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Is Gaming Economics Set to Influence Real World State Economics?

Welcome to 21st century economics: where a Valve economist becomes finance minister and the strength of virtual economies in intricate MMORPG are bound to directly influence not only economic theories, but more so, states’ economies themselves.

Gaming economics provides an easily studied, traceable microcosm of larger economic structures, providing a veritable playground for professional economists. From World of Warcraft to EVE Online, video games have shown thriving economic structures -- which often caused developer frustration, as players often moved in directions that they could never have anticipated.

Meanwhile, macroeconomics has long suffered from a classic problem: the continued inability to create a realistic model that can account for human behavior on a large scale. And no one knows this better than Yanis Varoufakis, Valve's former in-house economist, considered one of the top gaming economists in the world, and now Greece's new finance minister. From 2012 to 2013, Varouvakis studied Valve's unique economy, and interestingly, may very well bring what he has learned to the struggling nation of Greece.

An Economy Driven by Data and Collection

“Think of it: An economy where every action leaves a digital trail, every transaction is recorded. Indeed, an economy where we do not need statistics since we have all the data!”

This quote from Varoufakis not only underscores the principle issues that economists studying traditional models face, but also shows how the gaming economy's structures could be used to directly improve Greece's financial situation. Welcome to 21st century economics: where the strength of virtual economies in intricate MMORPG are bound to directly influence not only economic theories, but more so, states’ economies themselves.
 

Varoufakis’ data analysis shows spikes in TF2’s economy and barter system based on particular events.
Source: Valve Economics blog

Greece's economy makes it uniquely suited to these forms of experimentation and adaptation, as it is within the heart of an economic crisis. Turmoil often makes it easier, rather than harder, for an infrastructure to radically change.

The Value of the Gaming Economy as a Model

Most people react to the economy in fairly predictable ways. But in the real world, economic models are often muddled and confused because there are too many variables to track. A butterfly flapping its wings in New Mexico creates a hurricane in China; it's the heart of the chaos theory and the economy can be extremely chaotic. The gaming economy provides a valuable model of human behavior because it not only tracks its own data but it also allows economists to isolate very specific, smaller scale portions of the economy. It offers a completely new opportunity to economists that was never even remotely possible in the past.

The idea of using gaming as an economic model is not a new one. Game theory has been used since 1944, well before the very first game of Pong was played. But it has never been able to be used and access at such a wide scale, with such incredible amounts of player-driven economic data. A multiplayer game environment such as Team Fortress 2 allowed Varoufakis to watch complex economic events unfold in real time.

Economic trends are easy to collect and analyze when all data is tracked and saved. Here, you can see the unavoidable decrease in price of a newly released item in Team Fortress 2 as demand goes down.
Source: T2finance.com

In the video game world it's quite astonishing to watch. Quickly, collective aggregate behavior converges at equilibrium and then disequilibrates itself. Then some other equilibrium comes and then goes away. It's the speed and the irregularity of behavior around some equilibrium and the speed with which new equilibria are being formed.

Put simply, the video game world is agile in a way that real world economies cannot be, providing better and more substantive data.

A Man Uniquely Suited to a Dire Problem

Varoufakis was first propelled into public consciousness during the Euro Crisis -- but that doesn't mean that his career has not been without some remarkable accomplishments. Apart from working for the eclectic, mysterious Valve, he was also instrumental in the creation of Bitcoin -- and he accurately predicted its demise.

His time at Valve itself was, as one could predict, preparation for entering into a challenging and unique situation. On Valve's economics blog he wrote about Valve's unique management structure and economic philosophy, which has been called innovative by some and bizarre by others.

It’s staggering how the development of massive online virtual economies has offered employees the skills and knowledge now applicable to real world situations, including running the economy of a country. We may be seeing the line between virtual and real economies begin to fade.

Paving the Path to the Future of the Digital Economy

Greece's current financial situation is such that it needs a radical re-imagining to survive. And that introduces Greece to an interesting possibility: inspired by Varoufakis’ gaming experience, it could become the very first data-backed, fully digital economy. Rather than continuing to suffer under the weight of its debt, Greece could emerge both a phoenix and a thought leader. It certainly is not the only country currently in dire economic straits, and it can provide a case study on which other nations can learn.

As Varoufakis points out, traditional models cannot help the Greek economy because the Greek economy is currently so volatile. In fact, it is more similar to a game economy than a traditional economic model, creating a ripe opportunity for integrating knowledge of game economy models.

Futurists have long predicted that we could ultimately turn to a universal, digital credit currency that would make transactions -- both foreign and domestic -- far easier, blending us all into a larger, homogeneous economic structure and removing us from much of the fickle nature of local economies. Bitcoin was one attempt at this form of unification and decentralization -- and it failed for the reasons that Varoufakis accurately predicted. But the continued yearning for a "Bitcoin" solution cannot be denied, and Varoufakis could be uniquely poised to help spearhead such an initiative.

Of course, all of this is as yet supposition -- but what is known as that the world (including game developers) is now eagerly watching Varoufakis and the Greek financial crisis. Varoufakis, as the Greek Finance Minister, will be doing more than helping Greece recover; he may very well be paving the way to our collective financial future, and it may all occur on the backs of data collected from Valve's Team Fortress 2.

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