The Entangled Virtual Economy

Robert Cripps

Major Professor: Richard E Wagner, PhD, Department of Economics

Committee Members: Christopher J. Coyne, Carlos D. Ramirez

Online Location, Online
April 01, 2022, 10:00 AM to 12:00 PM

Abstract:

This dissertation discusses virtual environments, their dramatic increase in use in recent decades, and the implications for economic and legal activity. 

Chapter 1 discusses how virtual environments are places of increasing amounts of human activity in type, number, and complexity. Entire new economies are being created, communities are forming, new social norms within and across virtual environments are emerging. Property laws are evolving, real-world governments are interacting with virtual worlds through taxation and legal enforcement. Recently Robux outperformed the Ruble, and at one point an Everquest server equaled the GDP of Bulgaria. An increasing number of people are earning their living online, interacting with digital services and items. This paper explores the implications for economists of this new area of human activity. 

Chapter 2 explores the economic theory of virtual property rights, using Hernando de Soto’s theory of “Dead Capital,” discussing the ways in which people benefit from having intentional and legal title of their virtual property. (U) When people own either their real or virtual property, they can sell it, borrow against it, use it to make a living, and pass it to their heirs. This chapter also discusses the evolution of virtual property - from gaming console cartridges in the 1970s, to leased property in the 2000s, to Web 3.0 and individual ownership of virtual goods - and the economic incentives that caused movement in that direction. 

Chapter 3 discusses potential demand for real-world governmental oversight of virtual spaces and transactions. Unsavory and criminal activity have always occurred online in virtual spaces. Those spaces have never been as popular, nor as high-stakes as they are today, due to the new technology of virtual ownership and the increased amounts of money being spent in these environments. Because of this popularity and increased stake, demand for what users see as predictable, universal, and fair rules of governance surrounding their property will likely increase. The paper explores the sources of some of the likely demand, and some potential difficulties in implementation.