Muscle and blood and skin and bones

If you haven’t already, you should check out this week’s New York Times Magazine article on gold farming. For what it’s worth, it seems to me that the phenomenon is somewhat paradoxical from an economic point of view.

On the one hand, it illustrates the capacity of the free market to detect and meet consumer needs. Some players of MMORPGs do, in fact, desire to avoid the drudgery of slowly gathering the resources necessary to level up. That fact is perceptible to entrepreneurs, and it turns out that China, with its combination of relatively low labor costs plus relatively sophisticated technological infrastructure, is able to house firms capable of meeting that need at a price acceptable to consumers.

On the other hand (and this is the point where you would expect me to decry the fact that the needs are, apparently, entirely artificial and utterly trivial, but I won’t), the phenomenon also illustrates the capacity for firms in a free market to act in ways that ignore, or even actively frustrate, consumer needs. Take, for example, Blizzard Software. Their response to the existence of a market for gold coins, and the subsequent hordes of Chinese gold farmers playing World of Warcraft, has been to file lawsuits against resource auction sites and to attempt to identify and close the accounts of gold farmers. But Blizzard could, if it wished, create salable gold coins itself at no cost, thereby adding the whole revenue of the World of Warcraft gold farming industry to it’s bottom line as pure profit. Surely this is something that the people at Blizzard have noticed, and yet they’ve decided not only to leave money on the table, but also to attempt to prevent other firms from filling the market niche that they’ve left open.