Learning about basic economics from games isn't really anything new. If you were in elementary school in the '80s, there's a good chance you played Lemonade Stand on one of those ubiquitous Apple IIs. And while they were once the exclusive domain of RPGs and strategy games, practically every new game these days has some sort of market-like system for buying upgrades and selling unwanted items. Sometimes it's as basic as Super Mario Galaxy 2 asking players to trade in collectible star bits for extra lives and new levels, and other times it's as complex as the resource shortages and surpluses of the Fable games that encourage you to buy low and sell high for a profit.


But undoubtedly the best way to learn about economics through videogames these days is by following the markets in MMOs. While single-player games offer structured simulations of markets, MMO markets reflect the needs, trends, and irrational impulses of real people. The people trading in these markets are working to make a profit on the real-life time and energy they've put into the game. They have a stake in things.

The heart of one such market is the Auction House in World of Warcraft, where players go to buy and sell any of the game's thousands of items. There you can find not only items that are immediately usable, like weapons and armor, but also items that don't have much utility on their own and instead serve as materials for creating other things. Crafting raw materials into usable items requires players to have special skills; likewise, gathering those raw materials requires its own set of special skills. That intersection of gatherers and creators in a place where they can determine their own prices creates a free market and a powerful, hands-on demonstration of the principle of supply and demand.

The concept of supply and demand is undoubtedly economics' most well-known contribution to society and is a cornerstone of the field of microeconomics. It's a term that a lot of people will recognize, but not everyone will be able to sketch out what it really means. Talk to most people, and they'll tell you that if there's a demand for something, someone will supply it, like bad reality TV or low-brow summer comedies. Talk to anyone who has spent much time around the Auction House, however, and they'll have an intuitive grasp of the idea.

At its heart, supply and demand is about finding the intersection, or equilibrium, of how much it costs for a seller to provide a product and how much of that product customers are willing to buy at a given price. Consider "souldarite," one of the minerals in World of Warcraft. It can only be extracted by characters with the mining ability from just one area in the world. It is used by characters with the blacksmithing ability to make certain types of armor. That armor can in turn be sold to other players in the Auction House. The miners extracting the souldarite have to determine how much it will cost them to get different quantities of the mineral against how much the blacksmiths are willing to pay for it. Is the souldarite in an area that's dangerous for that character? Do they then need to spend more on healing supplies? What about on inventory space to carry more souldarite pieces? The blacksmiths, meanwhile, decide how much they can pay for souldarite based on how much profit they can expect to get from selling the armor they make with it to other players. The cost that the miners are willing to incur and the price that the blacksmiths are willing to pay determine just how much a piece of souldarite is sold for.

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