Why the Greek government could soon be taking tips on its economy from Diablo

Steve Dinneen
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How much can you charge for something intangible? Rather a lot, it seems. Games manufacturer Blizzard yesterday launched a real money Auction House for its hit title Diablo 3, meaning you can sell the stuff you find on the charred corpse of a ghoul for actual cash, that you can spend in the real world, on genuine, tangible stuff. That is, if you still have either the energy or the inclination – killing ghouls can be hard work.

The Auction House is already packed with gamers listing their virtual swords and shields at the maximum $250 price. Yes, $250. Two hundred and fifty dollars. Even within the insular framework of the gaming world, it is safe to say that’s pretty obscene.

The digital economy, though, is evolving before our eyes – and it looks remarkably familiar. At the moment, the problem is there aren’t enough reference points to properly value the available commodities. It isn’t surprising: if you were to set up an independent nation and create your own currency, you’d encounter the same thing. Imagine a country were to declare its fiscal independence tomorrow – for the sake of argument, let’s call that country Greece. How much should a loaf of bread cost? What about a plasma TV? There will be a lot of people who need bread in the short term, so opportunists wanting to accumulate lots of the new currency – I’ll call it the drachma – will try to charge a lot for it. After a while, though, competition will drive down the price of bread, while plasma TVs will remain relatively expensive – simple supply and demand. This is already happening in Diablo: a few schmucks will shell out big money for old rope, but competition is flooding in. A few rare items may end up being worth $250, but not many.

Like in the real world, clever punters will try to work out the purchasing power of the new currency – in this case cash – by looking to existing ones. In Diablo, there are two viable currencies, in-game gold and actual cash, creating an exchange rate. How much is gold against the dollar? Which will buy me a bigger axe?

The parallels with the real-world economy go even deeper. Blizzard will take either a flat $1 or a 15 per cent cut on each commodity traded, essentially establishing a system of VAT. In exchange, Blizzard, as the de facto government, will police the system and make repairs where necessary (the comparisons with Greece are running out now).

Of course, where there is taxation, a black market will emerge to try to undercut the system for those willing to take the risk (Blizzard doesn’t have the ability to throw you in jail, but it can block your account). The whole Auction House system, in fact, was developed as a way to protect against virtual bootleggers and racketeers, who hijacked previous games and created entire sub-industries dedicated to “farming” gold and items to sell for real money. In China, teams of these farmers are held as virtual prisoners, crunching games like World of Warcraft for 20 hours straight to collect items to sell to people with more capital than time.

The auction house will help to prevent, or at least sideline, illicit activity. But as with any economy, there will be winners and losers. Anyone who spent $250 on a suit of armour yesterday may live to regret their haste.

Blizzard hasn’t set up the first virtual economy – everybody has heard of Farmville, for instance – but it is among the most complex and polished yet. It isn’t a giant leap to establish a system that allows you to remove yourself almost entirely, instead investing in players who are better than you. They could even float shares in themselves and issue a dividend. Who says games are for kids?