A friend forwarded a link to an article written on the impact of "Farming" in the "World of Warcraft" online game. "Farming" in this case refers to companies set up in low-wage countries where players are hired to run characters which generate in game wealth which can be sold in the real world to players who want a leg-up for their in game characters. The article does a decent job explaining how farming actually happens but doesn't begin to accurately consider the impact on the in-game economy, IMO. For those who don't know, and MMORPG is a "Massively Multiplayer Online Role Playing Game". Think of it as "Dungeons and Dragons" with potentially millions of people in your living room. The game designers try to create a fully functional virtual world which can operate on its own with little or now outside intervention.

Keep in mind as you read my commentary on this article are that I'm not a player, but have studied it at least a little. I'm also making some assumptions from the article in terms of the actual workings of this in-game economic environment, and also assuming that the people running the game are tinkering as little as possible. This last bit is a big assumption.

Some of you players out there can check me on this. Some of you economists can now laugh at my attempt to figure this out.

With reference to "Secrets of Massively Multiplayer Farming" -- http://www.gameguidesonline.com/guides/articles/ggoarticleoctober05_01.asp

First, I think Paul is missing a key economic issue here in regards inflation. As I read the article, a great deal of the farming happens in "Instances" -- which I understand to be repeatable areas in the game which are the same to everyone and do not change as a result of what happens in them in a previous use by a player or other players.

If this is true, an instance which is repeatedly farmed yields more items of value each time it is used. Unless these instances are "zero sum" in some way, meaning they have a "cost" to enter and the items found in them are accounted for against this cost to the system, the continued use of these instances by farmers would in fact increase the amount of gold available in the system.

An economy works like this:

Each member of an economy - a worker - must buy things. To meet their needs, they spend money. Each must also produce things in order to earn enough money to meet these needs. We all know this. To "Succeed" in an economy, you have to earn more than you need. Earning more than you need allows you to buy luxury items and spend time doing things other than working to earn more money. When you buy luxury items, you generate income for those who produce (or find, or capture) those items.

In the case Paul describes, Farmers have a strange set of impacts. They do not buy luxury items, and do not look for free time. They spend 100% of the their time working to be most profitable while seeking maximum efficiency rather than style or joy when outfitting or supplying their own needs. Basically, they skew the marketplace. The impacts of this should be very complex. Here's what comes to mind:

Though you cannot, generally, compete with a farmer in direct terms of producing more raw goods which have value in the same time, you might be able to get more for specialized goods which are eschewed by farmers because you can hold an auction for a longer period. This divides the goods in the economy into two classes. Those which are more easily farmed become commodity items, while those which are less routinely available become specialty goods. This mirrors the real world, in fact. There are mass produced goods and speciality or custom goods. Mass produced goods will suffer heavy downward pressure on price pretty much all the time, while specialty goods will fluctuate much more with the overall economy. If players are earning "enough" to get them past the simple needs which are satisfied by 'farmed' (commodity) goods, they'll have expendable capitol for the luxury items. If a majority are in that boat, luxury goods prices increase.

So far, all of this sounds like a fairly stable kind of dynamic economy even if it doesn't really mirror our own. If anything, it will tend to be beneficial to players because their basic needs will become cheaper to satisfy, allowing them more funds to customize and be creative. Since customization and creativity are the motivational factors for players entering the game, this is probably a good thing.

Another impact of these side-economies which happen outside the game one, is that a player with non-game funds can escalate to a level of play they didn't personally earn. Is that bad? While I believe those players who earn every bit of recognition or level or whatever may resent it, they'll probably find what really happens is the newbies tend to be easy marks. They're probably playing over their heads. They'll tend to be less careful with purchases, which they'll make in large shopping areas. They're the yuppie suburbanites. They'll support the malls and fashion shows and so on. The die hard players then, will be the ones who know about the discount locations and the smart tactics that can only be gained from experience. They'll beat the yuppies in terms of getting the most for their trade goods, getting the best deals on their own supplies, and if they go head to head will probably have a significant tactical advantage from real experience.

While the yuppies put upward pressure on prices, the growth of farming tends to put downward pressure on the same items. If there were less yuppies, there could be less farmers. If there were less farmers, the increased non-game costs for buying in-game wealth would limit the number of yuppies.

It gets more and more complex the more you consider it.