Economic Principles Are Real, Even When Reality Isn’t

Banks in Second Life are offering unrealistic interest rates, according to MIT’s Technology Review, and the entire economy of that pseudoworld could crumble as a result.

Apparently economic reality trumps virtual reality. That’s important and interesting, because “banks” in Second Life aren’t regulated yet - although users expect their results to be translated into real-world dollars.

Economist Robert Bloomfield tells the Technology Review that everything will be copacetic:

In spite of the turmoil in Second Life’s financial sector, Bloomfield says, he thinks the game’s economy will survive as long as there is continued growth in the demand for virtual goods and services, as well as for real services, such as programming in-game systems.

But where virtual reality goes, virtual regulation is not far behind. As the Technology Review notes:

“A Second Life Exchange Commission is now forming, and it’s working to establish standards for in-world businesses. In addition, the heads of two of Second Life’s major stock exchanges, the International Stock Exchange and the Second Life Capital Exchange (formerly AVIX), recently agreed to allow Bloomfield to analyze their data and release the types of reports that are routine for real-world exchanges.”

Every economy is a “virtual” economy in some sense, since currency is a symbol.  So it makes sense that the same economic principles apply in cyberspace, and that there’s the same need for regulated commerce.