Compromise and Conceit

In your bases, pWning your Austerity

Following up on yesterday’s post about the new Greek finance minister, Yanis Varoufakis, today I investigated his involvement in computer game economics a little more. I found this article by Brad Plumer, written for the Washington Post in 2012, which describes the growing role of economists in computer gaming. Modern online multiplayer computer games are now so complex that they have their own economies, and small decisions by the game company can have major effects on the economies operating in the game and, by extension through the money players invest in some products, on the real world economy. The decisions can be political decisions – such as a decision by Second Life to ban certain kinds of gambling – or they can be god like interventions, such as when the people running Eve Online decide to change the distribution of resources in their galaxy. Some companies have recognized that they need to understand the consequences of their decisions if they want to keep players happy, and the company running Eve Online appear to have led the pack by assembling a whole team of economists.

Into this fray in 2012 stepped the new Greek finance minister, Yanis Varoufakis. Valve, the company now running Steam, wanted to join together a bunch of different games so that players could trade between game worlds. I’m not sure how this works or why one would want to do it but they seemed to think it was a good idea, but in essence what they were trying to do was set up a kind of European Union, in which different games are sovereign in their own resources and political decisions but not in their own currency. So they employed an expert on currency zone economics – Yanis Varoufakis, the new Greek finance minister. According to Varoufakis in the article, his academic colleagues

know I don’t have any actual interest in video games. But I only need to talk to them for a few minutes, and they quickly get excited, asking, ‘Well, what if you tried this . . . ?’

and I can see the appeal of this. You can run experiments, and learn about how decisions will affect the economy, which can provide useful information outside of the computer game world. Varoufakis has apparently used this to show interesting things about General Equilibrium theory, but interestingly the players quickly realize an experiment is being conducted, and game it. What does that tell us about the way ordinary people react to economic policy even when they don’t know it is coming?

Besides being a fascinating field of study in itself, this tells me interesting things about Varoufakis. While some people seem to see him as a threatening radical, and the Guardian‘s initial reaction to his appointment was to publish a whole run of “sky is falling” quotes from German bankers[1], in the world outside of politics it appears he is seen as a serious and intelligent judge of how to manage monetary unions, to the extent that people who depend on getting this right have paid him to help them do so. My guess is that his work on computer game economics will not register at all to Europe’s deep thinkers, or will even constitute a black mark against his name – further evidence he is not a “serious” economist – but it seems to me that he is someone they should listen to, and probably the only finance minister in Europe who might know something about the fundamentals of the EU process. Perhaps all of Europe could benefit from listening to the experience of Greece’s new finance Minister – if they can see past his party and their biases about Greek.

Varoufakis’s ascension to power politics in Europe also puts computer game economics in the spotlight. Maybe it’s time computer game companies started taking the possibility of economic experiments within their worlds seriously, and presenting their virtual worlds to world leaders as an opportunity to study economics in a safe environment. It appears we can learn a lot about the shortcomings of real world theories by testing how they work in worlds in which we can control the fundamentals, right down to the raw materials. There are many questions in economics that could be answered through interventions in these worlds.

My guess is that the European Union will ignore Varoufakis’s expertise, and even if they wanted to computer game companies will have little intellectual impact on the economics world, even though they offer a unique opportunity to test a wide range of economic theories. A shame, for both Europe and the economics profession. Let’s hope the Europeans listen to the economic aspirations of a bunch of dragon slayers and space pirates, and use the lessons learned to fix their most intractable problems!

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fn1: They put these on their execrable blog-formatted “live” news section, so I can’t find them or link them now. Why they thought German bankers would be objective commentators on Greek political appointments is beyond me.