Transcript of "111907 Synthetic Economics Metanomics Transcript"
NOVEMBER 19, 2007
ONDER SKALL: Hello everyone, and welcome to another session of Metanomics, part of
the Metaversed series of events that we hold in conjunction with Cornell University's
Johnson School. With us today is Ted Castronova, Associate Professor of
Telecommunications at Indiana University-Bloomington. He'll be introduced and interviewed
by Professor Robert Bloomfield of the Johnson School at Cornell.
The main sponsor of Metaversed Island is the Otherland Group: Making Sense of Virtual
Business. I'd also like to take a brief moment to thank the sponsors of the Metanomics
series and all
Metaversed events. They are Kelly Services, Cisco Systems, Saxo Bank, Generali Group,
SAP, and Sun Microsystems. And, of course, none of this would be possible without SLCN,
who are the best ones to talk to when it comes to working with video in virtual worlds.
Avatars across the grid at all event partner locations can join the conversation by joining the
Metanomics Group. And also remember to join the Metaversed Group for all future
Metaversed business events.
If you have any questions for our guest today, you can send them directly to me via IM to
Edward Castronova: His works on synthetic worlds and their economies and on EverQuest
in particular have attracted considerable attention. His paper on Norrath, a fictional planet in
EverQuest's Universe in 2001, claimed, for example, that Norrath had a GDP per capita
somewhere between that of Russian Bulgaria. I'm speaking, of course, of Ted Castronova,
who is here with us today to tell us a little bit more about his new book. But before we come
to him, I'd like to introduce everyone to Robert Bloomfield of Cornell.
ROBERT BLOOMFIELD: Well, thank you very much, Onder, and welcome, everyone, to
Metanomics. Looks like our sound streams are good. So welcome, everyone. As always, I'd
like to remind everyone to use the Metanomics Group chat channel for backchat. It helps us
know that you're out there and alive, and we get some responses to what we're saying. So
welcome, everyone. And Ted, welcome to you.
EDWARD CASTRONOVA: Hi. Thank you. Thanks for having me. Big honor.
ROBERT BLOOMFIELD: Yeah, well, our honor. And welcome in particular to Second Life,
because I know that this is not your usual stomping grounds. So we can talk about that in a
minute because I think a lot of people would be interested.
But before we get there, I guess I first want to just get a better sense of your background.
So as I understand it, you were a traditional sort of academic, and then you had what all of
us academics dream of, which is that one breakout paper, your firsthand account of
marketing society on the Cyberian frontier--that's CYB cyberspace--and you posted that on
SSRN, which business academics and social science know all about this. It's the Social
Science Research Network, ssrn.com. You posted that and it's now, I see, like the number
five most downloaded paper on this academic site. So kudos to you.
EDWARD CASTRONOVA: Thank you.
ROBERT BLOOMFIELD: We all wish we could do that. What led you to write that paper?
EDWARD CASTRONOVA: Well, basically I'm a failed economist. That's what led to it. The
short story is that I was teaching at a school teaching stuff I didn't care about and doing
research on stuff where I felt like I'd figured out everything I wanted to figure out about it.
And you know, my academic career just wasn't what I'd hope it would be when I started. So
I thought it would be a funny joke to just start writing about something that I was really
enjoying and was finding meaningful, which is playing in EverQuest. And what started out as
a joke kind of stopped being a joke when I used traditional economic tools and started to
aggregate the amount of stuff going on. You just see it here in Second Life, as well. Once
you go in and look around, you're just amazed at how much activity there is. And if you
quantify it, it's quite substantial.
So it started out as a joke, and sort of stopped being a joke the more I thought about the
ROBERT BLOOMFIELD: Yeah. And so that paper, I guess, led to a few other things. You
co-founded the academic virtual world blog Terra Nova, and you have been one of, I guess,
the co-organizers of State of Play, which is an academic and largely legally oriented
So one question I had for you is that--you know, a lot of the stuff that you've talked about
has dealt more with culture and legal issues in addition to the traditional economics. So I
guess your economics background is more on the side of public policy and--
EDWARD CASTRONOVA: Yeah. My background and training was in the area of what's
called welfare economics, which isn't about the economics of people who get welfare, but
more of how do you value strange things? And so that training and background was perfect
for virtual worlds because at least when you first look at them you wonder how does one
unpack the meaning here? How do you quantify these things?
And now in 2007, we have some protocols in place. But back in 2001, it was really an open
question. So it was really useful to have that training. But then once I used the traditional
toolbox of economics to do that quantification I just felt the really interesting stuff about what
was going on was, like you said, cultural and social and policy implications. What happens if
Second Life comes to occupy the time of hundreds of millions of people? What's going to
happen to life on the outside?
And so that's what I've been thinking about a lot in the past two or three years.
ROBERT BLOOMFIELD: Yeah. Now, you mentioned Second Life, and here we are.
Because you're not a Second Life user, actually. You are wearing my wife's avatar, if you
know that. So I don't know whether I'm going to ask you to sit on my lap or challenge you to
EDWARD CASTRONOVA: Does it have those animations or--
ROBERT BLOOMFIELD: No, actually, my wife is not much of a Second Life user either.
Now, let me mention, just for those of you who don't know, this avatar was actually created
by someone in Second Life specifically for Ted. This is not actually my wife's style, shall we
But let me ask you, you know, you've written so much on virtual worlds and on the
economies of virtual worlds, and right now I think certainly the people in our audience
believe that Second Life has the most throb-thriving economy. Excuse me--thriving.
EDWARD CASTRONOVA: It may well be the most throbbing one, as well.
ROBERT BLOOMFIELD: That's what happens when I try to read backchat while I talk. But
you have not been a Second Lifer. So can you talk a little bit about why that is? And just
EDWARD CASTRONOVA: Yeah. Second Life is interesting in that--I've heard--actually,
there are only two virtual worlds where I've gotten that kind of question. Why aren't you
here? So the implied expectation that “a person like you must be here.” And the other one
was EVE Online.
ROBERT BLOOMFIELD: Uh-huh, right.
EDWARD CASTRONOVA: And EVE, you know, everyone said is just--it's the economics
stuff. It's just so intense. And from what I said before, I kind of got beyond economics pretty
quickly, in terms of my interest in this area. So that's why I didn't really go into EVE.
And as far as Second Life is concerned, I just have a confession to make, that I'm a
traditional fantasy swords and sorcery, Tolkien lover. I just love that kind of stuff. And that's
where I've spent all of my time. And I guess being a churchgoing Catholic it's easy for me to
sort of reduce everything to one of my personal failings. So let's just say I have a personal
failure in that I have failed to properly exploit and appreciate the wonderful thing that Second
But the past is not the future. I now have graduate students who browbeat me daily with,
“Why aren’t you in Second Life?” So we're going to be in Second Life pretty soon. I mean,
this moment is just the beginning. We're going to have an Indiana University Island. And,
you know, I've been interested in experiments lately; we're going to be running some
experiments, and we'll see what comes out of it.
ROBERT BLOOMFIELD: Oh, fantastic. I'm glad to hear it and hope we'll see you in here
more. You'll have to get your own account and avatar, however.
EDWARD CASTRONOVA: Absolutely.
ROBERT BLOOMFIELD: So let's move on and talk a bit about your newest book. So your
last book was Synthetic Worlds: The Business and Culture of Online Games, and that sort
of laid out this entire economic perspective, but really, I think, sticking primarily within the
realm of game design.
And now the book that I understand is going to come out in about a week or so is Exodus to
the Virtual World: How Online Fun is Changing Reality. And so you've got--I mean, it's a
long book. We obviously can't talk about all of it. But there are two notions that I found really
interesting and that I'm hoping we can explore today.
The first is that you take the notion of migration to virtual worlds pretty seriously, and look at
it as an economic and a cultural form of migration.
And then the second is you develop a theory of fun, and you talk about policies that would
allow game designers and other types of policymakers--essentially regulate fun and make
sure we're optimizing it.
So let's take these one at a time, and start with migration. So you talk about a couple
theories, Hicks's The Theory of Wages and Becker's Theory of the Allocation of Time. And
can you just sort of walk through how you apply these to migration to virtual worlds?
EDWARD CASTRONOVA: I guess the first thing is people who aren't in economics should
know that these are not new theories. The Becker theory of time goes back to 1965, and
Hicks goes back to 1931, 1932. They're also not completely uncontroversial but, within
economics, they're pretty well accepted.
So the Hicks theory says that people move from one place to another when it's better for
them, especially economically better. So at a stroke, Hicks says he can explain a lot of
migration just by, you know, if wages are higher in one place and everything else is equal,
people are going to move to that place.
And then the Becker theory of the allocation of time says that people put their eyeballs in
their minutes where it's best for them. So again, explaining how people divide up their day.
If you put those two things together in the context of virtual worlds--I mean, if you want to
look at virtual worlds as a territory, then you use the Hicks theory. You say that there are
two territories that are close neighbors, basically the real world and the virtual world. And I
know that that's not fair and that we shouldn't be making those distinctions, so on and so
forth. But anyway, they're sort of useful starting points.
So we have this virtual world and we have a real world, and people bop back and forth,
depending on when it's better for them, either economically better for them or from an
And if you say, well, they really are all about entertainment, then we have the Becker theory,
which comes in batting cleanup, saying, well, if all it is about moving your eyeballs around
and figuring out where it's best for you just from an entertainment or cultural standpoint,
Becker's theory says people will put their eyeballs where it feels best for them.
And so from both theories you've basically got people choosing--choosing where to be,
whether it's physically where to be, if you see it that way, or whether it's mentally where to
be, if you want to see it that way. The only thing that differs between those models and the
real world migration is that, with real world migration, it's kind of a discrete process. You've
got to move the 220 pounds of waterlogged plasma from one spot on the earth to another.
We don't have to do--
ROBERT BLOOMFIELD: I have heard more flattering descriptions. But--
EDWARD CASTRONOVA: Speaking of myself. That was quite flattering. I'm actually now
down to 220.
And so I refer to that in the book as “discrete migration.” What you have with virtual worlds is
what I would call “instant migration,” where people are just bopping back and forth. But I
think the effects are the same. It's just instead of it being, you know, 10 percent of England
is now in America, it's more that 10 percent of the time of English men and women is now in
the virtual world. So I think the economic effects are the same, even though the ways it
happens physically are different.
ROBERT BLOOMFIELD: Now, there are sociological and cultural theories of migration that
have criticized the economic perspective by saying it isn't just where the money is, but there
are cultural pressures, family pressures, that can interfere with migration in particular and, in
some cases, might speed it up.
But I'm wondering what your take is on how the structural frictions in the migration market to
the virtual world might be different from the frictions in the real world?
EDWARD CASTRONOVA: Yeah. I mean, there's a definite haves and have-nots
phenomenon with virtual world migration. I don't really address it in the book. But I mean, if
you think about it, it’s pretty severe.
So if this were the way it were in the real world and only the richest people could move from
Cambodia to Japan--and that's clearly not the case. In the real world it's lower middle class
people who scrape and save to put together a smuggler's fee to cross some sort of border. I
guess in the virtual world, the real boundary is, you know, can you get a computer that'll run
Second Life? Can you log Second Life? How many hours does it take for all the prims to
load? That sort of thing.
And I really--boy, you know, while I look at that as a significant phenomenon, I'll also say
that if you realize how virtual worlds are exploding and where are they really exploding,
they're in these sort of low-tech environments, you know, Barbie World and the Guya
OnLine, all these sort of low-tech places are really where things are taking off. So that
makes me think that maybe in the long run virtual worlds are also going to be a lower middle
ROBERT BLOOMFIELD: Okay, yeah. I mean, my impression is, at least for Second Life,
that that's going to take a little while just because it is so difficult to get the computer to run
it. And actually, when we had Ginsu Linden on the show, that was one of the things that we
discussed that is their--you know, one of their competitive hurdles, is being able to spread
this out into a--as you say, the Barbie World market.
EDWARD CASTRONOVA: Yeah.
ROBERT BLOOMFIELD: So let's move on and talk about the--really probably the largest
section of your book is about the theory and practice of fun as it pertains to virtual worlds.
Before we talk about the theory can you just tell us why we would need a theory of fun?
EDWARD CASTRONOVA: Well, because we have an emerging practical industry of
people making fun things. And they're discovering things hit or miss. And I think what they're
discovering is very, very real and really, really important, and probably not too hard to trace
to something fundamental.
Let me just give you an example of something so everybody can get their heads around
this. The other day I was talking to somebody who was playing a new--I guess there's a new
Assassin game on the Xbox 360. And they have apparently figured out the horse. So for the
first time ever--this guy I was talking to, he said, "My wife saw me playing this game, saw
the horse, and said, 'Can I play the game'"? Why? To ride the horse.
So there's this thing between people and horses, and it's somewhere in the brain, some sort
of connection. And we know that there are sort of horse-based cultures out there. And
here's a game that's unlocked it. Now, I can guarantee you these guys did not use
psychophysiological research. And, you know, the history of evolution between homo
sapiens and horses [genensis?] or whatever the horse equivalent of homo sapiens is--and
figured out what is that mapping? What is the connection? So they just sort of found it.
But I know that there's something about the way we're wired that produces our interest in
Tetris, the horse game and the Assassin thing, leveling in World of Warcraft, and on and on.
And so there really needs to be a research project to unpack that, I think.
ROBERT BLOOMFIELD: Okay. So every book by an economist has to have its theory, and
so you've got your four-element definition of fun, and what I'd like to do is just read out these
four items and then have you explain to us why these are necessary and sufficient to
distinguish fun from other things, like happiness or pleasure or well-being.
So the first one is a little bit jargon-laden. The activity causes coactivation of motivational
systems. Second, the activity is possibly metaphorically relevant to survival. The individual's
choices promote survival. And then finally, the situation is known to be play. So start with
whichever one you want, and let's just walk through.
EDWARD CASTRONOVA: Well, the first one is most boring sounding. What I mean by
coactivation is--well, first of all, people should understand that the area of hedonic
psychology--so people doing research on what in the brain makes us think something is fun
or makes us happy--is actually pretty new. They haven't been at it for very long.
And one of the things that's been found is that--you know, what makes people get excited?
And there are two motivational systems in the brain. One is called “appetitive” and one is
called “aversive.” And the appetitive system is fired by anything that would help you survive
in the original environment. So we're talking food, sex, resources. "Yea, you know, I want
that.” Appetitive. And then aversive is, “Whoa, it's big, it has teeth, it’s going to eat me.” So
And you might think, “Oh, those things are opposite systems.” They're actually independent
systems. They're not opposite at all, which means they can both be activated at the same
time. And research has shown that people get mostly worked up when they're both firing at
the same time.
So check this out. If you're being chased by a dragon, that's exciting. If you see a pile of
gold pieces, that's exciting. But if you see a dragon on top of a bunch of gold pieces, that's
really, really exciting. And suddenly you see--you know, so many games have that. They
have a reward that's protected by some sort of threat.
And so it seems to me that a fundamental theory of fun would be, you know, you design an
environment that has both challenge and reward in it. And that's all I mean by the jargon of
coactivation of motivational systems. We're very, very strongly motivated biologically to seek
out those things. And if we find a situation like that and successfully master it, which is what
the other criteria are about, dopamine starts firing in the brain. You just get a lot of good
ROBERT BLOOMFIELD: Okay. So this is really--I mean, this is really a neurophysiology
perspective that you're taking, then?
EDWARD CASTRONOVA: Yeah.
ROBERT BLOOMFIELD: I mean, we're looking at brain activity. And by the way, for a lot of
people who are not academics in economics probably don't know this, but economists have
actually been doing a tremendous amount of research where they actually use the
functional MRI scanning, and they show people pictures or give them decisions to make,
and look at which parts of the brain fire.
I mean, is it safe to say, then, that fun--I mean, is it particularly those two systems that you
want to get firing, or is just getting as much of the brain firing as you can to give that sense
EDWARD CASTRONOVA: Yeah. Well, what's attractive about those particular systems is
that they're close to the old brain. So in other words--I mean, I could engage you with an
intellectual--a crossword puzzle, let's say, that would engage your frontal lobes, and so on.
But it seems to me that since you can play with your dog but you can't talk to your dog, that
the play part, the joy that comes from play and flow, is actually in the older part of the brain.
And that's where these motivational systems live.
In other words, when you see--when you're watching--I don't know, Jurassic Park, and the
Tyrannosaurus rex comes, your brain goes through this incredible dance where one part of
it is saying, “Oh, my God! There’s this toothy thing coming after me; I better get out of this
theater,” and the other part is saying, “No, no, settle down. It's just a movie.”
And what it seems to me that games do effective, like virtual world games especially, is they
go down to that lower level, the part that's saying, “Oh, my gosh; I have to get away.” That's
why you flinch when you're playing Quake, let's say, is that the aversive system fired so
much and so rapidly that your neocortex couldn't shut it down in time, and you actually
jumped out of the way.
And I think there's more joy--the more sort of natural joy the farther down you do on the
evolutionary pipe there. So that's why I focused on those.
ROBERT BLOOMFIELD: Okay. Now, you mentioned play just then, and that's the fourth
element. This situation is known to be play. I mean, is this as simple as, “If the giant toothy
thing actually is going to eat me, that's not a whole lot of fun?”
EDWARD CASTRONOVA: Yeah. You know, the way I identify it in the book is, if you've
ever been in something that's really truly dangerous, a lot of times people afterwards, to
lighten the atmosphere, will say, "Well, that was fun," which is sarcastic comment. No, that
was not fun.
So I think the pursuit of fun has to carry with it the idea that there isn't really anything all that
bad that's going to happen if it doesn't work. Otherwise, it isn't play. So people who have
done research on this say, for example, why do we even have play? It's so that like bear
cubs can play with their parents, and the cubs learn how to avoid dangers. And it has to be
sort of intrinsically motivating to do that because if it isn't intrinsically motivating, then, from
an evolutionary standpoint, nobody would want to do it. And it would be terribly inefficient to
take the little bear cub and say, "You know, look, here's a cobra. Good luck; I hope you
You have to really give people this intrinsic motivation to just fool around and be kind of
intense about it even though they know it doesn't matter. So I think that's why there's a lot of
joy that's associated with the play part, with doing this when it's play.
ROBERT BLOOMFIELD: Okay. So items two and three deal with survival, number two was
the activities relevant to survival, and number three is the individual's choices promote
So this is really just a way, then, if people are seeing these--the strong reward and the
strong danger in a situation that they know to be play, but at least it's tapping directly into
their lower brain survival notions?
EDWARD CASTRONOVA: Yeah. That's why there's all this sort of cheesy evolutionary
stuff in that kind of a definition. Again I want to get to the idea that it's deep in the brain
stem. You know, when I look at the things that happen to be fun, it usually involves
something that you could relate to the Savannah.
And again, when I talk about fantasy worlds, the extent to which the hunt-a-dragon-for-
treasure model goes right down there way deep in the brain stem. It's so clear that if you
could succeed at that, that it would be some metaphor for evolutionary survival. And that's
why that was attractive.
ROBERT BLOOMFIELD: Okay. You know, going back to a question that I asked earlier
about why aren't you in Second Life, looking at your definition, it seems like one answer you
could have given is well, it just doesn't seem like that much fun. Because other than the
sexual activity I am told goes on in-world, there is very little in the way of making choices
directly relevant to even metaphorical survival, or a lot of coactivation.
EDWARD CASTRONOVA: Actually, I know this is going to sound weird, but I feel like I
have to disagree with that characterization of Second Life.
When I first got interested in Second Life, 2003, 2004, it was largely empty. Right? And that
would explain why I wasn't going in. But I understand now more and more there are things
that would be fun under that characterization.
And we probably--you know, those who are sitting in this virtual room right here, a few
people could site some kind of activities, islands, and so on, that meet that definition. I'm
sure they're out there, and there are probably more out there than we can find. I mean,
people have told me about these amazing player versus player worlds where, if you
succeed--you know, you overcome your enemy, you get to dominate them in the worst way-
-or the best way, depending on your point of view.
So the thing--you know, Second Life by its very nature as a platform isn't something for
which this definition of fun is germane. That's like saying, “Is the Internet fun?” No, but some
things on the Internet could be fun. And that's sort of what we're seeing more and more in
Second Life. There's more fun content. I mean, maybe this is the appropriate time for me to
come into Second Life.
ROBERT BLOOMFIELD: Yeah. And so it sounds like really what you're saying is, “No, Rob,
it's just people have to create the content.” And maybe they already have, within this
I see I definitely fired up the crowd. I've got 15 or 20 people saying mean things to me now.
And scattered in those comments, actually, are a couple interesting questions. And let me
The first one is, “When you talk about the sort of neurological brain-based biochemical
definition of fun, it leads to a question, so is there a difference, then, between male and
female gamers, do you think?”
EDWARD CASTRONOVA: Wow, I go back and forth on the question of pink games. Lately
I'm thinking there is no such thing as a pink game. In my experience I have to confess again
has been radically changed. Not by some analysis or anything, but by personal experience.
My wife has suddenly become a gamer. And our policy in our family is like nobody's going to
pressure anybody to do anything. And she had a girlfriend who said, "Come on, and play
'Lord of the Rings' online with me." And now she's playing it more than I do. She's has
higher-level character than I do. And I'm absolutely surprised by this because I would never
have identified this, you know, Ph.D. and marriage and family therapy, former cheerleader,
mother of two--you know, I just--I was like, that does not code as gamer to me. Now here
she is gaming in just a traditional role-playing game. You know, it's just sort of blown me
away. So I'm still processing that.
And it makes me really wonder about whether there are differences between males and
females at the level where I'm trying to define what's central to this phenomenon.
ROBERT BLOOMFIELD: Yep. Okay. I mean, I guess we'd have to actually decide when we
talk about these motivational states, whether they actually are fired in different ways across
genders. I don't want to pull a Larry Summers here, so I'll stop talking now about gender.
Okay, let's actually move on to the next big topic in the book. And I have to say this was one
of my favorite parts where, after laying out what fun is and how you view it, you talk about
what's basically a bureaucratic structure that is necessary to make sure that virtual worlds
are fun. And you start out with the notion of a Fungineer. And so here I'll quote for a second
here. "A Fungineer uses psychology in game theory to create social environments, typically
digital and mediated, that are layered with choice problems through which the members of
the society experience ongoing, pleasurable sensations derived from survival, relevant, but
safe, coactivation of motivational systems."
So it's basically--Fungineer is going to make these games fun for us, which sounds
straightforward, except then when you describe how this would be done, you use this, I
guess, coming from your public policy welfare economics background--you pull together all
these ministries that are responsible for different features that are going to make these
environments fun. So--go ahead.
EDWARD CASTRONOVA: Well, what I originally planned for that section, actually I named
each of the ministry buildings after an innovator in this space. So I had like the Gordon
Tyrant Walton Ministry of Justice. And that's just too geeky. This is a trade book; nobody's
going to know who Gordon Walton is. I had the--Raff Coster(?) was the Minister of the
Interior, and so on, for all of his innovations in social gaming and things.
ROBERT BLOOMFIELD: So then you take out the inside jokes?
EDWARD CASTRONOVA: Yeah, exactly. But they let me keep the ministry structure. The
basic point I'm trying to make is that there's so much similarity in the way a virtual world
development company thinks about what they're doing and interfaces with their populace
and executes policy. There's so much similarity between that and the way a government
does. And I just wanted to hammer that home, that even the functional areas were similar.
Let's say the Ministry of Justice, you know, we have a cabinet-level office in every single
government that is involved with the execution of law. And in virtual worlds we have a whole
area, a whole set of staff, whose job is to go in and make sure that the end-user licensing
agreement and Terms of Service are being followed.
And so there are all these parallels and the tactic there--the purpose of it wasn't so much to,
say, validate virtual world developers--although I want to validate them--it was to send a
signal to everybody on the outside that policy is being made in these spaces and, therefore,
people who spend time in these spaces, when they come out of them, will sort of look at real
world policies, and they're going to see all these parallels, but the policies will be different.
Why is it I can't fly just any--why can't I teleport instantly from Canada to America? Why do I
have to stop at this border and show this piece of paper? In Second Life I can teleport
wherever I want, and so on and so forth. I just wanted to kind of point out to people on the
outside the way the policy decisions in virtual worlds could eventually start migrating out
Thank you everybody for waiting. So I assume you all have the audio feedback. What we
were talking about was this notion that the virtual world governments are sort of structurally
the same as real world governments.
An example I was talking about was making sort of constitutional affairs. So in the real world
that's where judges decide whether a law is consistent with the Constitution. And it's also
about the process of making new law. So in the real world, like I said, we have the
Constitution that regulates how we make new law.
And the virtual world developers have, I feel, a superior process. They have this thing called
the test server. And they make new policies, and then they test them for weeks and weeks
and weeks and months. And then they implement them and then kind of see what happens.
But in the real world, think about what we do. We have 535 people who sit around and say,
“Hmm, you know what? We really need to have more of an alcohol tax or more of a
cigarette tax or less of a gasoline tax.” And they just sort of conceive it, and then they go out
and they just do it. No testing whatsoever.
So that's a case where you could imagine socialized virtual worlds would go out and say,
"What do you mean? You're implementing this change in the game rules live, without any
test server at all? What are you guys, nuts?” And so that seems to me that would lead to an
improvement of how real world governments actually operate.
ROBERT BLOOMFIELD: Uh-huh. Well, I'll say one of my dreams, and actually one of the
things that got me involved in the whole virtual world community to begin with, was the
thought that we could try out some of these real-world regulations in a virtual sort of low-
stakes setting, and then see whether it works. Is Ron Paul right about his no income tax?
You know, let's find out.
EDWARD CASTRONOVA: Yeah.
ROBERT BLOOMFIELD: And then you also talk about the ministries of culture and social
affairs. So what's their role in the virtual worlds?
EDWARD CASTRONOVA: So in the virtual worlds, the Ministry of Culture is going to be
involved with the tone of the place, I guess is the way to put it. So like, are we going to have
role playing or not? It's sort of in this gray area between social norms and laws. And social
affairs are attached to that as well because, in virtual worlds, you have this whole thing
dedicated to community management and forums and class leads and all these--you know,
who interfaces with the representative groups? I'm sort of surprised that there isn't a
nascent sort of occupational-based or party-based politics in Second Life. Because now
you've got these conflicts of interest.
A lot of the users do want to interact with the Lindens, but wouldn't it be easier if you said,
“Okay, I'm part of this interest group, this interest group has these representatives, these
representatives go and talk to the Lindens”? And that's all a matter of interest elicitation,
which is really important for real-world governments.
So all that kind of activity is happening in the virtual world and it just parallels exactly what
happens in real worlds, where you have cultural affairs ministries worried about education
and access to public parks and, like I would say, atmospheric issues, and promotion of the
arts. And then, of course, community management and eliciting interests from people. That's
all part of real-world stuff, as well. So it's just another place where it parallels, and there are
things that people are doing in the virtual worlds that are in many ways superior to what
happens in the real world.
ROBERT BLOOMFIELD: Yeah. So on your observation about the lack of sort special
interest groups, PACs, and so on, in Second Life, I think some people would argue that
EDWARD CASTRONOVA: Yeah.
ROBERT BLOOMFIELD: And some people would--well, I guess what I would say is that--
you know, those take some time, and you have to get people to coalesce and actually agree
that they have common interests that differ from the interests of others. And I think we're all
just still trying to sort that all out.
EDWARD CASTRONOVA: Yeah. You know, Second Life is such a ground-up community.
Right? Not ground up like hamburger, but everything comes from the ground up. But like
Dark Age of Camelot, I mean, they explicitly tried to have people that they would hire as,
you know, this is the Paladin team lead, and the Paladin team lead's job is to talk to all
Paladins and figure out what they're doing and then report that into the policy making
process, which was very close to just plain old representative government.
So depending on the community, it can be handled in some ways. I would never be in favor
of anything that would break the role-play atmosphere of a fantasy game. But Second Life
doesn't really have that. So I could see things emerging here. It's just up to the Second Life
community to decide what are the relevant communities of interest here.
ROBERT BLOOMFIELD: Yeah. And so I'm seeing in the backchat Caliandris Pendragon.
His response is basically, “Are you kidding? We have thousands of these groups.” And I'm
thinking, well, you know, thousands is kind of like zero in the sense that no one of them has
enough power and consensus that they can actually say they speak for a large group of
EDWARD CASTRONOVA: Yeah. But like I said, this is like the ancient problem of interest
elicitation in any political system. That's why you ultimately have representative democracy
and not directed democracy.
And so then the question would be, how do you carve up Second Life? And again, then
you'd start getting into the same sort of issues that were solved, however well they were
solved by the U.S. Constitutional Convention, for example, where first they divided up the
map, and said, “Okay, we're going to have two from each square. And then they said--and
we're going to count the people, and we're going to have one for every 30,000 people. And
we're going to have two houses--you know--and so think about what that process would look
like in Second Life.”
My only assertion is that's going to be really, really similar to things that have happened in
the real world over and over again.
ROBERT BLOOMFIELD: Uh-huh, if they can get it to work.
EDWARD CASTRONOVA: Yeah.
ROBERT BLOOMFIELD: Which I think is an open question. You know, one of the things
that seems very different between the virtual world and the real world is this notion that in
the real world it's pretty difficult to segregate yourself from people who have different goals
and preferences. I mean, you talked about some people like role play and some people
don't. And you also talked--when we were touching on migration, you were saying there's
this sort of discrete migration, that you have to take your whole body and put it in another
In the virtual world, certainly in Second Life, and I suspect in many of the more structured
game-like worlds as well, you have people who are voluntarily segregating themselves. So
when I think about, for example, culture, you can have people choosing whether they want
to role play or not, or what myths they want to have underlying their role playing. Or you can
say “I don't want to be in a player versus player environment.”
Social affairs, you know, they ban people all the time, and there are more cliques here than
high school. And similarly, even as far as justice, you can actually say, you know, “I want to
be in a group of people who follow these laws rather than those laws.”
EDWARD CASTRONOVA: Right.
ROBERT BLOOMFIELD: So it seems like it really then makes it hard to come up with policy
EDWARD CASTRONOVA: Well, the thing about cyberspace is that, by its nature, the
boundaries are porous. So if there are going to be those boundaries, if there is going to be
any cultural individualism on a sort of geographic level, I think law and social institutions will
be necessary to make it happen.
And you might say, well, there's no way that a human design social institution of law could
really seal off the border between, let's say, the virtual world and the real world, or
something like that. And my response to that would be social institutions could be
tremendously powerful. In the United States, no one drives on the left side of the road.
Right? That's a social institution. We could, I suppose, if we wanted to. But it's simply the
fact that once you put that institution in place, it has a very powerful effect on human
And the same thing with the value of dollars, to go back to economics. You know, there's a
social convention that a dollar is worth about one diet Coke, more or less. And that comes
and goes with the years, and there is inflation. But it dramatically constrains behavior, even
though it's a social construct, a social institution.
So I think it is possible to have social institutions that would play the role that like oceans
have played in the past, in terms of helping communities to kind of be isolated and to grow
in their own fashion.
ROBERT BLOOMFIELD: Okay. At the end of the book you start speculating and, in
particular, you speculate about how the exodus to the virtual world is going to affect the real
world. And I'm just wondering, can you pick just one or two of the sort of most important
feedback effects you see, and just tell us about them?
EDWARD CASTRONOVA: Yeah. Well, I think the example that I like to site is virtual worlds
in Quest. So you have these dozens of millions of people now who, in their teenage years,
formative years, whatever, get used to the idea that if you are bored and you need
something to do or you need money or something, there's this guy with a yellow exclamation
point over his head. And you go up to that guy, and he gives you something to do. Then
they go out in the real world, and they're like, “Where's the Quest Giver? Who tells us what
we're supposed to do? Where's the job?”
And so it's sort of an argument for employment and money for all, which is obviously
radically different from anything we have right now.
And at the same time--so, okay, let's suppose people come out of virtual worlds, and that's
their expectation. Then there might be the second expectation that once you make the
playing field completely level, then nobody cares about inequality anymore, which is a very
And you see this in virtual worlds. People raised in that environment say, “Well, we all
started out with no gold pieces, and now you have--or you know, no Lindens--and now you
have this wonderful thing.” And if the system is set up so you only get this wonderful
building, or whatever, through the allocation of your time, nobody seems to care. Nobody
seem to care about differences in wealth, at least not at the level that they do in the real
world. And so that sort of predicts a future where people don't care about equality in the
same way that they used to in the past.
EDWARD CASTRONOVA: It's a big change, yeah.
ROBERT BLOOMFIELD: And you're saying that the reason people feel differently about
inequality in the virtual worlds is that they know everyone started on a level playing field.
EDWARD CASTRONOVA: Yeah.
ROBERT BLOOMFIELD: This is then, I guess, a little bit off topic, but the ability to engage
in real money trade to buy better equipment and so on would actually seem to distort that
level playing field.
EDWARD CASTRONOVA: Yeah. And this is where--if there's any takeaway that I would
like people to have from this talk or any talk that I give, is that in the policy area there are
closed and open worlds. Second Life is an open world. It loves the real-world economy. It
loves it when people buy and sell Lindens for dollars.
The use of Second Life is enhanced by the degree to which its membrane is porous. You
know, get more people in here. Let them talk about their real-world activities, their real-world
social networks, and let them take their Second Life experiences back out again. That's an
open world. And I would never advocate putting stronger walls around Second Life; I would
advocate more interoperability with every other efficiency-enhancing virtual world. That's an
Closed worlds are things like World of Warcraft and EverQuest. Their purpose is completely
different. And I just really hope that people understand how thick those walls have to be,
and how we're going to need to have legislatures and judges understand that these two
environments are very different and have very different legal and policy needs.
You know, World of Warcraft would be ruined if it were normal for people to just constantly
stream back and forth their economic values. The whole point is that people start with no
gold pieces and then get a lot of gold pieces. So that's my big takeaway, open and closed
ROBERT BLOOMFIELD: Okay. Well, so with that in mind, then, that's actually a very nice
lead-in to the last topic that I'm hoping to spend a couple minutes on, which is the
declaration of virtual world policy that came out of the Ludium Conference, the Synthetic
World's Congress, that you hosted at Indiana University.
And so as I understand it, a group of participants, many academics, a handful of people
from industry, game design, and groups like that, got together and came up with a list of
whereases, where they're basically saying, “Let's see, so whereas virtual worlds are places
with untapped potential, providing new and positive experiences and effect, we resolve th...”
and there's a list here of basically a kind of a Bill of Rights, saying a self-governance group
of virtual world stakeholders should be formed and draft a Bill of Rights, provide universal
age verification, provide designers with freedom of expression.
And so I'm wondering where you see this process going and how you reconcile the collision
of rights between the game designers who want their creative freedom and the residents
who want to be able to have their rights protected and do what they want to do?
EDWARD CASTRONOVA: Yeah. So first of all, just the Ludium idea itself is to play games
instead of having boring conferences. So the reason I hold these game-based conferences
is I just find regular conferences really, really dull. And I want to get together with academic
intelligent people, but I don't necessarily want to have them talk to me and then I talk to
them. It's like, “Let's play games.”
So it was a political game. It was a game of a political convention. It did come up with a
platform that has these internal inconsistencies in it, where the people on the design side
said, “We will accept a plank about player's rights if the players will accept a plank protecting
the designer's rights to make their own creation however they want.”
And the way this conflict can resolve, I think, is just by differences in the definition of the
goal of the environment. So differences in the goal of the environment. So if it's like Second
Life, it seems to me that the designers here are taking a hands-off approach. They're
saying, you know, “We're a hosting company; you guys do whatever you want.” And in this
case, you know, affordances of the space go to the users and what their use--their utility is
pretty dominant in Second Life.
Whereas, in World of Warcraft you'd want the design intent, the artistic license of the
designers, to be really respected. Because when I go into World of Warcraft or Lord of the
Rings online, I'm expecting a specific thing. I don't expect to be able to be free to do
whatever I want; instead I want to see what the rules are, see what's the covenant that I'm
signing up to. Then I should follow that convenient and try to appreciate the space as it is.
And if it isn't what I like, then I go somewhere else.
But in order for anybody to have a unique different and artistic experience--you know, in
order to provide that, the designers have to have some freedom to protect what they've
made. And so I think the inconsistencies in this platform really point again to these
differences in institutional political legal regimes.
ROBERT BLOOMFIELD: Okay. Interesting. We only have a couple minutes left. And so I
actually wanted to close by passing on a question asked by Sequoia Hax. Really, it's a two-
part question. The first is, “How has your conception of the boundary between real and
virtual worlds changed since your last book?” And the second side of that is, “How has your
study of virtual economies changed your understanding of real economies?”
EDWARD CASTRONOVA: Okay, so starting with the first one, when I first was writing I
thought that the porous boundary between virtual and real worlds was great. I thought it was
really neat. But by my 2003 paper on the right to play I had started to become concerned
about the extent to which economic development and so on would actually push reality into
the fantasy worlds, and wreck them. And I think we're at the moment of choice, as far as
So my development has been “Yay! People mesh the real and the virtual world.” And then I
started to go, “Hmm, that may not be so great in some cases.” And now I hope we don't lose
the moment and lose the magic because we failed to support the membrane in certain
places. And so that's how that's developed. And I've learned so much about the real-world
economy from looking at virtual economies.
So here's another example. In the real economy we are obsessed with growth. We want the
economy to be constantly growing. And that leads to this question: What's so fun about
economic growth? And why is economic growth so popular in the real world? Well, if you
have a growing economy, lots and lots of average ordinary people grow up and end up
getting jobs and earning incomes where they're above their parents. I think that's basically
what it's all about.
Now, mind you, three-quarters of the world's population, for them growth means having food
in your stomach. And I don't want to belittle that. I'm just talking about the mindset of a
growth-oriented economy, you know, in 2007, in the United States of America. We don't
need growth to put food in people's tummies right now. So why are we so obsessed with it?
And I'm not a--you know, I'm a Tory. I'm a Tory, churchgoing Catholic Tory. I'm not
somebody who's like really into economic development for development's sake. But I'm also
not a green. But here I am sort of saying whoa; what's the point? Why grow? Why grow?
You look at virtual worlds, and they actually--growth is a problem from the standpoint of
virtual worlds. You want people to start out with no money and end up with a lot of money
and feel good about it but if the overall economy is growing, that means that that journey is
getting harder for each new generation to travel.
And so this is the case where, wow, what would the real world economy look like if it was
designed for the fun of individuals as opposed to pursuit of these intermediate things, like
growth? Growth is intermediate to human happiness. What if the economy were designed to
directly affect people's happiness? I think we would get some subtle but important changes
in our policies, if we did that. And that's sort of what my agenda is right now. What are those
ROBERT BLOOMFIELD: Okay. Well, fascinating. I personally look forward to your third
book, and I wish you well with this one, your second.
Let me just point out as we close, Ted, I hope you have a chance to look through the
backchat in the Metanomics channel because most of our guests on this show have been
primarily Second Life-oriented, which you are not. And you know, there really is quite a
difference in perspective. And I agree with you about the role of the membrane here. And I'll
be the first to admit I'm really a no-membrane guy in Second Life. This is really just an
extension of what I do as an academic in real life.
But I think the ability to create worlds with--especially for me, that are business-oriented but
have a more secure boundary, is going to allow us to learn a lot about business and
economics, and bring some things back in ways that that I find pretty exciting.
EDWARD CASTRONOVA: Uh-huh, uh-huh.
ROBERT BLOOMFIELD: So I guess we're out of time. Thank you, Ted Castronova, for
coming on our Metanomics show. Thank you, those of you--
EDWARD CASTRONOVA: Thank you.
ROBERT BLOOMFIELD: --on Metaversed Island and those of you on other islands
watching this in syndication. And we will be back next week. Thanks a lot.
EDWARD CASTRONOVA: Thank you.
[END OF AUDIO]
Transcribed by: http://www.hiredhand.com
Second Life Avatar: Transcriptionist Writer