The very real chief economist, Dr. Eyjólfur Guðmundsson, of the virtual online game EVE has released his first quarterly economic report based on game data. I can imagine it was quite a task to organise economic data from the game and analyse it, so this first report is not so ambitious and concentrates on basic statistics about game players and activities, as well as a few macroeconomic indicators. It also has the coolest pictures that I’ve ever seen in an economic report.

As basic as the analysis is, there are still quite a few interesting things. For example, the distribution of wealth as measured by the amount of game currency that players are holding is skewed, although not as dramatically as distributions of wealth can be in the real world. Second, and very surprisingly, over time there seems to have been both an increase in the quantity of game currency in circulation and deflation. I’m not a macroeconomist, but I thought increasing money supply is usually associated with inflation rather than deflation. The report presents various price indexes and the deflation has been huge - over 50% a year in some cases - while the quantity of money has increased more slowly but steadily.

Of course, the in-game economy doesn’t look like a real world economy in many respects, because it’s just a game and there’s a limit to the amount of realism that can be simulated. So the big question for me is, what aspect(s) of the game’s design have lead to breaking the relationship between increasing money supply and inflation? This could help us to understand the conditions in the real world responsible for that link. I’m also curious about what effect the massive deflation has had on the game’s economy. When prices overall are falling, this induces people to hold onto money rather than spending it, because money increases in value over time. This depresses economic activity, as people just sit on their cash rather than using it for transactions. With such significant deflation occurring, I would have thought that this would cause severe economic problems, and it would be interesting to examine that.

Aside from macroeconomics, I can think of many other microeconomic questions that would be interesting to look at. For example, are there any impediments to trade (eg asymmetric information, externalities etc) and if so how do the game players overcome these? Or do players make contracts with each other and how are these contracts organised? Have spontaneous markets emerged for things like futures and options? Is there a credit market and if so how is it organised? And so on … With so many interesting things to look at, and so much good data, Dr. Guðmundsson is a really lucky guy!