Crisis-ridden Greece now has a finance minister with a lot of video game experience
09-Feb-2015 •Dhirendra Kumar
One of the things that the new Greek finance minister has done in his career is to be a 'video game economist'. Do you think that's a good thing or a bad thing? When one looks a little deeper into what he actually did under that unusual title, it's at least a very interesting thing. It may also be a very important thing for the health of the global economy.
Indians who have equity investments must have come to rather dislike Greece. For at least four years now, from time to time, global markets threaten to go into a convulsion and somewhere among the causes is supposed to be Greece. It seems that the Greeks are forever doing things that will harm themselves and everyone else. In effect have become sort of like economic suicide bombers of the Eurozone and by extension, the rest of the world.
After the elections held two weeks ago, the party that leads the coalition that came to power, SYRIZA, appointed the Greek Economist Yanis Varoufakis as the Finance Minister. It's probably the toughest such job in the world as Greece's economy has imploded in the wake of the crisis, now being 25 per cent smaller than it used to be, and the country has a 25 per cent unemployment rate. What has made the Eurozone convulse is that SYRIZA had promised to reverse the austerity program, the privatisation and other structural changes that was the condition of Greece's bailout. Mr Varoufakis, who sounds like a smart and reasonable person, is now working hard to convince everyone that the austerity program is part of the problem and not the solution.
Whether he succeeds or not, his video game experience makes him unique among economists and finance ministers. Back in 2009, when he had become a familiar face in the media during the first Euro crisis (about which he blogged extensively), he received an email from Gabe Newell, CEO-founder of an American computer game company named Valve Software. Valve is a hugely successful company with revenues of around $2.5 billion and runs the biggest online market place for game distribution. Newell wanted Varoufakis to work at Valve studying and managing 'virtual economies' that had come up in some of its games.
In these online, multi-player games players interact with each other economically. Players can acquire or create objects which they can then buy or sell using in-game virtual currencies. The virtual currencies and in-game possessions can also be purchased with real money, so in that sense there is an exchange rate with real money. Within the games there are many economic decisions to be made. Players have to decide whether to make, capture or buy possessions. They can also buy things in expectation of prices going up. They can buy things with in-game virtual currencies and then later sell them on ebay for real money and many, many more variations of these actions. Most interestingly, Newell wrote to Valve at time when the company was planning to merge two separate virtual economies, an action which was not unlike the economic and monetary union of Europe.
What made Varoufakis take up the job and become Valve's 'Economist-in-residence' was that these economies could be studied with total visibility of all data. As he puts it, "a digital community .... was an economist's dream-come-true. Think of it: An economy where every action leaves a digital trail, every transaction is recorded; indeed, an economy where we do not need statistics since we have all the data! .... I saw an opportunity for scientific research on some really existing (albeit digital) economy.
So we now have a finance minister of a crisis-ridden country part of whose experience comes from managing and studying virtual economies in which hundreds of thousands of people from around the globe interact in an artificial, computer-hosted world. As the joke goes, it looks like the future has finally arrived. Perhaps in a few years from now, governments will be able to test alternative policies and actions on virtual worlds before deciding what to do. As we head for what could be the most important budget day in years, perhaps Mr Jaitley would have liked to first test out his measures on virtual Indians living in a virtual world.