The Simulation Economy
Updated: May 13, 2020
The case for using Fortnite as a beta test for Economic Theory.
In 2002, a game by the name of EverQuest caught the eye of Edward Castranova, a US Economist. He saw that characters gain skills and possessions that they can then trade with other players using the game’s currency of “platinum pieces”. However, many EverQuest players found this process too complicated and instead opted to sell their assets for real money though trading web sites such as eBay.
Intrigued, he studied thousands of EverQuest transactions performed through eBay to determine the real-world economic value generated by the game’s players.
Castronova discovered that EverQuest’s gross national product per-capita is $2,266. If EverQuest was a country, it would be the 77th most wealthy in the world at the time, just behind Russia.
Castronova also found that EverQuest’s virtual currency was more valuable in the US than the Yen.
“It’s a robust, free-market economy filled with wealthy, hardworking people,”, was his description of the game.
This was in 2002, when the number of players around 50,000.
In comparison, Fortnite has 250 million registered users. That would place it 5th on the list of World’s most populated countries. (WHAT!!)
Fortnite is a online multiplayer game, if you haven’t heard of it you’re probably living under a rock.
It involves players, 100 at a time battling it out to be the last man standing, in a post-apocalyptic world.
Fortnite, like most modern games works on in-game purchases - it’s currency being ‘v-bucks’. V bucks are used to build new skins for players. Its game modes, such as ‘Battle Royale’ have incentives, community, alliances, roles, objectives, risks, and survival, just like any other economy. Although the form of the resources and relations change, the fundamentals of human behaviour do not. For example, teamwork and communication in a game of Battle Royale is no different than cooperative competition in real life.
The difference, howeve, lies in the data. The data that is available to be collected from such virtual worlds is richer than its ever been before, with granular insights into the mechanisms behind individual and group decisions.
Almost all significant economic breakthroughs try to explain human decision making and our relationship with resources, people and risks. Adam Smith’s Wealth of Nations, Ricardo’s Trade theory, Keynesian Economics, Game Theory, Heuristics etc. all attempt to give perspective to these fundamental questions.
Using online worlds as Economic Sandboxes is not novel however, with games like EVE online have full time Economists who track in-game markets.
An interesting story about EVE is that the economy is so developed, there are in-game corporations, that do in-game IPOs by obtaining investment from in-game venture capitalists. Crazy isn’t it. In fact the only reason why the game does not have an in-game bank is because the size would be big enough that the developer would have needed his own banking licence.
Fortnite however is different. It’s size and diversity is something never seen before. Players don’t see Fortnite as just another game, for them it is a part of their society, the world they live in. Many form deep long lasting friendships with other players and Twitch streamers are the Fortnite equivalent of Hollywood celebrities, with brand deals in the Millions. One of the coolest things I’ve seen is the Fortnite Travis Scott Event. Can you imagine a virtual concert inside a game attracting upwards of 13 million people? Thanks the power of this game. This shows that community element is just as important as the competition element, just like the real world.
Rarely is one able to impact 80 million people from across the world in one go for an experiment, without consequence. That is the power that Fortnite can give Economists - The power to beta test the global economy.
Games like Fortnite represent an opportunity to experiment with novel Economic innovations at a scale not seen before. A far cry from the tiny University surveys supporting some of the biggest economic discoveries to date. This can have massive benefits for the world, deploying tested and resilient concepts with greater speed and accuracy.
In fact, If online gaming grows the way it has, a time will come where in-game behaviour may even have a significant effect on our physical society.