Less than zero

What determines the value of an object in Second Life? I’ve been thinking about that since reading this article a few weeks ago. The answer given in that post – the market strikes a balance between what a vendor wants to charge and what buyers are willing to pay, based on the perceived utility – has face validity, but also a number of problems. There are often glaring inconsistencies between price and usefulness (I got my house for free; Olivia paid L$600 for her boots), objects that are practically identical can have wildly different prices (she could have got a similar pair for L$200), and there is little price stability (this week they’re down to L$50). There are factors that partially explain these anomalies; the SL market is fragmented and inefficient, there are big differences in the usefulness of virtual objects and their real-life counterparts, and the low value of the Linden dollar compared with that of user time discourages shopping around for the best deal. Even so, the model seems rather unsatisfactory.

Is there a more objective method for calculating the intrinsic worth of virtual objects? Old Bolshevik that I am, I tend to fall back on the labour theory of value. We are interested in those objects that are produced for the purpose of exchange, that is those objects which are commodities; according to the theory the exchange-value of such items will be proportional to the socially necessary labour-time involved in their production. (Socially necessary meaning the time taken for the worker of average skill labouring under average conditions, rather than the time taken by any particular worker, who may be more or less efficient than average).

So far, so good. The value of an object appears to depend on how much work its creator puts into it, assuming they are of at least average skill, which seems fair. Virtual items are different from those in the real world in one crucial respect though – they may be copied with practically no effort. (By this I mean copied by their creator for sale, rather than pirated). However many hours of work go into making the prototype, the value of that labour is diluted, potentially infinitely, by reproduction. Thus the value of any one copy will trend towards zero.

To get around this a content creator could produce unique items, or at least very limited editions, which in theory could command premium prices. There are a couple of problems with this though; unless you are a virtual Yves Saint Laurent no one is going to pay significant sums for your work, and even if you do have exceptional prim-sculpting talent the market for such work is going to be so restricted that you are unlikely to be able to earn a living. (In the real-life fashion industry the top designers make relatively little from their haute couture collections, since the volumes they shift are tiny; the real money is in the diffusion lines). If your design skills are no better than average then you’re in an even worse spot; even if you don’t go down the mass-production route, as long as a few other producers of comparable goods do they will reduce the socially necessary labour-time for the creation of your product, and its value will inexorably decline.

Is there any empirical evidence that this theory is correct? It’s difficult to get hold of meaningful economic statistics regarding Second Life commerce, but anecdotally there does seem to be a feeling that the volume of low-price and free items available is increasing, and that the quality of the free stuff is much better than it used to be; it’s certainly significant enough to support a whole SL Freebie” blogging subculture.

Second Life is copying real life, at a characteristically accelerated pace; the declining rate of profit is on the verge of producing a crisis of over-production. In the real world the point of crisis can be postponed by expansion of credit, though when this comes unstuck, as it has done recently, things tend to go spectacularly wrong, and capitalism is forced to fall back on the traditional remedy of economic depression and/or global war, to destroy unproductive capital and create the conditions for a new round of accumulation.

I don’t think that the Second Life economy will actually collapse though; owners of chronically unprofitable virtual businesses are likely to subsidise them indefinitely, just so they can hold on to their dreams of escaping the real-life rat-race, and this constant inflow of capital should be enough to prevent a crisis. (So long as the non-virtual crisis doesn’t consume Linden Labs).

Is there a better way to solve things? My ideal would be Second Life (and real life too) operating as a cooperative, collectively owned by its residents, who would each receive a social wage, and would freely contribute their talents for the betterment of the whole virtual society. “From each according to his ability, to each according to his needs” as the saying goes. I’m sure there are a few sims running on this principle, but my feeling is that the prevailing political tendency in SL is Libertarianism rather than Communism, so it may be some time before the virtual proletarians throw off their chains.

4 Responses to Less than zero

  1. frankelstache says:

    That’s interesting. A way that might work is http://en.wikipedia.org/wiki/Kibbutz
    Problem is, it takes away any sense of freedom from the individual. it becomes all about the community. And that will probably destroy 2nd life.

  2. johnny4sls says:

    I was thinking more of the Paris Commune.

    I think Second Life has to be all about the community. What’s the point otherwise?

  3. Ananda says:

    I agree in general. Second Life is like a fast-forward version of what is occurring in the world at large, as digitalisation and automation progressively drive any mass-produced item down towards the cost of the raw materials and energy involved. But I get frustrated when it seems like everyone keeps going towards either Capitalism, or Communism. Personally I regard both as anti-democratic, and anti-humanist in the long run. My personal preference would be to institute some version of Social Credit. http://en.wikipedia.org/wiki/Social_Credit In essence it’s the sort of stipend system SL used when it was first getting off the ground – consumers are given the tokens to exchange for what they need, and producers can compete for them, and you end up with a free-market distribution system in which profit is desirable but not necessary for survival.

    • johnny4sls says:

      It would be nice to run a sim in SL as a demonstration of one’s pet economic theory. If all the residents of a particular area agreed to pay their share of the tier (ideally in proportion to their RL income, though that may be impractical), on the understanding that everyone got an even share of the land, and everything that anyone created would be freely available to all other members of the group, then it would be possible to do away with currency altogether. The productive forces would be effectively infinite, so shortage would be eliminated, and in that context the concept of private property, or at least the private ownership of the means of production, would become effectively meaningless. It would be true communism, with no need for government, and everyone free to express their creativity, without having to worry about how it would be paid for.

      Of course it would only work if there was no free movement between the sim and the rest of the virtual world, unless Linden Labs agreed to turn the whole show over to collective ownership. Then there would be the problem of the interface with the real world – paying the electricity and bandwidth bills, and the need for residents to cover their real-life expenses. It could work if the real world was structured along similar lines, but for that to happen we’d have to stop wasting time in virtual worlds and get ourselves organised.

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