critical vulnerabilities in their design in 2003 I had ~5000 players working for me as I began building some of the first battleships in the game.

None of those players knew all their resources were being sold to me, there was no opportunity for Connection in the game design. Early attempts by players to cooperate were foiled by economic hackers who raided and emptied Corporate inventories. The ability of powerful players to exercise fiat power over weaker players and take anything they want from them (a core tenant of classical economics) in the EVE design actually worked pretty well to foil gold farmers but also made it very difficult for new players to enjoy the game.

The EVE Online game economy was designed by a classical economist to mirror the real world classical economy. The game play afforded players merit-based opportunities for power acquisition they likely would never experience in their default reality, but the obstacles to Connection were also carried over. While initially it did meet the interdependency requirement, as the lower economy flooded (and eliminated scarcity) that disappeared for all but the most powerful players. New players are generally powerless and disconnected, but can enjoy the early game essentially as a single player experience until a more experienced player attacks them and takes their stuff, pushing them back down again. Thus the EVE Online NR was never adopted in large numbers by gamers despite the beauty of the world.

It's lonely in space.

In 2011 Arena.net, aware of my work, contacted me to see if I could help with the design of their game economy for Guild Wars 2. They were excited about the possibility of generating a powerful sustained game economy that they could tap for resources as I described in an early paper on “Money Machines”. At the last moment they decided this task was important enough that they needed the world's top classical economist and at the time Dr. Yanis Varoufakis had just been credited with saving Greece from insolvency.

I don't know how much to credit him with as he exited the project a few months later. Given that they don't teach game economics in universities I would imagine he was trying his best to complete the secondary role of game economics without awareness of the first role of game economics. This was soon obvious because by selling game currency they were breaking one of the fundamental rules of game economics as described in the 2012 paper on money machines and also the 2010 Mona Lisa and the Alchemist. A year later, after the bugs were sorted out, I used Guild Wars 2 as a case study to show how one would even go about evaluating a game economy .

The end result was some sort of “fun pain” inventory hoarding contraption designed to force players to buy additional bag space. I consider it a missed opportunity to create a money machine in an otherwise amazing game.

The point I'm trying to make here is that people buy and participate in NR's with the objective of escaping classical economies. The last thing you want to do during the design process is introduce a classical economist into the design process. The math and statistics they have to learn is valuable, and game theory is very useful if they studied that (often optional if available at all), but the rest includes bad habits.