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All of the latest Mists of Pandaria newsThe gold standard: A WoW economics course proposal
by Michael Sacco 
Jan 10th 2009 at 4:30PM
If you're like me, you're ... well, you're probably incredibly handsome and charming. But you're also probably interested in WoW's economy, given that it's the biggest and most involved metagame in WoW and a fascinating microcosm of a free-market economy.I personally think that the how and why of WoW's economy is worth a deep look, and it appears there are a lot of people who agree with me--even some academics. It might even be worth just as much as any other book-learnin'.
At least, that's the basis of David Friedman's World of Warcraft economics course proposal. Friedman is an academic economist from San Jose, CA who's assembled this article as a think-tank for what a WoW economics course would entail if you had to fill it with a semester's worth of content. There's a lot of neat stuff in here, talking about relative prices of ore based on character level and rarity of ore and supply/demand, but he also asks for your input as to possible course material, which I'm sure you could gladly provide in the comments section of his page.
Good idea with sound academic basis, or another in the long list of high falootin' academia's attempts to justify playing WoW on the government's dime? WE REPORT. YOU DECIDE.
Filed under: Analysis / Opinion, Fan stuff, Economy, Making money
Reader Comments (Page 2 of 2)
ArchVile125 Jan 10th 2009 7:02PM
@ eadipus
Hmmm...that is an interesting point you make. I think I'm willing to meet you half way on that and say that perhaps there is some cause to examine the effects of a virtual economy (not just a WoW economy). I'm still not convinced that it justifies its own separate course, but I can maybe understand it being a side-bar to an economy course.
I think the thing about Zimbabwe's economy is that it counts as the global economy, and you'd probably be amazed at how much effect a seemingly unrelated economy can actually have on your own. Consider that Zimbabwe was at one point, under the control of the UK until its recent independence, and that the UK still conducts many operations from within. Also, due to their current economic hardships and their poor living conditions, you'll have to consider the involvment that the UK has had and the investment they have put into Zimbabwe in recent years, including trade, travel, and humanitarian efforts, all of which, in one way or another, affect the economy of the UK. Especially when you consider that it has long still been a valuable resource in trade for gold, ivory, diamonds and copper, not to mention safari expeditions for big game hunting and even illegal poaching.
On that note, since I've opened up that can, the point could also be made that we need to look at and consider China's economy and the effects that gold farming and trading for real-world currency as well as real world taxing on such transactions, has had on China's economy. I can see the legitimacy in studying that and those economic effects. I'm just not sure I'm open to dedicating an entire course curriculum to the study of the WoW economy just for it's own sake.
Oh come on Jan 11th 2009 9:39AM
"But in WoW, when a mob is killed, money is generated, in essence, "appears out of thin air", and of course, where does the money go when you buy a flying mount from an NPC, lets say? Nowhere. The money is destroyed. Lost in a black hole."
Killing a mob is our "job" in WoW. Occupation: Hero. Money, in real life, also seems to "appear out of thing air" in that there's no solid backing of the cash. Legal Tender is nothing more than something that we, as people, have agreed has worth. Killing mobs or doing a job causes us to generate money that, and this is the important part, does not really exist. If money couldn't suddenly appear out of thin air in reality, inflation would never happen.
As for the black hole argument, that's ridiculous. Just because they don't have any visible use, that doesn't mean that it's not being used. Your average taxpayers has no idea where his or her specific tax dollars are going. To them it's more or less a black hole because, more often than not, there's no up front visibility of their money being used. Irl taxes are used to repair roads, keep schools going, pay government employees, etc. Why can't we rp WoW gold being used in a similar way. The flight trainer has to spend his time training up mounts too. It's not like he can magically create an already fully trained and docile flying mount out of nowhere. Thrall needs to pay his guards, the auction house needs to pay its taxes, so on and so forth.
Barnister Jan 10th 2009 5:55PM
If you think WoW economy is complex and whatnot, then you truly have no idea what you are talking about.
You never once expirenced "real" (as real as it can possibly be in a game) economy in a mmorpg.
The "real" economy was in Star Wars Galaxies. Even(!!) though with it's unstoppable hyperinflation.
The crafting system and the economy itself was the most complex one up until they released NGE.
Amaxe Jan 10th 2009 6:00PM
I think the difference between WoW and a real economy is that the WoW economy is essentially a hunter-gather economy. It seems (on my server at least) that most of the things put up on the AH are found, and fewer things are made.
As others have pointed out, many items are made out of components worth more than the finished product, and the reason for production tends to be Skill ups rather than profit.
As such, I don't think it merits a college class, though it could have a purpose in a study of online sociology ("Why the hell did you bid 1000g on White Kitten?").
Of course if the government spent $219,592 in a “curriculum package” to teach college students how to watch television, I suppose it is possible we could see one
mdmikemd Jan 10th 2009 6:06PM
So many of you have commented about the time and trouble of creating a course about WoW's economics. I've been out of college for almost 20 years, but I remember a lot of "mini" courses. These were essentially fun classes about some obscure topic, like life in the dorms, or sci fi movies. They were usually 1 credit courses. So I can't imagine it is that big a deal to make a class for Wow.
Sean Jan 10th 2009 6:39PM
While I think that virtual economies are great case studies of toy economic models, I wonder whether there is really a semester's worth of content in any one game, particularly WoW. A broader course that looked at virtual economies in general, from Diablo II, to the original Everquest, to EVE Online would be more relevant, especially as an undergraduate introduction.
Amaxe Jan 10th 2009 6:44PM
I wonder how many students would be casuals, how many would be hardcore raiders and how many would be gold farmers...
alvl Jan 10th 2009 8:39PM
wow economy is not a microcosm of a real economy because ppl offer finished goods under mat prices because of skill up points. I just luv the messages "i pay you 20g if I get a skill up"
eadipus Jan 10th 2009 8:53PM
I agree it shouldn't be its own seperate course, but say (not familiar with how US course work) one module in a term (semester for yanks) on virtual economies could be valuable. If such a course were to exist focussing purely on WoW would be horrendously naive when like Eve, Second Life and even Home on the ps3 exist as alternatives.
With Zimbabwe the argument I was trying to put forward was that it is a highly unusual and unexpected situation. The part I didn't put forward so well was that we live in highly unusual times where the unexpected is becoming the norm. There seems to me that there is an acceleration at the moment in what used to be purely online culture invading the mainstream; imagine explaining facebook to someone 10 years ago, even when we had ICQ/irc/aol etc; and from this I can see virtual economies becoming much bigger over the coming years.
One final point I would like to make is that it is refreshing to debate this with someone who is clearly articulate and inteligent, a real change from the bitchiness and "FIRST culture" which seems to be so popular on this site.
laina Jan 10th 2009 9:26PM
I agree, this was an excellent read through the comments!
Here's my stimulating the comment economy: WTB more well thought out and written comments!
I like the lengthy ones... they separate those w/ short attention spans from participating hehe.
ArchVile125 Jan 12th 2009 2:45PM
I agree. I've actually been having a blast discussing an issue intelligently on the site, for once. As I said in one of my follow-up points, I regretted some of the confrontational tone I may have had in my original post, which was probably just the natural tone I tend to take here, since I'm used to responses like, "l2p fgt! QQ moar n00b," or any other variation of that.
I actually did know what you were trying to say about the Zimbabwe point. I think I didn't make it clear that my explanation one the Zimbabwe economy was more of a side-bar tangent, just to provide a solid example of why the economy of countries, like Zimbabwe, are grounds for proper study in an economics course. As I said, I wasn't too clear about my intentions of that point.
As for the education systems between the UK and the US, from the bits of information I have gathered over time, it doesn't sound like they are really too different, aside from differences in the terminology used. I think the similarities in our systems is probably why we in the US can recognize a degree from, say Oxford, and visa-versa for the UK (barring some circumstances, from irregular or non-accredited schools of course).
I fully agree with you about how things are changing and that we are finding more value in intangible trade these days. Especially with the advent of digital downloads. Could you have imagined that 5 years ago? I mean, even a few years ago, when you bought a DVD, you at least came home with a disc, a case, and maybe some collector's memorabilia , artbooks, or whatnot. Now people are completely comfortable buying a movie through digital download, or a game through Steam for example, with nothing tangible to hold in their hands at the end of the day. This has been the secret to the success of gold farming, really the major "X factor" in the WoW economy.
I think we can all agree that a WoW or any virtual economy and the real-world economy are, more or less, completely autonomous from each other in most senses, but the gold farming factor, I will admit is where the two worlds cross over (aside from the obvious purchase cost of the game itself, and the subscription fee, which goes without saying), and as I said before, I can and DO see the validity it analyzing that factor in an economics class, for sure. In an economics class, anything that can have a real-world impact, is valid enough for study.
I think for the most part, we are in agreement about most of these issues, I'm just thinking maybe we differ on the application, or perhaps we're just misunderstanding each other's viewpoints. I think that if this was a proposed course, at the moment, I wouldn't see it as anything other than an elective course, perhaps, and even then, it wouldn't just be related to WoW, but on virtual economies forever, since WoW will someday be a thing of the past, but similar virtual economies will continue to exist. I just think that, unless you are going to a school specifically for an education in game development, or perhaps you plan to be an economics major, in which case you will study ALL aspects of all types of economies, a class on a virtual economy is irrelevant, outside of it's real world impact (gold selling, or perhaps the annual cost of sustaining an account on the game itself), in which case, I think that would classify as a side-bar lesson to a general economics class. The idea behind a general education economics course is to give you an understanding of how to function in the real world, such as pay\salary, how a mortgage works, what an economic recession means to you, etc. A virtual economy, within its own right, is purely extra curricular and doesn't affect you outside of the real world for the most part. As I've said before, and I'll state again, so that there is no mistake than anyone may interpret from what I am trying to say, I do understand that the gold farming, and its impact on some economies (namely China) are the exception to this rule, but in that case, I think that most likely transcends the study of WoW's economy and delves into the study if human behavior and the value people are willing to put on entertainment, past-times, hobbies, and dare I even say, addictions?
Ayrianna Jan 11th 2009 3:21PM
I'll have to agree with Archvile on this one. I think that it would probably be a really great course if it was being taught in a game design curriculum. Economy is a very difficult and delicate balance when it comes to a game world- whether it be an MMO or a single-player game.
A general course in game economy might have a chance at being accepted as a 1-credit course at a university, but it would definitely have to take a look at more than just the WoW economy.
patrick Jan 11th 2009 1:02AM
Had to laugh. Had to reply.
I'm a post graduate trained economist who took the cowards option and forsook academia for the high paying but soul destroying finance sector.
But I still retain my training. And when I first started WoW I actually thought I could use my skills to make a fortune on the AH by simply collecting and analysing demand and supply data yada yada yada.
I hope this guy isn't serious as it took me about 2 hours to work out no useful empirical analysis of WoW pricing can be done nor can it be useful in game or out. Essentially there are at least 5 flaws:
1. Gold buyers and sellers distort the market, can't be traced and can't be analysed for their impact as people use external shocks (like using their credit card to buy purchasing power, which you can't do irl)
2. The fact people can send money to an from alts distorts pricing on gear below maximum level
3. It's only game money and whilst it takes time to 'earn' like real money, people's emotional responses to prices and 'wages' are far from reflective of real life
4. The majority of players are kids who don't have the sophistication to understand supply and demand or the experience to equate time with reward.
5. Participants in the 'WoW' economy can opt in (start playing) or opt out (stop playing) at any time due to non-wow economy factors. In real life you can't just decide you don't want to play 'eating' or 'having clothes' because you are bored.
But hey, if some professor wants to try modelling game theory and micro economics on a popular computer game and some faculty is stupid enough to pay for it, good luck to him :)
JALbert Jan 11th 2009 12:22PM
In regards to assertion 2 (alts distorting prices) you're entirely off base. Demand is demand. If rich daddy gives his spoiled girl 400 bucks for a designer handbag, that's just the market demand for designer handbags. Top end low level gear commands huge prices because people twink 19s and 29s. This totally follows market principles.
In regards to 3 (it's only a game) that's something you have to take into account as a market factor: The value of fun and convenience. This is why dailies are effective at combatting gold selling.... for most people it's no longer boring to get gold, and not evaluated on a pure gold/hour basis, because if it was people would spend real money for their gold. When they get some fun out of it, it's much more worth their time.
4 (it's full of kids) And that's the beauty of markets.... even if they're not understood by the participants, they still work according to principles.
Anaughtybear Jan 11th 2009 1:29AM
This might be interesting if WoW had a real economy that followed any real world traits. News flash: It's actually a video game and nothing you do makes a damn bit of difference.
For all Blizzard's weeping, farmed gold does absolutely nothing to the economy. It gets spent, and then disappears. It's not like vendors are charging a tax that goes to Thrall, who then implements a health plan for the Horde. Spent gold doesn't do or affect anything.
Prices are what they are on the AH because dummies/rich players are willing to pay them. Most of the things being bought are going to people that are so "wealthy" the could care less what the price is.
The economy doesn't exist because gold isn't money and it's not real. There is no economy because the things that make up an actual economy aren't there, such as taxes, governments and consumers with limited incomes.
JALbert Jan 11th 2009 12:14PM
I think a ton of commenters are missing the point here. It's not that WoW models real life, and thus teaching about WoW will train people about the real life economy. It's that WoW can be used to teach the *principles* of economics.
The best example I can provide is that Tank/Heals/DPS shows the benefits of specialization and trade. By maximising efficiency in one role and sharing the duties, you get a far more effective group than 5 people who can sort of do both, in gear to sort of do both. Saying "OMG, there's no tanking IRL!" is totally missing the point. Plenty of principles can be illustrated by using WoW examples, and if this engages and interests students, that's quite awesome. When I did 100 level Econ classes, lots of people didn't care, didn't pay attention and didn't bother to understand the material. If there was a 100 level Econ Class that taught microeconomics through WoW (and I can practically guarantee that you can cover most 100 level micro topics via WoW) it would further learning. Furthering learning is what college is for.
Ayrianna Jan 11th 2009 6:03PM
"Killing a mob is our "job" in WoW. Occupation: Hero. Money, in real life, also seems to "appear out of thing air" in that there's no solid backing of the cash. Legal Tender is nothing more than something that we, as people, have agreed has worth. Killing mobs or doing a job causes us to generate money that, and this is the important part, does not really exist. If money couldn't suddenly appear out of thin air in reality, inflation would never happen." -Oh Come On
Well, here's the fatal flaw in your logic:
In the real world, money is not created on the spot, and when it is (because of Mints putting out more money than what is destroyed), inflation does occur. The money you make at a job is given to you by your boss, who had to make that money by producing a product or service that other people pay money for.
If my boss doesn't have the money to pay me, because he's not selling enough of that product or service, to offset all the costs of keeping his business open, I either lose my job, or I take a pay cut. He CAN'T just say "okay, you've done great, let me create this money out of nowhere for you." Even if he's paying me with his line of credit, that money has to be taken from somewhere.
In World of Warcraft, money IS generated on the spot. You kill a mob, you either take the gold that's on it, or you take the items that you get from it.
In the case of the gold, it came out of nowhere when the mob was spawned. That mob didn't contribute to the tangible economy in any sort of way. It can infinitely respawn out of thin air, and put MORE money the economy.
With the items, you take it to a vendor and sell it. They vendor will NEVER tell you "I'm sorry, I don't have the money to buy that from you," or "Oh, this item is only worth X amount of gold to me."
A ruined leather pelt will always be worth the same exact amount to any vendor, no matter how much business the vendor does, and what their item is. A food vendor in the middle of Dalaran will buy it from me for the exact amount that a leather armor vendor in Desolace will buy it from me for.
As for your "no black hole" argument, It's completely ludicrous! Have you ever attended a public school? Have you ever been trapped in a traffic jam because of road construction? Have you ever used the INTERNET for christ sake?! All of those services were set up and put into place by the government that taxes us. Just because we can't say "okay, this nickel is going to public schools, this quarter is being sent over to homeland security. AH! I'm sending this dollar into widening the freeway that I use to go to work" Doesn't mean that your money isn't being spent in some way.
In the real world, if people can't pay their taxes, or go out and spend money, the whole economy stops. Stores start to shut down, roads get bumpy, schools can't afford books. If you're not seeing this, you need to turn on the news.
In world of warcraft, if people stopped buying items from vendors, the world would continue exactly as it has been for the last 4 years. Thrall would still have his guards. The mount vendors will still have every kind of perfect mount you want to buy, and he will NEVER run out. Stormwind Keep will still be shiny and clean, and the orphans will always have an orphanage to sleep in at night.
So yes, the money to give to a vendor is a black hole. It would be nice to rollplay that the money is being used to produce his goods, but it's not. They have infinite supplies, and infinite money to buy useless items from you.
AJT Jan 13th 2009 9:17AM
I doubt anyone from wildhammer is here, but i'm AJT, and i make at least 2-3 k gold doing JC if 'm not even trying. i barely play only a 5 days played at 80. I have have 70+k in the last month and a half. When wrath came out, and i leveled jewlecrafting and enchanting , i made over 150k in like 3 months. people always think i must farm or something to make that gold. i never bother with walking out of ironforge or orgrimmar. nor do i bother with dailies (cept for cooking, i want the title)
i still have like 100k between my chars. gold is easy to make, and there shouldnt even be an article about making gold or any dicussion. if you had half a brain, you could make easy money.