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Long before the videogame era, games operated as simulations in one fashion or another. Yet forced to rely on relatively simple procedures and calculations, games were necessarily abstract, and resultantly, they tended to simulate in a highly metaphorical manner. For an example, look no further than Monopoly.
Originally titled The Landlord's Game when it debuted in 1904, Monopoly was the brainchild of a Quaker woman named Lizzie Magie, who hoped to explain the single-tax theory of Henry George and demonstrate the dangers of real estate monopolies. But rather than write a treatise or climb atop a soapbox, Ms. Magie instead devised an abstracted simulation of private land acquisition in which participants rolled dice and moved around a board collecting properties and attempting to bankrupt the competition. She made her argument through a game - a highly abstracted yet compelling simulation of the business practices she wished to condemn.
Think about it: an abstracted product that represents a bigger real-world issue, a subversive argument with political overtones, an intellectual engagement with the audience - this is art we're talking about. Yet the form it takes is not one we traditionally associate with art of any sort. It is simulation as art, procedural representation used to express thoughts, convey ideas and communicate the intangible.
Monopoly is hardly an edge case, as countless games perform similar tasks. Operation simulates surgery; Clue simulates a murder investigation; Mall Madness simulates ... umm, shopping. Risk simulates global warfare; Battleship, naval warfare; chess, medieval warfare. Life, Assassin, Mafia, Settlers of Catan - each of these provides an abstract, though relatively straightforward, representation of some scenario. Even games without such deliberate contexts still provide metaphorical enactments of human actions. Poker, for example, hinges on economic conflict, reliant on prudent wagering and chip acquisition. Most team sports are, in the end, highly abstracted campaigns of territorial conflict. And as WarGames taught us, even Tic-Tac-Toe can ultimately be used as a proxy for global thermonuclear war. (Thank you, Matthew Broderick).
Yet with the dawn of the computer, games have been able to leave metaphors behind and provide a much more literal representation of reality - a simulation in the contemporary sense of the word. Computer Space and Pong, the very first commercial videogames in history, were basically rudimentary physics simulators that mimicked thrust and rotation or deflection and vectors of direction. From the get-go, the medium's impulse was similar to its analogue predecessors: to simulate. Now, games can do so in much more direct ways - but that's not to say they gave up the artistic license of games past.
Fable 2 provides a good example. Many think of Fable 2 as a fairy tale. It tells a lengthy story; it involves monsters, magic and a legendary hero - heck, it's named "Fable." But this isn't quite accurate. Fable 2 doesn't tell a fairy tale; rather, it simulates the experience of living through one. It's a fairy tale simulator, delivering players into an interactive, fable-like environment. There are a wide range of simulated elements that flesh out this elaborate world: jobs, trading, marriage, kids, townsfolk, countrysides, side quests, moral choices and a variety of other tangential details that help suggest the life of a legendary adventurer.