With Grand Theft Auto a case in point, we have much to learn from wildly popular titles enjoyed by gamers the world over.
Videogame economies provide useful models for the real world
Stealing cars, killing innocent bystanders and blowing up nightclubs is a profitable business, as any hardened criminal will tell you so long as he’s sure you’re not wearing a wire.
If you were able to remove the painful beatings, the threats of deadly reprisal from rival criminals and the prospect of serving years in a high-security jail, such an occupation would perhaps be far more attractive to many more people.
Take-Two Interactive Software, the mastermind behind the Grand Theft Auto videogame franchise, seems to have proven this theory with the fifth instalment in the highly successful series, reaping at least US$1 billion in sales in its first week alone.
Revenues were so large in the United States, in fact, that many economic commentators have been moved to point out that sales of the game might register what is called a “non-trivial” impact on America’s GDP this year.
GTA V, as it is known, is an enormously successful product, but such a phenomenon in the videogame world is nothing new.
Look at Angry Birds, the most successful thing to come out of Finland since the Nokia mobile phone and the steam shower. A couple of years ago sales of the game became one of the largest single contributors to Finland’s GDP.
And why not? It is not hard to imagine that just as many people play Angry Birds as drive cars, eat hamburgers or all the other things that we commonly include in GDP data.
We all love videogames, it seems, and we have for a long time now.
The death last week at the age of 85 of Hiroshi Yamauchi, the founder of Nintendo who transformed the company from a small maker of collectible baseball cards into one of the most successful videogame companies of all time, arguably inventing the industry as he did so, is a timely reminder of how long we have been gaming.
He brought us Super Mario in 1981, more than 30 years ago.
In all that time games have changed immeasurably in terms of their presentation, the subject matter they deal with and the technology they are created and played on.
But there are quieter changes afoot in the gaming world that are having a profound effect on the socioeconomic reach of the genre, so much so that economists are increasingly taking note and wondering how far beyond sales at the register videogaming activity might be felt.
One game called Eve Online is a case in point. On the surface the game is all about exploring galaxies in a spaceship but in actual fact it is a vast economic model with all the players engaged in buying and selling commodities, setting up corporations that then engage in activities such as mergers and acquisitions, raising money on markets and borrowing from banks.
CCP Games, the Icelandic company that runs Eve Online, even has a chief economist called Eyjólfur Guðmundsson who heads a team of eight economic analysts to ensure that the massive and complex economies running within the game are performing in line with accepted economic theory. To the Eve community he is like Ben Bernanke.
And CCP is not alone. Gaming companies, particularly those that sell massive multiplayer online games like Eve and World of Warcraft, have discovered that they need economists to act as virtual central bankers as the economies they have created are so complex.
And this is not all child’s play: gamers spend real money on this virtual stuff. About US$2.9 billion a year at the most recent count.
I don’t play these games myself, but a friend and former colleague who does little else these days assures me that bidding for and buying virtual items can have serious financial consequences.
To prove his point he told me how players of Eve Online were hit by a financial scandal that would have made Bernie Madoff blush. Two players set up a virtual fund manager called Phaser Inc Investments. They convinced other players to invest nearly 2 billion units of virtual currency with the promise of a 5 per cent return every week.
They finally closed up the “fund” after a run on deposits claimed about half their capital, but they still ended up with credits worth a real world $51,667.50, which is not to be sneezed at.
There have been dozens of similar cases, and some of them were eerily prophetic.
There was a run on the banks in a game called Second Life back in 2007 that cost players as much as $750,000 in real cash. The banking collapse was similar in scope to the one that hit the real banking industry less than a year later.
Virtual economics is taking off in a big way in videogames. There are rumours that Take-Two is working on a real cash-based economic system for the as-yet unreleased online version of Grand Theft Auto V. And while you are waiting, there is a stock market for current GTA V players called BAWSAQ that may become virtually workable in any future online version.
Economists, meanwhile, are keeping a close eye on these massive models to see if they might reveal any more of the mysteries of the real world of economics. After all where else could you find thousands upon thousands of participants willing to play out pretend scenarios for days, months or even years? They even compile all the data for you.
Who knew macro economic modeling could be so much fun?