Wednesday, August 24, 2005

Virtual Economics

For roughly a decade, people have used role-playing online games to conduct parallel lives. Raise another family. Start a new business. Build your own city. It's all possible in these virtual worlds.

Now, some economists and social scientists say these Internet worlds could be a new type of laboratory to study economic behavior, such as how consumers respond to inflation.

Now, Castronova wants to do more. He wants to tinker with the economic rules of the game in a way that would allow him to draw cause-and-effect relationships between changes in rules and changes in behavior. This is possible, he said, because of the way these virtual realms are embodied in server computers.

What Castronova would like to do, but so far hasn't accomplished, is gain access to the software that sits on those servers, changing some while leaving others alone. Assuming a random distribution of players to the various servers, differences in economic outcomes and behaviors should be traceable back to the changes, he said.
I like it. This seems like a great way to do "empirical" testing of economic prinicples in a controlled environment. I think that this concept could be applied to all of the social sciences. I can't wait for the day when government officials will run simulations of their policies before enacting them. What would be the impact of a tax change, or a drug law, or a trade policy? Test it out it in the virtual world and find out.

Via Seattle PI

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