Reality is a Game

Game thinking from Adam Clare

Tag: Economics(Page 1 of 3)

EVE’s Exquisite Economic Equilibrium

Not too long ago a single item almost brought economic havoc to the MMORPG EVE Online and the makers of the game, CCP, did what they had to do to ensure economic stability. A player found a brilliant way to game the trading algorithms used in the game and got himself a ton of in-game cash (ISK). The PA Report explains what happened.

The ship contained that “useless” item, but the game thought it was worth half a billion ISK. “You get loads of loyalty points, and you cash those in for something good. He completely manipulated the market, and it started having this massive effect on our economy,” Lander said.

This got me thinking more about how the economy of EVE allows for perfect monitoring of transactions and great statistical analysis. Working on a digital economy must be every economists dream as the irregularities and lack of tracking makes real-world economic data hard to capture (and trust).

Dr. Eyjólfur Guðmundsson is the economist in charge at CCP and he sat down with RPS to talk about the general economic policies of EVE Online. They talk about game design issues and how the economy is interconnected with the game play experience; particularly how they’ve learned from prior games.

Dr Eyjó: So with ‘mudflation’, [the term] relates to the old MUD games – multi-user dungeons – that were just text-based games. If you were coming into the game as a new player after other people had played it for a long while, you would never catch up to them. It was just ridiculous because it just kept growing and growing and it was difficult to get there. In EVE we are very much aware that new players need a path in order for them to participate – they don’t need to be the best right away – but they need to participate in the game. So we designed the game in such a way so that it’s beneficial for old players to get new players with them because they can use them as scouts or they can use them as foot soldiers in bigger battles. And that’s really why we don’t think we would have ‘mudflation’ in EVE.

The interview also goes into how how things in game are inspired from the physical world, particularly the economy of Iceland (just look at ISK and ISK), and the economic hilarity that occurred in the past decade:

Dr Eyjó: So, in 2004 to 2007 Iceland was able to acquire a lot of international loans from foreign countries. A lot of money. Lehman Brothers, Deutsche Bank, they were all willing to lend Icelanders Euros or Dollars and different kinds of currencies, because everybody believed that Iceland would just flourish forever. And the money supply in Iceland – because that’s money from the outside pumped into Iceland – just sky-rocketed. And having a sky-rocketing money supply means there’s more money in the system but there’s still the same economic value. So the joke that I was making was very simple: That system blew up. And they should have known it was going to blow up. EVE has a lot of ISK in it because of ten years of history. A lot of ISK in EVE can mean a hell of a lot coming to Dust. And we don’t want that money to move too fast into the [new] game because it will ruin the economy of ‘slow growth’, so we have to know the balance before we completely open it up.

We Behave Irrationally if We Don’t Understand the Rules

Game theory is not the same as game design theory but the similarities are striking when they happen. This month a paper has been published on game theory which can help explain some aspects of what happens when a game has complex rules and systems. When we can’t understand a full ruleset we make irrational decisions.

In Complex dynamics in learning complicated games by Tobias Gallaa and J. Doyne Farmer they show that by running gaming simulations with players they can expose non-rational behaviour.

When stuff like this comes out it boggles my mind that people can still stand up in favour of the Chicago School which banks on the idea that people always make rational decisions. This doesn’t even explore what is meant by rational.

Here’s the abstract from the paper:

Game theory is the standard tool used to model strategic interactions in evolutionary biology and social science. Traditionally, game theory studies the equilibria of simple games. However, is this useful if the game is complicated, and if not, what is? We define a complicated game as one with many possible moves, and therefore many possible payoffs conditional on those moves. We investigate two-person games in which the players learn based on a type of reinforcement learning called experience-weighted attraction (EWA). By generating games at random, we characterize the learning dynamics under EWA and show that there are three clearly separated regimes: (i) convergence to a unique fixed point, (ii) a huge multiplicity of stable fixed points, and (iii) chaotic behavior. In case (iii), the dimension of the chaotic attractors can be very high, implying that the learning dynamics are effectively random. In the chaotic regime, the total payoffs fluctuate intermittently, showing bursts of rapid change punctuated by periods of quiescence, with heavy tails similar to what is observed in fluid turbulence and financial markets. Our results suggest that, at least for some learning algorithms, there is a large parameter regime for which complicated strategic interactions generate inherently unpredictable behavior that is best described in the language of dynamical systems theory.

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