Question: You’ve proposed the creation of an academic center for the study of synthetic worlds. What would such a center try to accomplish?
Castronova: It would try to develop some sense of the policy options in this space, try to parse out the opportunities and the risks. It would develop educational applications. It would develop the following research idea: If we built a series of comparable synthetic worlds, couldn’t we unleash slightly different policies in each one? It seems to me that this would be an unprecedented opportunity to study human behavior at the social level. No one has ever been able to study such things before, not in this way, not using the tried-and-true experimental methods of the natural sciences. Imagine how a few well-designed experiments about socialism in 1870 might have affected world history. We have a lot of pressing questions about societal behavior right now—human population response to disease, for one example; community response to natural disaster, for another. These things could be directly studied in synthetic worlds; without them, all we have is pure theory, and historical data (in which policy causality is basically impossible to untangle). The idea would cost $20 million to $50 million, but it would also dramatically improve business as usual in a large chunk of the university
This snippet of an interview with Edward Castronova raises what I believe to be one of the most important points in the future of social science. Virtual worlds as complex as Everquest will allow true experimentation in a way that was never before possible. Social sciences will actually become sciences, based on empirical data and testable hypotheses, not suppositions and crude polling methodology. Public policy can be tested before it is implemented. Economic forecasting and modelling will improve to the point where the Federal Reserve can maintain the US economy at its optimal point. Recessions and inflation could become distant memories. While certainly ambitious, Castronova's proposed institute could have so many applications that it more than justifies the price tag.
Personally, I'd love to get involved in a program like this. In particular, I think there's an interesting macroeconomic study that's waiting to be examined. Thus far, every virtual world's economy basically revolves around perpetual currency creation. Every player can go off and slay whatever monsters inhabit that particular realm, and are rewarded either directly with currency, or with some object that is easily converted into currency. The result, of course, is inflation. In order to combat the perpetually collapsing value of the realm's currency, the games' designers have implemented a variety of money-sinks which, if attractive enough, will entice the players to spend there, thereby reducing the realm's money supply and keeping inflation in check.
My suggestion is as follows: why not create a world where the creation of currency is far more difficult? Instead, implement a banking system where currency can be lent and borrowed. Initially there would probably have to be just one central bank, controlled by the simulation's moderators. Over time, though, wealthier participants could create their own banks, set their own interest rates, and succeed or fail based on the whims of market forces. If enough complexity is acheived, a reserve banking system could be implemented, and then both fiscal and monetary policy could be tested in a laboratory environment. Experiments could be repeated and modified in order to determine the best course for the real Federal Reserve to take.
Perhaps this type of simulation is too complex for the time being. I suspect, however, that it's not. Too bad I have neither the time nor the programming skills to put something like this together...
