Edward Castronova

Indiana University, Bloomington

Gold From Thin Air: The Economy of Virtual Worlds
27 minutes, 12.4mb, recorded 2005-10-31
Edward Castronova

In this PopTech 2005 session, Ed Castronova, who is considered to be at the top of a very short list of the world's leading economists on virtual worlds, discusses the relevance of synthetic world economies as it relates to, and impacts the real world. Ed encapsulates the theme of his talk as "the salience of massively multi-player, avatar-mediated communication in the world."

Ed's personable and witty speaking style easily keeps his audience's attention during the fast moving presentation. He shares some of his groundbreaking thoughts and statistical data that certainly appear to confirm his findings. During his talk, Ed compares the very lucrative game of golf and Hollywood’s movie market to the gaming industry. He discusses participation levels possible in online gaming and how that compares with Hollywood’s passive entertainment industry, movies. It would seem that unlike Hollywood’s offerings at the box office, multi-player online gaming is interactive, productive, and aggressively growing. He clearly makes a case that gaming is serious business these days.

Ed talks about a couple of games in particular and expands on the discussion by actually logging in to one of the games and interacting with one of the online players and later shows his auction room where all they do is buy and sell virtual gear and gold. He also mentions that there are hundreds of servers around the world online, 24/7. Ed also discusses how the virtual gold and gear acquired in the synthetic worlds can be, and often is, sold to other players in the real world through what is called RMT (Real Money Trades). Some people are not only willing, but also able to make these transactions, which total into the billions of dollars worldwide.

Ed pointes out that about a third of all online gamers spend more time in their virtual worlds than in the real world. He further discusses the correlation between what is going on inside the games and what's going on in the real world culturally and socially, income level wise, and more. Some players have actually stated that they live in the synthetic world, and simply spend some time here in the real world. Within these virtual worlds, they are productive and although life may not always be rosy inside the games, it is a world where players may wish to remain.

Virtual worlds can be a great incubator to see the results of political studies such as seeing how democracy plays out in a given region, as well as other educational studies. Ed shares his thoughts on commercial applications and the cost of building virtual worlds. He has some very profound things to say about synthetic worlds and what they might mean to the future for us as a species and the way we experience the world.

This talk was from the Serious Games session at Pop!Tech. The other speakers in this session were Ivan Marovic and Steven Berlin Johnson. The question and answer period can be heard at the end of Steven Berlin Johnson's talk.

Edward Castronova is an Associate Professor of Telecommunications at Indiana University, Bloomington. He is also the Director of Graduate Studies for the department. Edward obtained a BS in International Affairs from Georgetown University in 1985 and a PhD in Economics from the University of Wisconsin-Madison in 1991. During his studies he also spent several years at research institutes in Mannheim, Frankfurt, and Berlin.

From 1991 to 2004 he held U.S. university professorships with teaching responsibilities in Public Policy, Political Science, and Economics, specializing in value measurement techniques for the difficult area of income redistribution programs.

Beginning in 2001, he began applying these value measurement techniques to another difficult area, the economies generated within online video games or "synthetic worlds". Edward's eureka moment came when he discovered that these economies had already become huge. His initial paper reporting these findings, "Virtual Worlds", continues to be one of the most influential works of economics on the net, with over 30,000 downloads at the Social Science Research Network as of May 2005. In 2003, Edward co-founded Terra Nova, a weblog about synthetic worlds, and wrote The Right to Play, arguing for special legal treatment of synthetic worlds. His book, Synthetic Worlds: The Business and Culture of Online Games, is expected from University of Chicago Press in Fall 2005.

Edward also consults regularly on the implications of synthetic worlds with leaders in business, government, education, and software design.

Edward is married and has a son. He was born as Edward Bird but changed his last name at his marriage on December 31, 2000.


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