Saturday, 6 March 2010

MMOs: Explaining real life

The BBC has published a story and a video interview on its website looking at how Eve Online teaches us about managing real world economies.

OK, it's time to get a grip people.

Games are at best inexact metaphors for real situations. A market crash in Eve may be superficially like a market crash in the real world but it's a huge leap to go from there to saying that Eve can teach us about real economies.

Let's look at the ways in which market behaviour is different in Eve as opposed to real life:

- it's a GAME. People are doing things that they would never do with their career, with their life savings, with their national economies.

- isk is not real money. People will gamble around with their game money because it has a totally different value to real money. Most notably your isk means nothing once you get bored with the game unlike real money which will be of value your whole life and can then be bequeathed to heirs.

People willingly invest in dubious schemes in Eve. In fact every financial scheme in Eve is dubious for a number of reasons including the game deliberately encourages an atmosphere of distrust, you are not hurting people by taking isk away as you would if you took their life savings away, the person you trust is an avatar that can be sold without you knowing to someone else and so on.

In real life people don't knowingly invest in Ponzi schemes. In Eve it's part of the fun, throw a few billion in while the Ponzi is building, extract it when the Ponzi peaks, chuckle at the people who got burnt while counting your billions when it all crashes. Scamming the scammers.

- it's nothing like a real world economy. People make items to sell just because they like making stuff, many items are cheaper than their raw materials. Many producers value the ore they mine and the time they spend transporting goods at zero. Mineral prices are protected by the isk payouts people get for making ships then blowing them up, the entire economy is underwritten by insurance fraud.

OK, but perhaps we're not being fair, let's look at the video and see what important lesson for managing real world economies the Eve universe can teach us:

"what Eve has taught us about how to deal with the current crisis in the real world I would say that the biggest lesson is transparency and trust in the individual in the sense that we need to trust individuals to make the right decisions."
Dr Gudmundsson, BBC News, from 1.33 in the linked video.

Now hold on just a minute.

The recent banking crisis was not caused by lack of transparency. It was pretty much an open secret in banking for some time before the crash that the system was going wrong because of a tragedy of the commons type situation. Bankers were getting bonuses based on making a lot of loan deals. The people supervising them were getting bonuses based on their staff making a lot of loan deals. The best way for any individual to meet his or her targets was to drop standards. Loans that would once have been refused because the lender's projected income would not keep up with the repayments were accepted. Collateral that would have been considered inadequate was passed. Each individual knew this was bad business but if they baulked at acting in this way the guys in the adjacent cubicles would make more loans, would get the bonuses, would avoid the sack.

This is not a transparency issue. Everyone knew what was going on.

This is not an issue that could be solved by trusting individuals. In this situation it is in the rational self-interest of the individual employed by the bank to make sub-prime loans and get a fat bonus. People who baulk would get sacked and replaced by people who won't baulk because their managers also want to hit their targets and get their bonuses.

So the key thing highlighted as being something Eve can teach us about real life is just plain wrong.

I'm not saying that everything in games is not mirrored in real life. Monopoly teaches us that staying in hotels in Mayfair is expensive, this is a pretty solid lesson.

However most of what games teach us is either bleeding obvious or wrong.

So why do academics find virtual worlds so fascinating?

It's partly the vested interest of academia.

Look if I say I will pay a yearly stipend to anyone investigating whether black is actually grey some people will simply say no it isn't and not get paid, some will take my money and do research.

In the same way if an academic says that an "instantaneous price change in Eve" such as tons of people buying a moon chemical after an announcement of a patch change in the way moons function is a significant example of how real world economics work they will get paid where the guy saying "so what?" won't.

Once you have a system where people are paid to rationalise then the rationalisations will trend towards the lines of thought that encourage new research grants.

This isn't simply pure cynicism: if you have a lot of very clever people explaining how black is actually kind of grey in many ways eventually your inner bullshit detector will fail and you'll start to see their point.

It's what's happening in virtual world academia. A lot of very clever people are articulating about how what happens in virtual worlds explains real life and people are increasingly buying into it.

Even to the point where a usually intelligent man is suggesting solving the banking crisis by trusting bankers (surely amongst the least trustworthy people) based on his experience of Eve players (undoubtedly the least trustworthy bunch of MMOers out there).


  1. EVE is great and has a lot of depth and possibilities. It totally rubs me the wrong way if their marketing propaganda or players portray it in such a way, you know, the Butterfly-Effect video and the reports about the great "heists" aka scams and all that.

    It is sensationalist and attention grabbing, and I am not sure if it is the best way to promote the game.

    It is very misleading. I do not think this is necessary at all! EVE has enough potential for player drama and interaction and to fascinate people *without* making such "stories" about it that are so flawed that I almost want to strangle the guys who come up with this bullshit.

    The game is better than that.

  2. I think in this case it isn't intentional hype.

    Eve's economist is an ivory tower theoretician given 300 000 lab rats to test his pet theories. What he is seeing is largely confirmation bias but he's understandably excited about it.

    "I always thought economies worked like XXXX but could never prove it before - ah ha!"

    What I'm saying is we need to step back from his immersion and enthusiasm and apply common sense.

    The butterfly effect promotion was silly hype, bad science and a misleading portrayal of the game. This is an academic who genuinely thinks he's on to something who may need a little reining in.

  3. There is only one difference between what EVE's economist is doing, and what other economists do with computer models and simulations. EVE's economist has real people interacting in his simulation, whereas other economists have to assume how those people are going to behave and program it in to their models.

    Saying that studying virtual economies can't teach us anything about real world economies is like saying that looking in a mirror can't tell you what you look like. The image in the mirror is fundamentally flawed (in that its the wrong way round) but you can still use it to tell whether you've missed a bit shaving or if you have a hair out of place. The simple truth is that almost all of modern economic thoery is based on the study of 'virtual' economies.

    Of course theres going to be confirmation bias in Dr. Eyjo's conclusions, but that is what peer review and publication of findings in journals etc is for. Economics is by no means an exact science anyway, as it is based on an awful lot of flawed assumptions.

  4. It's even worse when science gets coopted by politics. The BS meters go off the charts there.

    Excellent article, Stabs.