Do Video Games Teach Economics?

GalagaMany teachers know that encouraging interest in the dismal science can be difficult because students often find economics abstract and, well, dismal. It’s basically a truism then that if economists want to engage students, we should use interesting and relatable examples. And more often than not, this means mining pop culture for teaching moments from music, TV, and film. Along these lines, I suggest economists begin to look to video games for inspiration as well.

In the last few years, there has been an explosion of interest in the economics of the video game industry, and especially in the digital economies that emerge within games. Whether we look at social interaction and trade, or money and inflation, it’s obvious that as games become more complex, they increasingly illustrate the principles of economics. The most common examples come from Massively Multiplayer Online (MMO) titles like World of Warcraft and EVE Online, but I think games incorporate economic ideas in more fundamental ways as well.

I’ve discussed in a recent article how games imply economic behavior, and how making decisions within a game highlights the fundamentals of human action. The basic idea is that virtual worlds, like the real world, present us with a series of choices. Games impose digital scarcity, obliging players to weigh the benefits of different courses of action, make tradeoffs, and incur costs.

Good examples are found in the role-playing game (RPG) genre, where players face tough choices between different specializations and skill trees. To take one universal example, brute strength often comes at the expense of nuance in magic or persuasion, and alternative skills are not equally useful. Note also that obliging players to make difficult decisions highlights the opportunity cost of choice, not the money cost. Sure, you might use a lot of XP or in-game currency to buy skills, but gamers are intimately aware that the true cost of their choices are the skills they forego. In this sense, acquiring virtual skills is not unlike acquiring human capital; in fact, in some cases, they may even be the same thing.

Games also encourage players to think entrepreneurially: to take risks and sacrifice scarce resources in order to profit. Entrepreneurs specialize in a kind of creative problem solving in the marketplace, and gamers do much the same in the virtual sphere.

Choice, cost, and entrepreneurship are just a few of the economic concepts that games illustrate. But there are many more ways—real and metaphorical—to bring gaming into economics, and vice versa. Economics teachers and researchers should keep an eye on the gaming industry, which seems likely to continue to play an important role in pop culture, and therefore also in shaping popular ideology.

Comments

  1. I’ve noticed some amusing things in discussions with MMO game players:

    * In-game inflation can run wild and threaten the game’s attractiveness as the game is expanded and new rewards are distributed with inadequate limits.

    * The difficulty of finding market information with increasing number of users gives rise to arbitrage opportunities.

    * Game rules can differ from realistic world. That may teach the wrong economic concepts within particular games.

    * Games could collapse (becomes boring) under it’s own weight as it grows if economic incentives have been distorted.

    * To prepare to scale up, game economics should be worked out before development and launch, along with technical issues.

    * Users have not yet noticed most games thrive without taxes. They either assume running computer does not cost much in real life, overlooked security, incremental development, or that costs have been covered in upfront purchase.

    * As competition for realistic games grow, Austrian economists may be in demand for being able to help explain trading, inflation, cycles, etc.

  2. I know city builder games, like SimCity, tend to have a blighted reputation amongst libertarians, but if you think of them along the lines of running a company or private city, they can teach the importance of scarcity. RPGs are excellent at that, and also tend to focus on the division of labour.

    Then you have games like Capitalism III, which are explicitly oriented at imparting an understanding of how firms under competitive conditions function.

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