Game Theory: World of Warcraft will Save the Economy

World of Warcraft will Save the Economy

We've talked before about how incredibly addictive World of Warcraft is. But one thing we haven't mentioned is how the game is secretly training the some of the greatest economic thinkers in history. Business school? MBA? Forget that! Play a couple hundred hours of WoW and you'll be able to solve some of the world's most difficult financial issues. This video explains how!

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WOW economy != Real world economy

WOW gold is unlimited. You can go out, kill monsters, and gold will magically appear from nowhere to reward your effort. Inflation occurs when the gold sinks, such as NPC vendors, cannot keep up with players making gold from killing monsters, quest rewards etc.

Real world money is a finite quantity. Inflation occurs when people put money in savings accounts and the banks lend that money. The banks can pretend that their savers still have the money, as long as they don't all try to withdraw their money at once, while the borrowers also have the money, so the money effectively exists in two places. Sometimes this house of cards collapses and the money disappears, so governments have to create a lot of extra real money.

Of course, it could be argued the faucet-drain model adopted by every MMO since Ultima Online is superior to real world currency systems, and possibly useful as a real world currency model. But discussions about the WOW economy aren't really applicable to the real world currencies that exist today.

just want to point out that the gold cap in WoW is 304000 though it may have been increased by 100k again with warlords being released. I know this because I had a friend who is retired and spent most of his day just farming for gold.

I've been a more casual gamer when it comes to WoW and there is always some shiny new cash sink to pour down what saving I do have. But hey what good is all that money if you don't use it, right?

Bad Jim:
WOW economy != Real world economy

WOW gold is unlimited. You can go out, kill monsters, and gold will magically appear from nowhere to reward your effort. Inflation occurs when the gold sinks, such as NPC vendors, cannot keep up with players making gold from killing monsters, quest rewards etc.

Real world money is a finite quantity. Inflation occurs when people put money in savings accounts and the banks lend that money. The banks can pretend that their savers still have the money, as long as they don't all try to withdraw their money at once, while the borrowers also have the money, so the money effectively exists in two places. Sometimes this house of cards collapses and the money disappears, so governments have to create a lot of extra real money.

Of course, it could be argued the faucet-drain model adopted by every MMO since Ultima Online is superior to real world currency systems, and possibly useful as a real world currency model. But discussions about the WOW economy aren't really applicable to the real world currencies that exist today.

With the magic of accountants you can make more money, along with the usual printing of it. No matter which way it happens though, both systems experience inflation with more money entering and the cost of goods constantly going up. Which does make it an interesting way to explore how people treat inflation in one world, even if the method of generating new money may be different.

Bad Jim:
WOW economy != Real world economy

WOW gold is unlimited. You can go out, kill monsters, and gold will magically appear from nowhere to reward your effort. Inflation occurs when the gold sinks, such as NPC vendors, cannot keep up with players making gold from killing monsters, quest rewards etc.

Real world money is a finite quantity. Inflation occurs when people put money in savings accounts and the banks lend that money. The banks can pretend that their savers still have the money, as long as they don't all try to withdraw their money at once, while the borrowers also have the money, so the money effectively exists in two places. Sometimes this house of cards collapses and the money disappears, so governments have to create a lot of extra real money.

Of course, it could be argued the faucet-drain model adopted by every MMO since Ultima Online is superior to real world currency systems, and possibly useful as a real world currency model. But discussions about the WOW economy aren't really applicable to the real world currencies that exist today.

If that's your argument, it doesn't really hold water. The dollar is a fiat currency, meaning central banks can conjure money whenever they want to by simply having the Feds print more. That's more or less what happens when players go out and earn gold by killing monsters or completing quests.

And while gold sinks exist, money sinks also exist in real life - that's why risk is a thing. Really, while the exact mechanisms aren't the same(obviously, this is a world where demons and magic are real, after all), many of the same principles of trade and the exchange and flow of currency are still present.

Bad Jim:
WOW economy != Real world economy

WOW gold is unlimited. You can go out, kill monsters, and gold will magically appear from nowhere to reward your effort. Inflation occurs when the gold sinks, such as NPC vendors, cannot keep up with players making gold from killing monsters, quest rewards etc.

Real world money is a finite quantity. Inflation occurs when people put money in savings accounts and the banks lend that money. The banks can pretend that their savers still have the money, as long as they don't all try to withdraw their money at once, while the borrowers also have the money, so the money effectively exists in two places. Sometimes this house of cards collapses and the money disappears, so governments have to create a lot of extra real money.

Of course, it could be argued the faucet-drain model adopted by every MMO since Ultima Online is superior to real world currency systems, and possibly useful as a real world currency model. But discussions about the WOW economy aren't really applicable to the real world currencies that exist today.

Inflation occurs from a lot more sources than just banks, though that is one of the ways money supply is increased. However, to give you an idea of how much inflation is out there, there are about 1.2 trillion actual US dollars in circulation. On the other hand, the active money supply is over 10 tillion dollars.

Arcanist:

If that's your argument, it doesn't really hold water. The dollar is a fiat currency, meaning central banks can conjure money whenever they want to by simply having the Feds print more. That's more or less what happens when players go out and earn gold by killing monsters or completing quests.

Not even a little bit.

See, banks cannot simply direct the government to create more money on a whim (unless your government really wasn't thought through). There are a lot of factors that go into when a treasury decides to print how much of what types of currency and in a lot of cases the bank is actually required to simply exchange their old/damaged currency for fresh versions, allowing the old to be destroyed.

In order for a RL economy to come even close to mimmicking WoW's economy; every time you squished a bug you'd mint a penny, and every time you shot a dear you'd mint like, I dunno, $50. Now multiply all of those bugs ALONE, by the number of people in the United States, per day. That is an OBSCENE amount of money being minted, from nowhere, every day.

The same thing happens in WoW. As the player base rises the amount of money effectively being 'minted' goes up astronomically. Furthermore, gold spent on the AH will never actually leave the economy, and it can never be replaced or reset without angering and driving off a considerable portion of the player base that Blizzard wants to keep around for the real money that makes them. On top of that, if gold sinks like repairs, reagents and travel costs exceeded the amount of gold earned by a single player just while they were out and about, then the players would get discouraged and still leave, which Blizzard doesn't want, because money.

So in WoW you have a fixed currency which is minted in droves by everyone, everyday, all day, that never leaves the economy faster than it is minted and pumped into the economy. Unlike real world currencies, the value of Azerothian gold has never gone up, only down, and it will only continue to go down unless all those rich players suddenly sink 300K gold in repairs in a weekend.

I'm afraid your argument is the bombastic sieve here, not Jim's.

All WoW really provides is a good study of mob behavior and how social pressure affects individuals in a community.

Bad Jim:
-snip-

Proto Taco:
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Just because it doesn't match up 1:1 doesn't mean it can't be used as a way to study how the real world economy works, which is sort of the point of the video's premise. Video game economies are just about one of the only (or at least easier) ways for people to study an economy in a controlled setting. Studying WoW could indeed provide some valuable insight into how the world's economy works.

CAPTCHA:
I have fallen? But I'm just debating with people on the internet! It can't be that bad.

Why post a video that's six months old?
https://www.youtube.com/watch?v=fDfNoCjtXvQ

LittleMikey:
Why post a video that's six months old?
https://www.youtube.com/watch?v=fDfNoCjtXvQ

Might even be older than that wasn't this originally released around or just after Cataclysm?

 

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