Massively interviews EVE Online Lead Economist Dr. EyjoG

The sci-fi game EVE Online is unique amongst the other massively multiplayer online titles on the market. One major aspect of the game is that its far future setting of New Eden functions as one server, where players can build up empires -- or topple those of their rivals -- across more than 5000 solar systems. Beyond its scale, what distinguishes EVE Online from other games is that it has a player-driven virtual economy, the backbone of the game. EVE's economy has been a major draw for players interested in market and crafting sophistication generally unseen in an online game.

EVE's creators, CCP Games, have fostered a setting where players can do what they want in the 'sandbox', a setting where the tools are in place for players to use as they see fit. Nearly every ship, module, and item used by a player in the game was produced by another player in New Eden at some point. Fight for military dominance and control vast regions of space, or corner the market as part of an industrial conglomerate -- it's all possible in EVE. In fact, the game's warfare and industry are very much intertwined, making EVE's virtual economy a dynamic one. Monitoring and researching this economy is important to CCP Games, and to further that goal, they've hired real world economist Dr. Eyjólfur Guðmundsson (aka CCP EyjoG).

Massively recently caught up with Dr. EyjoG, who told us about his rather unique position at CCP Games, and what he's learned about virtual economies along the way.

Massively: You have a rather unique job in the game industry. What is a typical day like for a Lead Economist dealing with a virtual economy?

Dr. EyjoG: There's no typical day for us, but my job basically has three parts to it. Number one, it is to oversee the economy in terms of what's going on. We look over daily market data, daily trade, socio-economic data -- look at how people are moving around in the system -- and we use that information to prepare reports and other ways of disseminating that data to the general playerbase.

Second of all, I use the same information to help the developers understand how certain game mechanics changes or additions to the game might impact the overall market. And then the third part of my job is really external communication. Just like today we had visitors from parliaments of different Nordic countries coming and being educated about what's going on within EVE and the gaming industry in general.

For me personally, we are now a unit of four to five analysts doing different jobs both in terms of data mining and in terms of operating the Council of Stellar Management, and all the tasks that we have here internally. So my work day is very diverse. There's a lot different management and economic projects that I deal with.

I wouldn't even say this a unique job in terms of the gaming industry. To me, this is a one of a kind job in the world, and economists should envy me just as much as anyone else because there are not many economists who have their own world to oversee. And being able to study how decisions made by CCP in terms of development affect the market and how the players -- which is actually more interesting -- take these tools that we give them and create something absolutely new. That really relates both to the economy in general and to specific things like the banking that we'll discuss later.

How do real-world economic principles apply to a virtual economy like EVE, and how don't they apply?

So far I have not found any example of an economic theory that does not apply to a virtual economy like EVE. And in all honestly, it looks to me that it even applies better than to the real world because there is less distortion in the EVE universe than there is in real life.

As an example there is no government in EVE getting in the way of the players making wise business decisions. They make their decisions completely based on a competitive environment and on trust. They have to form business relationships; they have to form trust relationships with other players in order to create communities that can thrive and survive. And there is no government coming in and just changing things overnight by putting in restrictions or legislation, or taking money and re-distributing it in inefficient ways. So you can say there are less disturbances in the EVE economy than there are in the real economy. And for me, as an economist, it's been really -- I just want to say awesome -- to see how well the economic theory fits with the data I've been able to look at so far.

Examples are the market reactions to changes in attribute of weapons. Market reactions to changes in relative supply of certain minerals. So if we increase, through game mechanics, availability of a certain item, we see it instantaneously drop in prices. Just a basic economic principle that increased supply decreases prices.

It's also interesting to see how institutions such as trade hubs or markets have evolved and established themselves in certain places within EVE, completely without our intervention. We do not say "this should be the trade hub" -- there are 5000 solar systems in EVE, there's a core in the middle that's a high security area. Within that core, three to four major trade hubs have evolved, completely based on the players themselves. And they've not done it consciously, it's just happened over time that these have become the major trade hubs. The distances between these trade hubs and the distances from the hubs to the out layers all fit in very well with theories in economics about locations. Hotelling's theory is one. So economic theory could predict that these kinds of hubs would develop with these distances between them. That's an example of how well theory works in terms of explaining phenomena within EVE.

The idea of player-run financial ventures is an interesting one. EVE's players are always finding new ways to get involved with the game's economy, whether it's through establishing bonds, IPOs, or even banks. But how would you describe the current state of player-run financial ventures in EVE?

Well before we start talking about financial ventures, I just want to state that EVE is designed as a sandbox where we give the players the tools and we encourage them to evolve and develop this world by themselves. At the same time, there comes the responsibility of the players to make sure that their game mechanics works. If it fails because of the way that the players set it up, we do not come in and help. There's no bail out plan by CCP.

To take a simple example: transportation services. Within EVE it can up to two to three hours to travel between the ends of the world. This can be long distances to travel and some people don't have the time to do that, or want to spend their time in EVE doing something else. So players have offered services to move stuff for you at a certain price. Now of course if you give somebody your stuff, what's the guarantee that he will return it? Because there is no game mechanic in place that allows you to securely get it back if you've given it to another player.

So the players have come up with a system where you put up collateral for that transport... players that have been able to show that they're trustworthy can put up less collateral than others, or even none. There are players in EVE that are trusted to do business dealings worth billions and billions of ISK in terms of creating alliances and getting access to the assets of all the corporations involved. They are just trusted completely to do this.

This then relates to the financial industry. Anything that's created in EVE by the players has to be based on the trust put in those who create these ventures. So I would say that in terms of the state of the financial sector in EVE, I would say it's in the early stages. It's been developing over the past few years and each stage has taken a more ingenious approach to creating a structure that all the players can trust. To me, it's been absolutely awesome to see the effort and thinking the players have put in creating these financial institutions. It shows us how the game can develop in the future in terms of advanced financial institutions and that's one of the directions I personally would like to see the game to develop further.

So we would not be providing banking to the industry in the future, but we can still provide them with tools to be better able to monitor financial transactions. That would be one of my dreams -- to be able to make that part of the game.

You mentioned the importance of trust in the way that player-run ventures work in EVE. It seems it's inevitable that, at some point, certain players involved with managing funds in EVE will decide to try and embezzle those funds, not limited to the recent incident with the player-run Dynasty Banking. Do you think this degree of investor risk is fitting for EVE, or would you like there to be additional safeguards put in place by CCP as the game evolves?

That's a very good question... I think that it would be best if the Council of Stellar Management were to request further tools to be able to enhance such banking, because then it would be the community asking.

So they haven't actually brought this up then?

We have discussed this informally, and they have asked about advanced financial tools and markets in the future. We've discussed the possibilities but we haven't talked about specifics. I am assuming that these incidents that have come up in the past few weeks will be discussed among the CSM and CCP as a general way of describing, "How far do we want to let this go?"

But as a design philosophy for EVE as a game, it should be based on player interaction and player trust and not be controlled by CCP. We are simply the janitors of this world. We don't want to be the guards controlling everything, we want to help people have an interesting experience.

On the starbase exploit >>