World of Warcraft: The Austrian Paradise
When the caucus results came out in Iowa, Ron Paul declared that we we’re all Austrians now. What he meant was that his followers were supporters of the Austrian School of Economics. A school of thought that was championed by Ludwig von Mises (pronounced Me-sis), F.A. Hayek (pronounced Hi-ek), and currently the most visible Austrian academic is probably Robert P. Murphy (pronounced Pee). Of course, with any school of thought there is no absolute consensus. But on the whole, Austrians believe in: 100 percent reserve banking, gold standard for currency and that the less government intervention, the better off individuals will be. Now, nobody has 100 percent reserve banking, are on the gold standard and few believe in zero regulation – except Ron Paul. There must be 10,000 non-Austrians economists to one adherent. I mean, the von Mises Institute has about one hundred members while the American Economists Association has about twenty thousand. So where on Earth will you find someplace that lives the Austrian dream? World of Warcraft.
There are banks in World of Warcraft and they practice 100 percent reserve banking. Having 100 percent reserves means that all the money that comes into the bank in the form of deposits stay there until such time that they are withdrawn. Most banks use the money you put into them by loaning them out, a practice known as fractional reserve banking. In exchange for the liberty of using your cash the bank rewards you with a little interest. No banks lend zero dollars out. It’s a lose-lose situation for them and the consumer. They don’t make money off the interest and fees, you don’t get the loan for the down payment on your house, and your investments in the bank don’t grow. Banks in the World of Warcraft don’t lend money out. Instead, they charge a fee for additional space to store goods and money. Therefore, save a glitch, your money will always be there for you. Which is a piece of mind that Great Depression era bank customers didn’t have. People panicked when their stocks plunged. They went to their local banks to withdraw their money, only to find that the bank had loaned it all out, much of it to people who bought stock (known as buying on margin). The stock those people bought was worthless so they had nothing to pay back their loans. And thus many banks collapsed. A problem that banks in World of Warcraft never have to worry about.
The Aztecs called gold the sweat of sun and then Cortez killed them all and mopped up all the sweat he could carry. Gold and other precious metals have been used as currency since time in memorial. In the old days of Mercantilism, the amount of money was fixed, since there is only so much gold in the world. The principle held fairly true after the switch to paper money until 1933 when the US came off the gold standard and by 1944 forty-four other nations followed suite. The point of all this was to control inflation, the phenomenon of more money chasing less goods. Whereas in a fiat currency, governments print more money through their treasuries, dictated by central bank policies. Now you might say, Jon, WoW doesn’t have a gold standard. True, they use gold but it’s virtual gold not bound any physical constraints. I say they have something better, transactional constraints. Gold in World of Warcraft is gained by doing quests and selling goods. Even gold that is bought on the internet was farmed by some poor lad. So the money supply is directly correlated to the amount of goods and services. This is the essence of the gold standard, that there is something real behind the money. This is an advantage to Blizzard, the makers of World of Warcraft. If their servers are secure, they don’t have to worry about regulating the money. Even when you can buy gold online there is no net gain in money versus the goods that are out there. The gold farmer that obtained that gold to sell online still had to sell or do something for that cash. This is opposed to other games like Infinity Blade where players can buy gold straight from the game’s producers. That causes inflation, money getting more worthless. Infinity Blade’s developers combat this by price control. They say how much things cost. That system benefits the players who pay. Of course, that makes sense in from the game developers point of view. I used to play a game called Ederon. Those who paid were unstoppable. Did they deserve to win? I don’t know. That’s the main question that economists try to answer, who deserves what.
So now you got your money from quests and instances. What do you do with it? Buy shit of course. Now, in WoW, characters don’t need to eat, are not susceptible to the elements or have any other constant needs. However, there are things to buy and the auction house is the place to buy them. At the auction houses, players put items they’ve acquired on sale for whatever price they want. This calls to the essence of the free market that all those talking heads on cable news are always yammering on about. There is free entry and exit, anyone can sell anything for whatever price, and there is no one to deny them. In this system, the people decided what is priceless and what is worthless. When arctic furs first came out during the Wrath of the Litch King expansion, they were out of this World of Warcraft expensive. New entries of arctic furs under cut the old entries and the price fell. Then the price stabilized as the community reached a consensus about how much arctic furs are worth. Further, any player can get any item there is nothing but level requirements stopping you. No guild or player, can have undue influence on how much things cost on the auction house. The only way for them to have such power is if Blizzard granted them it. Austrians would be glad. According to them the only people that have the ability to set nonconsensual prices are those who given that power by the government, like your utilities company. This is important to gamers in a subtle way. Prestige and power are only for those who earn it. When I use to play, there was sense of fairness. All those purple items were mine and no outside force gave them to me or could take them away*. That is the basis for the Austrian School, individuals making their way through their own actions.
World of Warcraft has been used to study the spread of disease and terrorists cells. Blizzard always makes a statement that the game is never intended to mirror anything in the real world. But I see no harm in using it as a tool to harness knowledge. That is where I think Austrians would like most about WoW. It’s not a mathematical model based on perfect assumptions or a game theory scenario presented to some hapless under graduates who are trying to make up for never showing up to the class expect to pick up the syllabus. As much it is a virtual world, it’s a world populated by living people, making real choices. Austrians and their opponents could delve into this world both as players and as observers. This is one of the reasons why I think games are so important. They are as aloof as our imaginations can float them but anchored by our mortal flesh and blood.
At the end of all this, you might ask, “what are your opinions of Austrians and World of Warcraft?” I can say that WoW has its flaws but it’s still a great game. At times I found it cliched and filled with angry prepubescent children. But what online game isn’t these days? I don’t play anymore because of money and time constraints but it was fun while it lasted. As for the Austrian School, I can confidently tell you that I don’t know. One-hundred percent reserve banking is very secure. But it doesn’t allow for the multiplier effect of loaned money, when you loan someone money that guy buys something from some guy who takes that money to buy something else… etc. The gold standard is to a large extent self regulating but if we suddenly switched over to it there would be chaotic deflation. Finally, a market place without regulations is like sitting in a room with a strange dog, it might bite you, it might not. And in the end no economist can really tell you how much things should cost. It might be labor involved, scarcity, desirability or myriad of other things. That’s why I say, play some WoW and read some Human Action and decided for yourself.
*I know people can buy characters but thus far I haven’t met or heard of anyone meeting a player that bought their character. Where’s the fun in that?
**If you want to learn more about Austrian Economics vs Everyone else check this out