Why Economists Love Video GamesS

The billion dollar business of selling virtual goods in free-to-play games is more than just a financial windfall for companies like Playfish. A controlled economy with millions of active participants gives economists an entirely new way to model consumer behavior.

In Newsweek article titled "Money for Nothing," Playfish founder Kristian Segerstrale explains how a virtual economy like the one generated in that company's flagship title, Pet Society, can give economists access to more pure consumer behavior data than was previously available through traditional studies.

"The data is always limited, and once you get hold of it there are tons of reasons to mistrust it," Segerstrale says. In virtual worlds, on the other hand, "the data set is perfect. You know every data point with absolute certainty. In social networks you even know who the people are. You can slice and dice by gender, by age, by anything."

Segerstrale uses the example of taxes. In a traditional economy you can generally determine how consumers react to a tax increase, but knowing exactly who is reacting is tricky. The data is far too generalized.

In a virtual world, however, all of the data you need is at your fingertips, and the population is entirely manageable. You can increase taxes for a specific demographic to gauge their reaction.

"You can conduct any experiment you want," he says. "You might discover that women over 35 have a higher tolerance to a tax than males aged 15 to 20-stuff that's just not possible to discover in the real world."

I liken it to an ant farm, the toys that kids once used to study how a colony of ants works together to build and maintain their habitat. It's essentially the same sort of thing, only with much more control in the hands of the farm creators.

This is yet another example of how gaming has changed the way we look at the world in a positive way. By generating compelling virtual worlds and selling virtual goods, a company like Playfish isn't just generating revenue, but data that could have a lasting effect on how we study the interaction between people and their money.

As Newseek's Daniel Lyons points out, the subset of people who play such games might not accurately represent the rest of the population, but when you've got 20 million people logging into Pet Society every day, I'd say you're getting pretty damn close.

Money for Nothing [Newsweek]