Making Cents of Video Game Economies

Making Cents of Video Game Economies

Caps in Fallout, rupees in The Legend of Zelda, and gold in almost every single role-playing game imaginable. Money, it exists both in the real world and in virtual ones too. Since the move of video games out of the arcades and into homes in the 1980s, currency in games has served as a means of exchange for virtual goods and services. Some games keep their economy pretty simple and closed off. In Super Mario Bros, 100 coins nets you an extra life—not too much choice there. However, some games build more life-like economies where the price of a good isn’t set by a developer, but rather the market.

Take World of Warcraft (WOW), one of the most famous massive-multiplayer online role-playing games (MMORPG). In WOW, members can trade items on an auction-style exchange where prices can be bid up. In addition, through microtransactions, money like US dollars (USD) can be used to purchase in-game currency. Furthermore, we can see the exchange on USD for WOW gold as a normal exchange of currencies—like exchanging British pounds (GBP) for USD. However, what’s interesting about the WOW economy is that this past year WOW’s fake gold was worth more than Venezuela’s bolivar on the black market.

Economies in games like Fallout, Zelda, WOW make sense—because they do a great job at replicating our own economy. And what do all of these games share in common? An overly enthusiastic fan-base? Well, yes, but more importantly they all share a single common currency in the game and if there is another—let’s say the USD—it can be easily exchanged for the USD (at least one way). In Fallout, all merchants accept caps as the common agreed upon currency, similar to how all stores in the US accept USD (even if some accept Bitcoin, they are required by law to accept legal tender money better known as cash).

So, even games with microtransactions make some sense—as it can be viewed as an exchange of currencies (even if my WOW gold can’t buy USD). But some games don’t quite make cents. Take developer Bungie’s 2017 game Destiny 2. For those of you not familiar with Halo developer’s recent entry, Destiny 2 is an online-only, multiplayer, first-person shooter science-fiction game. In Destiny 2 there exists not one currency, but instead three—glimmer, legendary shards, and bright dust. Each of the three currencies is used for different purposes, glimmer is like a general currency used to purchase normal items with the other two being for specific purposes. This does not include the numerous “tokens also available for redeemable goods and services.

At first glance, this economy makes sense, these three currencies are used as a medium of exchange for the purchase and sale of goods and services. However, if we begin to think about how money operates, how it has developed historically—this economy begins to make less sense.

Let’s back up for a second. Have you ever wondered why when you walk into a Target that you can purchase all the same goods with your USD? That the clothes don’t cost 1 kilogram of copper, and that the TVs don’t cost 120,000 bottle caps? We aside from the huge inefficiencies that Target now has to convert bottle caps and copper into USD to pay its workers and bills humans have been through this before.

Money has developed considerably over the past thousands of years. Through the millennia, humans moved from direct exchange to indirect exchange. In direct exchange, the goods are traded for each other; in indirect exchange, there is another agreed upon item that represents value and serves as a medium of the exchange—or better known as money. Even indirect exchange has changed a lot (no pun intended). Before the advent of money as we known it, usually a few goods were generally accepted. For instance, wheat or gold. However, as time went on, humans moved towards using a single medium of exchange rather than multiple ones. This reduced the number of prices, as goods would be measured against a single item rather than multiple.

Later on, governments would issue full-bodied coins—or coins that were worth their weight. For example, 2.50-gram silver coin would be worth the same amount of money as a non-money piece of silver of the same weight. Due to the scarcity of metals governments also made token money, where it’s value in exchange was greater than its physical worth. As a result, people would continue to move out of token money. Today, we use a mixture of fiat money and bank credit money.

While multi-currency games like Destiny 2 do not necessarily have token money, the evidence of multiple currencies creates inefficiencies in the economy. Unlike the real economy, players can’t move out of legendary shards and bright dust into glimmer, the way they would out of the wheat and gold into government issued coins.

With the reduction in microtransactions seen in blockbuster games like Star Wars Battlefront 2, it will be interesting to see the direction in which economies in video games move in, and if they continue to resemble our economy or deviate further from their logical development.

 

 

Sources:

Curott, Nicholas A. “Adam Smith’s Theory of Money and Banking.” Johns Hopkins Institute for Applied Economics, Global Health, and Study of Business Enterprise, Studies in Applied Economics, no. 47 (February 2016).

Davies, Glyn. A History of Money From Ancient Times to the Present Day. Wales: University of Cardiff Wales, 2002.

“Legal Tender Definition | Investopedia.” Accessed January 5, 2018. https://www.investopedia.com/terms/l/legal-tender.asp.

Morris, Chris. “Venezuela’s Cash Is Now Worth Less Than Currency in ‘World of Warcraft.’” Fortune, August 1, 2017. http://fortune.com/2017/08/01/venezuela-bolivar-world-of-warcraft-currency/.

Thomas, Lloyd. Money, Banking, and Financial Markets. Ohio: Thomson South-Western, 2006.

Tran, Edmond. “Destiny 2 Guide: How Currency Works.” Gamespot, October 23, 2017. https://www.gamespot.com/articles/destiny-2-guide-how-currency-works/1100-6453201/.