Virtual Economy In The World of Warcraft

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World of Warcraft is a popular multiplayer computer game in which you go around killing dragons and pretending you're a wizard in a fantasy game land. World of Warcraft is one of those games that has an ongoing virtual universe built around it for its players. In the life of your fantasy character you will need to make money to buy weapons and armor and things you'll need to survive and win the game. One of the ways you can get money is through "farming" for gold.

Farming isn't quite as fun as duelling or casting spells and all that; it's really quite a time-consuming task, but if done right can be very profitable.

Gold and other items are transferrable from one player to another player. You could do alot of work to get some loot and then give it...or better yet sell it, for real money, to a lazy player who just wants to have more toys for his character.

Now the amount of money someone will be willing to pay for this virtual gold isn't gonna be worth your time and effort. You will be better off working at White Castle than pulling shifts on Warcraft, so the farmer-for-hire thing hasn't taken off in American suburbia.

But there are some industrious entrepeneurs that are making a few calculations and learned a very valuable fact. The amount an American kid is willing to pay for this imaginary gold is well worth the time of a Chinese peasant. So the Warcraft sweatshop was thus born.

As you are reading this, there are literally rooms of rural Chinese sitting at computer terminals, farming computer gold in 12-hour shifts (each character has 2 people working it 24 hours a day), carefully staying out of the watchfull view of the game's administrators, and trying not to bother the real players as they collect their gold. Real farming on planet earth won't provide them with the $150 (equivalent) check they recieve a month for doing Warcraft farming.

That comes to 42 cents an hour, and thats low enough so that the white middle aged man can make a sweet profit when he then resells these "goods" to his playing customers over here.

This process is the same as the clothing manufacture, and a million other tangible items. And you know what happens when a flood of cheap foreign goods suddenly becomes available on the market? The value of the products plummet to almost nothing.

In the game World of Warcraft, it's the currency itself that's being overproduced, not just any paticular product. This means it'll take more units of that currency to exchange for any product in the game. Inflation. The price of everything goes up. Everything you worked so hard to save suddenly becomes so much less.

The World of Warcraft economy appears to be on the lip of this plunge and administrators are taking steps to try and curb its inflation. When they find a career farmer, they will ban that character. Now the farming company has to re-buy the game and set up a brand new account. This makes the process of creating these goods overseas more expensive, and functions similar to a tariff (which is a protective tax).

With these tariffs, the price of overseas goods rises, and it becomes more worth the time of Americans to well farm their own gold.

There are ways of getting around this barrier though. One of them is through the black market. Another way is to increase productivity per dollar on the supply side. When a farmer was getting $150 a month (42 cents/hour), but now he will only get $100 and will have to work 14 hour shifts, to counteract the effect of the tariff.

However it happens, water will find its way to the ocean, and cheap foreign goods will find their way to the American market you can bet on that. If it gets really out of control then gold, and anything that can be produced through time and effort--anything that's not finite in amount will then become worthless, and trade will occur among things that are finite, or require a much greater skill to acquire or everyone will turn off the game and just read a book. I'd say don't hold your breath on that one.

If that happens, it'll be just like a factory shutting down. It'll put a bunch of rural Chinese out of work all at once.

There is a balance, which in the real world, the Treasury, and the Federal Reserve, and a bunch of International Organizations try to maintain on our behalf. And by maintain, I mean getting as much cheap shit for themselves as possible without throwing the system completely out of whack.

What lies ahead for the Warcraft economy? Let's keep watching it in the near future.

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