The Economy of Second Life

by F.

The Economist devotes a few pages to Second Life:

Second Life…is not a game. Admittedly, some residents—there were 747,263 as of late September, and the number is growing by about 20% every month—are there just for fun. They fly over islands, meander through castles and gawk at dragons. But increasing numbers use Second Life for things that are quite serious. They form support groups for cancer survivors. They rehearse responses to earthquakes and terrorist attacks. They build Buddhist retreats and meditate.

Many use it as an enhanced communications medium. Mark Warner, a former governor of Virginia who is considered a possible Democratic candidate for president in 2008, recently became the first politician to give an interview in Second Life. His avatar (also named Mark Warner) flew into a virtual town hall and sat down with Hamlet Au, a full-time reporter in Second Life. “This is my first virtual appearance,” Mr Warner joked, “I’m feeling a little disembodied.” They then proceeded to discuss Iraq and other issues as they would in real life, with 62 other avatars attending (some of them levitating), until Mr Warner disappeared in a cloud of pixels.

Some stratch their heads at the amount of commerce in Second Life and wonder WTF,

[b]ut “there’s actually no economic puzzle in this; all kinds of things derive their economic value only from the realm of the virtual,” says Indiana University’s Mr Castronova. The American dollar, for instance, is virtual (aside from the value of the paper used for the bills) in that it requires consumers to have faith in its worth. In the context of online games, virtual economies much bigger than Second Life’s have existed for years. Many people in poor countries, called “gold farmers”, play games such as “World of Warcraft” professionally to score weapons, points or lives to sell to lazier players in rich countries. But Second Life is unique in that residents conceive what they sell. As such, says Mr Lanier, it is “probably the only example of a self-sustained economy” on the internet.

Full story here.

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