What Type of Economy is Second Life?

Salsoam · June 6, 2016

I have taken a very basic economics class in my ethics and government class this year, and I have started noticing economic systems in MMORPGs. Minecraft has a traditional system, Club Penguin has a command market system, but what does Second Life have?

I have heard from my teacher that "no real society in the world has a pure free market system" and I believe Second Life is that society, except for the fact that monopolies are impossible to develop and supply and demand doesn't exist either.

Anyone willing to discuss with me?

Pamela Galli · June 6, 2016

I would be a free market economy except Linden Lab chooses certain favorite businesses to promote -- for example, just last week, they sent an email to users promoting several businesses with items on sale on the MP.

I dont know why you say monopolies and supply and demand do not exist.

Salsoam · June 6, 2016

I say monopolies and supply and demand do not exist because a monopoly usually develops from buying out other companies.

Now, with supply and demand, all items on the market have unlimited supply, so a balance between the limited availability and the demand for a certain product don't add up well.

With monopolies, the reason someone sells their buisness is because a sum of money comes in exchange for the product/company. Because of the unlimited supply of one certain item you can sell, selling off your products and store usually isn't worth it, because now another person owns rights to a product that has unlimited supply. You'd ultimately losing money if your business is decently successful.

I hope that makes sense?

SAULGOODiE · June 6, 2016

A monopoly is the exclusive possession or control of the supply or trade in a commodity or service. How one "Usually" comes to being in a RL economy should not apply. In SL it might work a bit differently, for example a company can become a monopoly by providing a high-quality product at a low price point. Years ago the furniture market almost completely collapsed because of a singler seller/company creating low prim/low cost products that competed with everything else being sold on the market at the time. To me that would be a solid way to position a monopoly on an industry, blow all competators out of the water, you would not need to "Buy Out" any other company at all.

As for supply and demand, it is also different in a digital environment where things are not likely to be "Consumed", so you might need to bend your concepts a bit. When Mesh became a possibility, there was obviously a demand for new mesh products from avitars to houses and decorations, a demand which was then supplied by all the content creators and merchants.

Also, "All items on the market have unlimited supply" is simply false. The slightest effort of research will show that non-copy/transfer items can increase in value after initial sales, that is why the Gacha scene is so popular in SL. Limited edition "Rare" objects can develop value over time, since they cannot be duplicated in-world.

Salsoam · June 6, 2016

Would that mean that Second Life is an example of a pure capitalist economy?

SAULGOODiE · June 6, 2016

You could say that, yes. I feel as though someone at the same time could claim that Linden Labs has a Pure Monopoly on SL and the marketplace. Ever since XStreet SL and 3rd party shopping are no longer allowed (presumably to encourage more in-world shopping) and SL Marketplace, power seems increasingly on the side of the Labs as opposed to the private interests creating all the contents. Interesting questions posed for sure, I think it will take a bit more deep thinking beyond current "physical" economic definitions.

Perrie Juran · June 6, 2016

I think it is really closer to a Free Enterprise Economy.

But Second Life also has a very strong Gift Economy.

But all of it operates within the parameter of Linden Lab owning the platform. As one attorney put it, in Second Life, Linden Lab is the Law.

Salsoam · June 7, 2016

So we could say Linen Labs is the Government of the society of Second Life. So depending on how much involvement LL has, shows us how free the free market economy can be, and if SL is in fact totally free or a mixed economy.

Rhonda Huntress · June 7, 2016

Speaking of monopolies ....

Linden Lab.
It's singular.
There can be only one.

Chic Aeon · June 7, 2016

I am pretty sure I skipped "economics" in college. Sure I would remember .

That being said it would be noteworthy that quite a few high profile and extremely popular shops do NOT have a Marketplace presence at all. They rely on their products and the quality thereof rather than opt into the mainstream seller experience.

Theresa Tennyson · June 7, 2016

Salsoam wrote:

I have taken a very basic economics class in my ethics and government class this year, and I have started noticing economic systems in MMORPGs. Minecraft has a traditional system, Club Penguin has a command market system, but what does Second Life have?

I have heard from my teacher that "no real society in the world has a pure free market system" and I believe Second Life is that society, except for the fact that monopolies are impossible to develop and supply and demand doesn't exist either.

Anyone willing to discuss with me?

It's basically a latter-generation feudal system - there is a merchant class but the Crown still has ultimate control over all aspects of society. Land, in particular, is still owned by the Crown, although various Lords/Dames have been given fairly extensive control over their fiefdoms in exchange for providing forces to defend against the threat of bankruptcy (i.e. hard currency.)

Persephone Emerald · June 8, 2016

I agree that Second Life is most like a feudal system, but with a free-market economy layered on top of that. The only true monopoly is in the ultimate ownership of land, although a few merchants create items that are of high enough quality & uniqueness that they have a near monopoly on those items.

The monarch (Linden Lab) is the ultimate owner of land, which is one basis of the economy. When one leases land from LL, one can in turn sublet it for residential or commercial use, but has to continue to pay "taxes" in the form of tier to LL.

Some skills in creating items are in higher demand than others, so people who have these skills may become part of a service economy, selling their labor to others. Some items are easy to create, so they don't have much market value - e.g. standard body shapes. Others are harder to create, so they have a higher market value - e.g. mesh bodies. The most valued resource is thus complex creation skills, rather than materials, land or capitol. One could thus say the SL economy is also skill-based.

The two things that don't really figure into the SL economy are raw materials & storage space, since both are essentially limitless. Because raw materials & storage are essentially limitless, while distribution is extremely easy, there is also a surplus of free items, which throws a traditional market-based economy out of whack. Creator-merchants have to work hard to make a profit when similar items may be available for free or nearly free and when nothing is ultimately essencial for consumers to purchase. - They don't need food, shelter, land or anything they can't get for free or make themselves.

wherorangi · June 9, 2016

Theresa Tennyson wrote:

It's basically a latter-generation feudal system - there is a merchant class but the Crown still has ultimate control over all aspects of society. Land, in particular, is still owned by the Crown, although various Lords/Dames have been given fairly extensive control over their fiefdoms in exchange for providing forces to defend against the threat of bankruptcy (i.e. hard currency.)

this is pretty much it

the Lords and Ladies of the land-owning class have great powers over their tenants. Powers bestowed upon them by the Sovereign (LL)

the Sovereign is municifient in that any citizen (resident) can become and remain a member of the land-owning class, provided they pay their land taxes (tiers) on due date

the Sovereign thru the Minister of the Exchequer (Supply Linden) maintains tight control over the liquidity (M0) of the realms currency (L$). The realms currency is tied to a Gold Standard (in this case the Gold Standard is the US$). The Exchequer allows the exchange price of currency for gold (Lindex), to float within prescribed bounds known only to the Minister. The Lindex and the exchange (sale and purchase) of currency to gold is controlled exclusively by the Sovereign

the Sovereign is also municifient toward merchants. Any citizen can become a merchant and continue to be, provided they pay the Sovereign the necessary taxes. Upload fees, and in the case of the web Marketplace, sales taxes. The web Marketplace is controlled exclusively by the Sovereign

the Sovereign will not intercede in disputes between the citizens. Even in the case of robbery involving realms currency. The Sovereign will intercede in the case of robbery of Gold (US$) bc of the demands of their distant Emperor (the USA government) who has a long reach in the matter of Gold

the Sovereign's Ministers will at times (as Ministers in feudal societies do), favour some citizens over others, for reasons known only to the Minister. Favours that can be withdrawn without explanation, just as abruptly by a new Minister as they were granted without explantion by the predecessor Minister

so what is left is a market that is as free as it was in feudal society times

ChinRey · June 9, 2016

Second Life economy?

Klondyke shortly after the goldrush superimposed onto a feudal social structure.

JamesKisson · June 12, 2016

Linden Labs is THE BANK..they hold the morgages, the lands notes, ultimately they get the rents from the stores....ALL ROADS and paper trails lead to Linden Labs, with a small amount (in comparrision) of profilts landing in individual's pockets. Its like having one big Bank Of America ruling the *world* SL.

One Bank, one goverment and they are one in the same.

Hope you post whatever you write on the topic...would make an interesting read.

Codex Alpha · July 5, 2016

Everything prior being said to this, the Second Life economy is open to all with minimal starting requirements.

Unlike RL, with red tape, licensing, accreditation, and other bar-raising measures to keep the majority of people out, anything you can attain in SL is based on your creativity, innovation, and originality and the skills you develop to communicate them.

At one point I could only use prims in SL, and dreamed of a day I could enter the world of 'mesh' and start designing my own stuff.

Having no income for an official education in 3D Modeling, I instead set out to use the amazing world library called the Internet to learn and implement anything I wanted to, now I'm on my way contributing content to SL myself beyond simple blocks. Everything I create in SL have been self-taught, and with guidance from other helpful SL creators.

Some things still exist - such as not being able to afford land rentals or ownership, but as I progressed I could fund such efforts creating an income selling content in SL.

SL has been good to me that way, and the only obstacle to my success is how I utilize the opportunity.

Unlike RL, where there are many things that can stop you, SL is open to anyone interested.

Pamela Galli · July 5, 2016

entity0x wrote:

Everything prior being said to this, the Second Life economy is open to all with minimal starting requirements.

Unlike RL, with red tape, licensing, accreditation, and other bar-raising measures to keep the majority of people out, anything you can attain in SL is based on your creativity, innovation, and originality and the skills you develop to communicate them.

At one point I could only use prims in SL, and dreamed of a day I could enter the world of 'mesh' and start designing my own stuff.

Having no income for an official education in 3D Modeling, I instead set out to use the amazing world library called the Internet to learn and implement anything I wanted to, now I'm on my way contributing content to SL myself beyond simple blocks. Everything I create in SL have been self-taught, and with guidance from other helpful SL creators.

Some things still exist - such as not being able to afford land rentals or ownership, but as I progressed I could fund such efforts creating an income selling content in SL.

SL has been good to me that way, and the only obstacle to my success is how I utilize the opportunity.

Unlike RL, where there are many things that can stop you, SL is open to anyone interested.

What does this account of how you learned to make content have to do with a discussion about what economic system(s) operate in SL?

Codex Alpha · July 5, 2016

Pamela Galli wrote: