An Online World Hires an Economist

Gaia Online has hired the Hoover Institute’s Michael Boskin to head the online world’s Council of Economic Advisors. Boskin’s answers in the CNET interview indicate that he sees the relationship as an opportunity to study a robust world that behaves in way that is quite similar to the real world, “I think the fundamental similarity is that you have people making decisions on how to allocate their time and use their skills.” Still he states that “this is not designed to replicate a real economy.” So to Boskin’s credit he appears sensitive to non-economic aspects of the experience.

Nonetheless when he explains “we want to make sure that the economy part is the best experience it can be, that it grows appropriately and that we anticipate problems and head them off. And that we develop new things that people will find interesting and valuable,” I can’t help but to remember the scene in Ghostbusters II when Egon watches and monitors kids in a room. He sends in a puppy. The kids are happy. He waits. He then says “Let’s see what happens when we take away the puppy.” Giving an economist a lab like Gaia Online with which to play could mean some severely upset people. That result is not necessarily the case, but I wonder what might happen if the way people structure their lives in such a world deviate from what the Council thinks makes sense.

Would the Council study it to learn? Or would it impose rules to improve the world on their terms? If the later, doesn’t that move undercut the value of watching the system operate? This scenario is not meant to be nefarious. For example, as Boskin notes the virtual banks have varying interest rates. He then asks “so do we develop some mechanism to provide greater transparency about prices?” Let’s suppose that happens. What recourse do the online members have to change the rules back? Or in what way can they voice what they want? And last, maybe the fun of the online world is that it is a game. One can have the wild west, inefficient information, insider trading, and so on as one lives out fantasies of living in worlds governed by rules other than the ones we have now.

In any event, it seems like another fun area to watch. For those interested in papers on the subject of virtual worlds, The Law of Virtual Worlds by Greg Lastowka and Dan Hunter is a good read, and I know Michael Boone is working on the topic. Of course State of Play which Beth Noveck started has had several conferences looking at the area. I have started writing on a related area, but I’ll go into that some other time.