Synthetic economies may need regulation

by Christopher Grant { Dec 5th 2005 at 5:00PM }

Parents suing Blizzard for World of Warcraft addiction

Last week on All Things Considered, NPR covered the popular topic of economies of MMORPGs. Host Robert Siegel talks with Edward Castronova, an economist who studies "synthetic worlds" and their interaction with real money/economies. Despite successful attempts to commodify the practice of selling game goods for money, Castronova fears it could damage the game: "What's at stake here is the game itself. These things could be destroyed if we don't try to put a wall between the real economy and the virtual one." An exampe he gives, why isn't the IRS taxing people on the profit they make selling gold?

NPR's game reviewer, Richard Holt, talks about the ethical problems of buying levels, gold, or goods. The balance of the game is damaged once people start buying their status and not earning it. He writes, "There should be no advantage to you in the game if you're rich in real life. This may be idealistic, but I play games to get away from things like this." Will the relationship between synthetic economies and real ones need to be regulated?

[Thanks, Richard]

Reader Comments (Page 1 of 1)

flyNN @ Dec 18th 2005 9:13PM

re: "why isn�t the IRS taxing people on the profit they make selling gold"

Well, cause you didn't make the money in the U.S.... you made it in the virtual world. If make money in Brazil, you think the US has a claim to it?

Now, will there be a WOWIRS??? That'd suck bigtime!

charlie @ Dec 18th 2005 9:13PM

"Well, cause you didn't make the money in the U.S.... you made it in the virtual world. If make money in Brazil, you think the US has a claim to it?"

Yes. According to our tax code, americans are supposed to pay income tax on all money that they make across the world. Which is besides the point that the law doesnt recognize "virtual" worlds and instead might say that the transaction occured where the server physically resides, which would be in the US anyway.

Now if you incorporate in the Cayman Islands and somehow route part of the selling process through a server there, that MIGHT be a different story... if you have good lawyers...

Andy @ Dec 18th 2005 9:13PM

"Well, cause you didn't make the money in the U.S.... you made it in the virtual world."

Legally, I believe, you're making the money in whatever country the servers reside in. Although, it doesn't count as real money until you cash it out.

Rare Hare @ Dec 18th 2005 9:13PM

the IRS doesn't tax eBay sellers, why would it tax people selling things from WoW??

Ken @ Dec 18th 2005 9:13PM

Poor, poor idealists. They can't make communism work in an imaginary world, let alone the real one. I'm sure a certain New York Senator will be introducing the WoW Centralized Economy Act soon.

Patrick Ross @ Dec 18th 2005 9:13PM

Liberals attempting to stifle capitalism? That's news?

fush @ Dec 18th 2005 9:13PM

I actually just wrote an ethics paper on the topic of should someone be allowed to sell their character for real world money. It was one of the more interesting topics of the course, because it forced us to define the essence of the character and the game world.

I feel that the exchange of synthetic property for real money may end up creating a problem, especially when those exchanges begin to reach the GNP of small nations. Also, it is difficult to say that regulation is needed since much of the basis of capitalism comes from the notion of everyone doing what is best for them for the entire good.

By the way, a sort of regulation is already in place. Blizzard reached an aggreement with Ebay to not allow selling of characters or items from WoW. Blizzard's EULA and other statements declare characters and other objects within the game as their property.