Diablo 3 and economics

Now that it’s been online for a while, here’s my latest column for the BBC (only available to non-UK readers on BBC Future itself), delving into an ongoing minor obsession of mine: virtual economics, and what’s happening in one of the world’s hardest-working fields of fun.

I only ever deleted one game from my computer because I was playing it too much, and that was Diablo 2. It was the early 2000s. I was supposed to be writing a thesis, but instead I found that I was pouring my evenings and then my nights into exploring virtual dungeons in search – and this was the root of its grip – of better and better equipment for my in-game character.

The deeper into the game you got, the more powerful the items became. Each foe you vanquished – and I hacked and slashed my way through tens of thousands – was like a box containing hidden delights. The moment it was dispatched, you got to keep whatever came out: magical armour, weapons, in-game gold, or perhaps a vanishingly rare rune that only one in ten thousand foes carried.

In one sense, all this was utterly absurd. In another, though, playing Diablo 2 was perfect. At a time in my life when many things felt formless, it was like coming home each evening to the perfect job. I knew the rules, I was good at playing, and I got my rewards: better and better items, a grindingly slow but steady progress towards higher and higher levels. Writing a thesis couldn’t compete. Hence the strange joy of playing. Hence the deletion.

Now, a dozen years later, I’m facing a version of the same dilemma all over again. On 15th May, the next game in the Diablo series (called, with marvellous economy, Diablo 3) was finally released after a dozen-year gap. An itchy voice at the back of my head is begging me to buy it – but, among other things, I have a new book to finish writing. So I’ve made a deal with myself: I’ll finish the book, then I’ll buy the game. Then, a few months later, I may well find myself deleting it.

Global video-gaming has grown up considerably since the millennium – and what intrigues me most about Diablo 3 is the decision by Blizzard Entertainment, its creators, to take a bold step beyond the in-game item questing of its previous incarnation. Because you can actually earn real money by playing Diablo 3. In fact, you might even be able to treat it like a job – if you don’t mind your place of work being a demon-stalked purgatory. All you need to do is sign up and start playing.

Specifically, what Diablo 3 has set out to do is to bring inside the official realm of the game one of the shadowiest areas of modern economics: virtual item sales between players. And to understand this, it’s worth looking first at the most famous video game in the world – also, not coincidentally, created by Blizzard Entertainment – World of Warcraft.

Almost eight years after its launch, World of Warcraft still boasts around ten million paying players across the world. And over their playing careers, a good number of these players will have indulged in something that’s against the game’s terms and conditions, but that has proved extremely hard to stamp out: they will have paid other people real-world money in exchange for in-game assets, like virtual gold or weapons.

The logic is simple enough. As a relatively affluent European gamer, I may have little spare time, but be very keen to own a powerful in-game character. This creates a market niche for someone else – probably in a less affluent country – to invest some serious effort in playing the game, and then selling the fruits of their labour to me. Indeed, given the sheer number of players and the level of enthusiasm Warcraft attracts, it has even made economic sense for some people to organize full-time “gold-farming” – where dozens of workers in a kind of digital sweatshop log hundreds of hours at company computers in order to earn virtual assets and then sell these on the global “grey” market.

At its peak, this kind of “farming” was a multi-million dollars business – and a bothersome source of scamming, spamming, and potentially game-ruining distortions of virtual market forces. In its latest title, then, Blizzard has taken the logical next step – and brought the entire business in-house.

Enter one of Diablo 3’s boldest gambles: a “real money auction house”, where players can sell to each other almost every kind of virtual goodie it’s possible to earn through hours and days of dungeon-crawling and baddie-bashing. At the time of writing, a week after the game’s release, the auction house’s doors had yet to open – but what’s promised is a service allowing players freely to sell the spoils of war to each other at any price they like, with Blizzard taking a 15% cut (or flat fee on some items), plus a similar percentage again for those wishing to “cash out” their profits via PayPal.

The service won’t be available everywhere in the world, and using it is entirely optional – but it’s likely to have at least hundreds of thousands of users. In Blizzard’s words, it’s designed to provide “the foundation for a player-driven economy that’s safe, fun, and accessible to everyone” – an aspiration that will be music to many ears after years of gold-purchase spamming in World of Warcraft and its ilk.

What Diablo 3’s auction house also represents, though, is a fascinating fiscal experiment in its own right – not least because it explicitly acknowledges something that has been implicitly true within online gaming for a long time: economics is an awful lot of fun.

Indeed, economics isn’t just “fun” like football or kiss-chase. It’s good, hard, complex, peer-to-peer fun, in the way that work ought to be but most often isn’t. As anyone who’s made more than a few purchase on eBay will know, electronic auction houses offer labyrinthinedelight once you’ve learned their language of bids, deadlines, quests for rare purchases and sudden discovery.

Match this with the option of earning your assets by teaming up with other players and slaughtering picturesque hordes, and you have a seriously entertainingbusiness proposition. Not to mention the pleasures of making a sale and learning to read the market. Does it look like demand for high-end barbarian swords is rising? Buy now, hoard your product, then sell when prices hit their peak.

So far as Blizzard Entertainment themselves are concerned, potential problems abound that will make compulsive viewing for anyone interested in the future of digital assets: from attempts at exploitation and monopoly to the security of users’ accounts and the black market’s ability to undercut official sales. Then, of course, there’s the nebulous realm of addiction, work-life balance, and the question of just how much time it’s healthy to spend waving around unreal swords.

To me, though, what’s most interesting is the near-seamless alignment of play and labour a system like Diablo 3’s represents – and the willingness of all involved to pour time, money and belief into assets that have no existence beyond the magic circle of the game.

In this respect, the fantastical prizes of a game like Diablo 3 are very much like money itself – which is only as real as collective belief, and just as meaningless if this fails (ask a Greek if you don’t believe me). If you need a lesson in 21st-century social realism, in fact, there’s a lot to be learned from video games. There are few things we humans like more than the serious business of play. And of all the games we play, there’s none more absurdly serious than money.