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The poor get poorer, the rich get Pokémon

See how Pokémon Go works, and why everyone's so crazy about it. (Video: Jhaan Elker/The Washington Post)

Pokémon Go is sweeping around the world. The six-day-old mobile game -- in which people wander around in the real world to find and capture the fantastical little animals known as Pokémon in the game -- has sent crowds of people meandering through Central Park. It’s sending many tweens to their local post offices for the first time, and some haphazard wanderers to the hospital.

For all the excitement around the game, what you can do in it is actually pretty limited. You can collect different Pokémon, gather items to use in the game at “Pokéstops” (public places such as the the post office), or fight your Pokémon, either against your own team for practice, or another team to win their turf. But that’s about it.

More features are coming soon, however -- such as the ability to trade Pokémon with your friends. Trading was a core element of the old-school Pokémon video and card games, the major way to “catch them all.” But it’s noticeably absent from the current version of Pokémon Go.

Why might this be? Edward Castronova, an economist who works on game economies, says there’s probably a simple reason – if trading isn’t done carefully, it’s one of the easiest ways to upset a virtual economy and ruin a game. Plenty of games have fallen prey to this problem. So instead of introducing trading right away, Pokémon Go’s creators probably will observe how people are interacting with the game first, and then carefully introduce trading later.

Chris Kramer, a spokesperson for Niantic, the developer behind Pokémon Go, wouldn’t say whether Castronova's analysis is correct, but affirmed that trading would soon be incorporated into the game. “Trading is a core element of the Pokémon experience and Niantic needs to make sure it's done right,” Kramer wrote in emailed comments.

It turns out that crafting and regulating the economy in a game is extremely tricky, just like the task of watching over the real-world economy. And games do have economies that are similar to real ones. As in the real economy, goods are manufactured, bought, sold and consumed.

There are differences, of course -- in most online games, there’s no way for players to innovate, and there are no brand names, for example. But research by Castronova and others suggests that virtual worlds function in ways similar to the real world, making them a great place for economists, sociologists, political scientists and others to study. In the real world, researchers can’t just mess with a family’s income or a country’s economy. But in a game, they can actually change the parameters of an economy for various players to create a real experiment.

“Every economic theory that’s true from the history of economics is true inside game economies,” Castronova said. That means that researchers can use economic theories to explain what's happening in a game, as well as use games to test such theories. Games may seem unrealistic, Castronova says, but “a rat maze is also not realistic, but you learn a lot about cognition through rat mazes.”

For example, researchers at the University of Chicago and Erasmus University Rotterdam recently partnered with an online game company to carry out an experiment on how the prices of goods affect sales. Working in an online game gave them the ability to alter prices for 14 million people and see how they responded -- a massive experiment that would never been possible in the real world.

In another study, researchers observed how inequality formed in a game called Pardus. They discovered a wealth distribution that was similar to that of many Western countries and created by similar causes. Players who joined the game earlier tended to be wealthier. But the most important factor in determining a person's wealth was their position in a social network, particularly how many people they traded with. Unlike in the real world, the researchers were able to watch inequality form over minutes or hours -- and monitor every move that made players richer.

“A multiplayer game environment is a dream come true for an economist,” Yanis Varoufakis, the Greek finance minister who worked as an in-house economist for an online game, once said. “In a video game world, all the data are there. It's like being God, who has access to everything and to what every member of the social economy is doing.”

Economists don’t just love online games; online games also need economists. Many of the major games use economists to help design their systems and make sure their in-game economies stay on track.

One of the problems that economists help manage in games is inflation, a condition of rapidly rising prices. As people buy or find currency in the game, money is pumped into the economy, just like it is when the U.S. government prints dollars. And if too much money enters the system, it can lead to rapidly rising prices in a game, just as it does in the real world.

But probably the biggest problem that most games face is something called “gold farming.” Gold farmers basically do certain repetitive tasks in games to earn virtual currency, then sell that virtual currency to other people for real money. In China, perhaps 100,000 people worked farming virtual gold and selling it for real money in World of Warcraft, one of the world’s biggest online games. Many games ban the sale of in-game items for real money, but it can happen anyway in black markets.

The problem with gold farming is that it gives some players a huge advantage in a way that can quickly ruin the game. People who are willing to pay real money can buy virtual currency and then use that to buy weapons and other items to get ahead. The regular players who just want to have fun and don’t have a lot of money to spend are quickly left behind, beaten at every turn by the wealthier players. When that happens, the game stops being fun for most of its players -- and they stop playing it.

Basically, what has ruined the in-game economy is sharp inequality. The few on the top acquire all of the resources, and the many on the bottom can no longer compete. It’s as if the haves and the have-nots are actually playing two different games governed by two different sets of rules. Sound familiar?

“Justice issues are huge,” says Castronova. “As a game player, nothing is more frustrating to me than to go into this environment where everyone is going to start out completely the same, and then you find out someone is getting ahead because their dad is a dentist.”

The design challenge for a game is creating an economy that is fun, Castronova says -- which typically means a world in which you can quickly move up the economic ladder through hard work. There’s a fine line between making this journey too fast and easy, and making it too slow, in which the game becomes tedious -- just like a low-wage job in the real world.

“Economic design is pretty hard. It’s just as hard in games as it is in the real world,” Castronova says . “You have all the same issues -- justice, freedom, reward for merit.” And just as inflation and inequality can topple governments, they can topple online games.

Most game companies today are pretty sophisticated at maintaining this balance and warding off gold-farming and inflation. And in contrast to some online games, Pokémon Go has a much more controlled economy. Like other so-called “freemium” games, the game’s virtual currency is only available from the game company, either earned in the game or purchased for a cash payment, which limits the potential for gold farming. And so far, Pokémon Go players are saying online that Niantic appears to have done a good job designing the game so that those who pay real money for items don't have a massive advantage over those who don't.

But after trading is introduced in the game, that will create the possibility for people to buy and sell their Pokémon for real money in some kind of black market. Even when it doesn’t involve black markets, trading in a game will cause inequality to form much more quickly.

Right now, all the players of Pokémon Go are all basically impoverished, but equally so. When trade is introduced, some people will be able to accumulate "capital" much more quickly. And the players who will benefit the most will be those with wealth -- the real-world funds to buy in-game items to get more Pokémon -- and the connections to trade them.

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