111907 Synthetic Economics Metanomics Transcript

EDWARD CASTRONOVA

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

Onder Skall.

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

long-run implications.

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

perspective.

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

a duel.

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

say.

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

why is--

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

Life is.

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

entertainment standpoint.

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

class phenomenon.

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

fine.

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

chemicals.

ROBERT BLOOMFIELD: Okay. So this is really--I mean, this is really a neurophysiology

perspective that you're taking, then?


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

of fun?

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

make it."

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

survival.

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

platform.

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

ask them.

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

there.

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.


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

they're there.


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

people.

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.


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

country.

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

absolutes.

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

behavior.

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

right-wing idea.

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.

[CROSSTALK]

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.


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

open world.

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

worlds.

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

that goes.

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

differences?

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--


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.


[END OF AUDIO]

Document: cor2011
Transcribed by: http://www.hiredhand.com
Second Life Avatar: Transcriptionist Writer

111907 Synthetic Economics Metanomics Transcript

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