Pioneering Economist Argues Diablo III's Auction House Removes Distinction Between Real Money & Virtual Gold

Unsurprisingly, economist Edward Castronova (who practically invented the study of virtual economies) has a very interesting review of Diablo III's real money auction house. If I'm reading him right, he's arguing that Blizzard's new service has effectively removed any meaningful distinction between real money and virtual gold:

The real money auction house erases any line between the gold piece and the dollar, as far as regulation goes. When I buy with dollars, a popup says "Sales tax may be charged on this purchase." Buy the same thing with gold pieces, no popup. Why not? What's the difference? ... If the state were to extend its regulatory scheme from dollars to gold pieces, what could Blizzard say in opposition?

Not sure what they'd say either. Especially if, as I wrote awhile ago, Diablo III's virtual economy transformed the real one.

Comments

[Galathir Darkstone]

Blizzard would probably say the same thing any other virtual world with an Exchange to real-world currency does: that their has no value outside the game environment. Same with Linden Dollars, IMVU Credits, BitCoins, etc. Is this a valid argument? I would imagine you could find people to debate from either side. There are certainly those in Governments around the world that want to tax virtual currencies already, but until I can deposit my gold coins in a bank and spend them to buy groceries, I certainly see a distinction. Of course the flip side is that while most Treasuries start out issuing currency based on hard assets, we've seen the 'evolution' of many national currencies that are little more than paper based on the well-being of those nations... which certainly begs a comparison with digital currencies that are based on the well-being of the digital environment they originate in. Perhaps in the end it really comes down to this: Can I hold anything in my hand that is worth X number of D3 gold coins? Linden bucks? IMVU credits? No. In fact, those numbers only exist in the virtual worlds of their origin. Whereas I can certainly hold Dollars, Pesos, or Yen in my hand... even if my local grocer might look at some of them only to shake their heads.

[Galathir Darkstone]

*That should be: "that their (currency) has no value outside [...]"