The Ghost Iron Shuffle: An Interview with Professor Lawsky

Yoshi Burns and Gerardo Sosa
J.D. Candidates 2016, UCI Law

[Eds. Note: Gerardo Sosa & Yoshi Burns interviewed Professor Lawsky on behalf of the Entertainment Law Society for an ongoing column on professor profiles. The following is the transcript of that interview]

To those who may not be familiar with MMOs [massively multiplayer online games] or virtual economies, how is it possible for a video game to have an economy?

A lot of videogames have economies. So basically the way games, World of Warcraft for example, work is that there are many, many actual humans playing characters in the game. People want things in the game, and other people have them. You can work out some complicated trade or you could use gold, which is what you use to buy things in the game.

What are the features of the economy of this game?

You play a character and you do quests, and the quests give you a little bit of gold. You can also pick things up in the world, like ore or herbs, or you can also get items from quests. All these things give you a little bit of gold, either directly or if you sell them through a non-player character. Then if you want more gold, you can post items on the auction house, and other players can come and buy things for gold. The auction house takes a cut of the price.

Would you say the label virtual economy is a good name for currency systems in MMOs?

Yes. There’s a lot of scholarship on virtual economies.

Are there any parallel rules between these economies and the economy of a modern state? Why do these exist?

There’s definitely inflation. The way Blizzard [the company that makes World of Warcraft] handles inflation is pretty clever. First of all, there’s been massive inflation in the game. If you played early World of Warcraft, 1000 gold was a lot – so there’s been massive, massive inflation which is always going to happen as the currency in the system increases. The way WoW handles this, which is pretty smart, is that they have what’s known as “gold sinks.” These are ways to get players to spend money to get money out of circulation. For example, there are mounts [in-game vehicles] that you don’t buy from someone else–you buy them from non-player character [NPC] vendors, and the gold goes out of circulation. But there’s been massive inflation.

Is inflation in these systems harder to regulate because it’s hard to keep track of new players coming in?

It’s easier to regulate because [the company] doesn’t have any obligation to keep the gold around, like Full Faith and Credit. They can do what they want to deal with the inflation. It’s not that often that in the real world people are in a situation to buy things from the government. The government couldn’t really have a gold sink except in things like tax. Blizzard can create an extremely cool mount that, for example, has someone who does transmogrification [an in-game process to modify equipment] on it and it can cost lots of gold. People will go spend gold on that, and then gold goes out of circulation. It’s much easier to handle in-game than it is in real life. There’s also fewer transactions in the game, and the company can track every transaction and see where the money is going. It’s definitely easier to handle in-game.

There’s a whole gold-making community online, and I think Blizzard has referred to this as a not-normal use of the game. Also, inequality is also huge. The vast amount of wealth in-game is held by very few people. The average amount of gold is much higher than what most people have. I’m guessing most people have a few thousand gold. I have more than a million gold. This is going to massively skew the average. There are people who have multiple characters with a million gold on each one.

In game currencies have a great deal of value to players, either through time spent or real money spent to amass virtual wealth. Are there real life legal remedies available to people experiencing something like fraud in these economies? How about within the game?

I don’t think you need legal remedies. You just reach out to customer support.

So they would be like the judicial authority in this world?

That’s a way to think of it. If you think about what the laws are in a videogame, there are different kinds of laws. One law is the actual code of the game. This is Larry Lessig’s idea: code provides certain laws of what you can and cannot do. It’s like the laws of physics in the real world, or architecture. Separately, there are the restrictions of the Terms of Use, which is a contract (maybe, depending on the law around clickwrap). You have to follow these rules, and if you don’t then Blizzard will kick you out. They will say you can’t play the game.

Have you noticed any similarities between cryptocurrency, like bitcoins, and in-game markets, that are not parallel to the real world?

Part of the appeal of bitcoin is that Bitcoin is incredibly hard to monitor and to track. In a videogame, everything you do is tracked. Everything. Even if no human is necessarily gathering that data, it can still be stored. So there’s nothing you do in a videogame that isn’t accounted for. But the whole appeal of cryptocurrencies is that you can move money around without it being associated with you. Although, the NSA and the CIA became concerned about terrorists that were meeting or talking –

[Interviewers laugh]

This is a real thing. I’m not making this up. Some agents joined World of Warcraft and they were going in-game talking to people. They were playing World of Warcraft during work to track supposed terrorists. I know it sounds like some crazy thing I made up, but you should look that up. It’s a real thing. That really happened.

Other than the fact that the money is not real, and cannot be legally converted to real currency, what are some differences between in-game economies and real economies? Things like size, volatility, etc.

It varies server by server. Some servers are super volatile. The biggest difference [from the real world] is that, at least on my server, volume was so low that although there were a few of us who really understood the price and value of everything and were good at coming in and buying up things that were underpriced. Compared to the real world there was much less volume and many fewer people who had invested time in the economy, so it was much easier to find bargains. Things could go underpriced on the market often. You would often see a mismatch between prices and fair market values of items.

Where would you get the fair market value of these items?

From something called The Undermine Journal. It’s a website that pulls down the data from Blizzard’s API [Application Programming Interface, facilitates transfer of data] for all the realms and updates every hour. There is an add-on in the game that can take that data. The add-on I personally use is TradeSkillMaster. After some point when I’d been doing it long enough I could just look at the Undermine Journal and they would have certain things listed that were below the historic median, and I could see–that’s a good deal, that’s not a good deal, that’s just dropping in price because a new patch came out or whatever.

In the real world, there’s just too much volume and everything is happening too fast. There’s very little that’s madly underpriced. [In the game] there are so many people that don’t know the value of what they have. They’ll be out questing and they’ll be doing some old raid and some armor will drop they don’t need and they’ll put it up on the Auction House for 10 gold. But actually turns out that it’s highly valuable for transmogrification. So I’ll buy it for 10 gold and sell it for 500 gold. That’s pretty much how I made all my gold. Just buying things that were underpriced and reselling. And this is way easier to do in-game than in the real world, because there are fewer people who care and it’s not real money. I’m not aware of anywhere in the real world where things are so regularly underpriced.

 Have you been financially successful in any of these economies?

Yes and no. Given the amount of time I spend on it, I have disturbingly not been too successful. Other people were hitting gold cap [1,000,000 gold, the maximum in-game amount for a given character] way faster than me. But I mean, I’m also doing other things. That was my big excuse. It took me over a year. But I was doing other things.

How exactly have you amassed wealth?

Auctions. Almost entirely through playing the auction house. Relying heavily in the Undermine Journal to look for things that were underpriced and selling. I have also leveled up almost all the nongathering professions. I would also do this thing where—I almost don’t want to go into it—where the idea is that you buy certain things and then you craft and you disenchant [skill used to gather valuable items from equipment] the things you craft, and then you sell the things you get from disenchanting. Basically it’s arbitrage. There’s certain things, and if you take them and have certain skills that you acquire in the game you can turn them into something else and sell the other thing for more.

That sounds like production.

I did do some production because I had all these professions. I did a lot of buying ore—don’t put this in the article because it’s too boring—but you play the game so I’ll explain. I would buy ore and I would prospect the ore. I would take the prospected ore and I would either sell some of the gems or use some of the gems to craft particular necklaces and rings. And I would disenchant the necklaces and rings and sell the dust on the Auction House for a lot of money because people needed it for leveling enchanting [in-game skill]. This is a massive source of income. Lots of people know about it, but you have to have a lot of professions leveled up.

You said not to include this, but it actually sounds very interesting.

You can include it if you want. I didn’t invent it. People call it the Ghost Iron Shuffle. You can do it with Ghost Iron or you can do it with lots other ores. There are whole spreadsheets that pull down the prices of all the different things, and you can see when it’s time to buy the ore and when it’s time to disenchant. People spend way more time on this than I do. There’s all these gold making blogs that people write and it’s really hardcore.

Did you use principles from real economies in-game to get rich?

I don’t know. Buy low, sell high. That’s a good principle.

Last one, are there any lessons to be learned about the real world from these virtual economies?

There is actually a vast amount of scholarship on that– there are economists and law professors and others who actually study these economies—there is even a government white paper on the subject–so I’m far from qualified to reply.