The many uses of Second Life
Last year the World Bank's Doing Business team released its annual report in Second Life. For those of you without the appropriate level of nerd credentials, Second Life is an online virtual community that allows users to create avatars and interact in constructed virtual worlds. Doing Business took advantage of this platform to reach some 700 "residents" of Second Life and another 1,000 audio listeners. (The DB team's Dahlia Khalifa sums up the event nicely in a post on the Doing Business Blog. Also see below for a video of the event.) As it turns out, the Second Life event continues to generate interest, and DFID's quarterly journal Developments dedicated a story to the role of online communities in promoting development. According to one non-profit cited in Developments:
...Second Life offers an unprecedented opportunity for global meetings which are not just interactive and participatory, but which are also carbon neutral. And the UN is watching closely to see if...Second Life provides a domain where non-profits and NGOs might promote campaigns and share ideas as never before.
Developments also quotes Dahlia Khalifa on the benefits of Second Life:
I think Second Life today offers a great chance to reach out globally, like we never have before.
So Second Life offers two potentially important benefits to the development community - reducing the carbon footprint of conferences and increasing the global reach of initiatives like the Doing Business report. Developments speculates about a third possible benefit. Second Life is also home to a virtual economy in which avatars truck and barter in Linden dollars - a virtual currency. But these virtual dollars can be cashed in for real dollars, and apparently one enterprising individual, a German user named Ailin Graef, managed to rake in a million US dollars. Perhaps Second Life could offer citizens of developing countries opportunities to earn a real living through their online activities - contingent, of course, on having access to sufficient bandwidth.
I'd like to suggest a fourth - and perhaps even more important - opportunity represented by virtual worlds like Second Life. One of the questions that Dahlia Kahlifa received during the Second Life event really struck me:
One of the most interesting questions I got from the audience was whether or not Doing Business benchmarking methodology could be applied to the economy of Second Life. I had to think about that one for a few seconds. My answer was that yes, in principle, it could. To the degree that economic activity in Second Life and across its various islands is regulated by laws and procedures, it might be possible to rank where it is easiest to do business.
One of the biggest problems faced by development economics is that it is virtually impossible to test out macroeconomic policy prescriptions. Sure, we can compare, for example, different reforms carried out in the transition countries to try to figure out what was the best way to privatize state-owned enterprises, but at the end of the day we can never be sure that one policy was better than another. Did the Czech Republic's economy do better than Bulgaria's because of its reforms or because of initial conditions? Would the reforms implemented in the Czech Republic have played out the same way as they did in Bulgaria? There's no real way to answer these question with finality - at least not in the same way as microeconomic questions, which are made somewhat more pliable through randomized evaluations.
Virtual worlds offer a very partial remedy to this problem. I could imagine certain macroeconomic policy prescriptions being tested out in virtual worlds to see what the end effect looks like. One of the real moneymakers in Second Life is real estate - virtual real estate commands real money. Perhaps a virtual world offers an opportunity to test out ways to deal with asset bubbles a la the subprime crisis. Two researchers have also looked at the outbreak of a disease in an online gaming world to try to understand how people react to an epidemic. As they put it, "appropriate exploitation of these gaming systems could greatly advance the capabilities of applied simulation modelling in infectious disease research." Perhaps even Doing Business reforms could be tested to see what kind of outcomes result from particular reforms.
Update:
As it turns out, there is already a website called Metanomics dedicated to the issues raised in this post. I should have known!
Video of the Second Life Doing Business Event:
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That would be a fascinating way to use Second Life. I wonder if you could also test behavior change interventions that way.
Posted by: Alanna | Jul 23, 2008 1:56:18 PM
Hmmm. Very clever, but I doubt real life incentive structures carry across (apparently) similar Second Life settings. People in SL talk about "Monopoly money" (as in the game). The Ailin Graef/Anse Cheung case was back in 2006/early 2007, when SL was experiencing a bubble of its own. That was terminated by an article in Wired in summer 2007 (titled "How companies are wasting billions in an empty Second Life). The Linden dollar plunged, losing 90% of its value. Hey, no big deal. We're in SL to learn, connect, explore, perhaps even build a piece of future. You can make some money out of it, but only by selling SL activities to some rich guy who does not understand them. If I were a macroeconomist, I would steer well clear of that.
Posted by: Alberto Cottica | Jul 24, 2008 3:48:39 AM
Alberto, thanks for the comment. I agree that incentive structures are a critical issue, and in Second Life they're probably going to be so different as to not really tell us anything useful.
However, I imagine that as technology improves, macroeconomists might have the opportunity to design virtual worlds specifically for the purpose of testing out hypotheses. This would require figuring out ways to create incentives that mimic the "real" world. Obviously, the usefulness of any model would depend on how well these incentives could be constructed. But I should point out that behavioral economists are already carrying out such experiments - they already gather a couple dozen people in a room and test out hypotheses about things like risk aversion with small sums of money. A virtual world offers a much larger scale to carry out similar experiments.
And just to clarify a little further - I don't think that such experiments would provide a final answer to any question. But they could be useful in identifying as yet unnoticed or unappreciated issues, as I believe was the case in the study by the epidemiologists.
Posted by: Ryan Hahn | Jul 24, 2008 8:10:48 AM
Very interesting. I wonder if IFC could create a virtual advisory services facility there. It could be an accessible warehouse of its accumulated materials and knowledge!
Posted by: David Lawrence | Jul 24, 2008 11:51:13 AM
I was recently told by a co-worker about a psychology study that she helped out with through the local university one summer.
The subjects of the study were patients with brain injuries who were left unable to interact well with the world because they could never remember where they were going.
The study used the "unreal" video game engine to create a virtual model of the neighbourhood around the university, then let the subjects roam freely through it. Certain objects were left throughout, and the purpose of the study was to see if, through repetition, memory improvement would result.
Personally, I think that the idea of a 3D world is pretty exciting, but whenever I spend any time in SL, I find that there isn't really much to do...
Posted by: Trevor Stack | Jul 24, 2008 6:52:43 PM
One commentator suggested the need for "a virtual advisory services facility" in Second Life. There is one:
Our First Opinions Panel of 10,000 SL residents. They are studied by 33 "real" and SL attributes such as Gender, Age, Income, Education, Reasons for being in SL, Frequency of SL use, etc.
Posted by: Andrew Mallon | Jul 26, 2008 8:58:10 AM
I would like to address the comment from Alberto. With all due respect, you have received some misinformation. Alien Grief is still making tens of thousands of dollars per month, but it is true that she passed the 1 million U.S. Dollar mark in 2007. She owns massive amounts of land, which she earns rent from each month. This is still the case. The second point is that the Linden Currency is at 267 Lindens to the Dollar today, which is at the same rate it was in late 2006. If you were correct then the Linden would be at (267/.1) = 2670 Lindens to the Dollar.
The Wired article was simply an opinion piece.
I hope you don't think of this as a personal attack. I intend simply to correct the misinformation that you have been given.
Thanks,
Ecocandle
Posted by: Ecocandle Riel | Jul 29, 2008 8:30:44 AM