Virtually Free

An online world embraces regulation.

Wagner James Au from the June 2008 issue

In February, subscribers to the virtual world of Second Life awoke to a surprise: The garish, skyscraper-sized billboards they had learned to tolerate as part of their three-dimensional landscape were about to be vaporized, the site’s creators announced.

Billed as “Your world, your imagination,” the five-year-old Second Life has been offering subscribers a sprawling realm of user-generated simulated mountains, oceans, and sky where participants can build and interact as “avatars,” alter egos they control and customize. Thanks to the world’s virtual currency system of Linden dollars (which can be exchanged for real U.S. dollars at fluctuating rates) and the ability to buy and sell parcels of land on Second Life’s two main continents, a thriving, free market economy has taken root.

That economy has included a lot of advertising, much of it ostentatious. So Linden Lab, the company that developed and owns Second Life, announced on its blog in February a new rule prohibiting advertising on Second Life’s mainland continents if it impairs a neighbor’s view. The rule was especially directed at advertisements erected “to deliberately and negatively affect another resident’s view so as to sell a parcel for an unreasonable price”—i.e., to pressure that neighbor to sell his virtual land. It was a vague prohibition that would require a high degree of hands-on regulation by the Lindens (as company employees are known to Second Life users, who are in turn called residents). As such, it was the latest in a long series of intrusions on what once was arguably the purest libertarian economy in existence.

Linden Lab’s experiment with laissez faire began at the end of 2003, when the company first started selling virtual property to its users, encouraging them to buy and sell to each other with Linden dollars. Before then, the company had carefully nurtured its small early user base with frequent cash and land handouts, planning activities with the cloying enthusiasm of a metaverse Hillary Clinton.

After the creation of private property rights, Second Life quickly became a place where free minds and free markets predominated. Users could make millions of Linden dollars as real estate barons or fashion designer magnates, or spend time in kinky virtual sex clubs or art communities. As long as they didn’t interfere with other people’s liberties to do likewise, the company really didn’t care what people made of their alternate-universe lives.

The world did retain some occasionally left-leaning regulations, perhaps owing to the fact that Linden Lab is based in San Francisco. (The company’s user rules, for example, included European-style prohibitions against hate speech directed at gays and minorities.) But for the most part, staffers adhered to a principled hands-off policy that would have done Milton Friedman proud.

In 2005, when one landowner first began peppering the world with ugly billboard towers, residents protested. The Lindens generally refused to intervene. “It’s not for us to decide the relative merit of construction in Second Life,” Linden’s community manager, Daniel Huebner, told me back then. In 2006 company founder and CEO Philip Rosedale refused to intercede against Ginko, a virtual “bank” with a high rate of return that many residents accused of being a Ponzi scheme. That same year, some residents protested “age play”: simulated pedophilia with avatars who look like they’re underage, though the actual people behind them are over 18. Company Vice President Robin Harper replied that it would be forbidden only “if this activity were in public areas,” implying that it was still permissible in private.

The reversals started last year. Age play and other vaguely defined “broadly offensive” behaviors were universally forbidden in May 2007. This policy was announced shortly after a German television crew presented evidence to Harper that avatar-based age players were also using Second Life as a conduit to exchange real child porn photos. Age play was creepy but arguably harmless; when real-world molestation entered the picture, the moral equation changed.

But the changes didn’t stop there. Gambling was prohibited in July 2007. Unregulated banks were banned in January 2008. The February prohibition of exploitative billboards was preceded by the debut of a “Linden Department of Public Works” dedicated to “improving the experience for residents living on or visiting the Linden mainland.” The Lindens were restructuring their universe into the communitarian society it had been in early 2003, when early residents regularly received welfare payments and public works projects to make themselves useful.

Did the Lindens reject laissez faire as a failed experiment? Maybe. From the summer of 2007 to early 2008, the number of active users gradually plateaued at a population of about 550,000—large, but nowhere near as large as tightly regulated virtual worlds such as World of Warcraft or Habbo Hotel, which boast millions of users. Complaining about the ugly casinos or sexual perverts they had to share Second Life with, many residents voted with their feet and left. The number of participants willing to buy virtual land from Linden Labs also dwindled. Offered a fully free society, the market plainly rejected it. So the Lindens went with a mixed economy.

But there is an alternative explanation. As all this was going on, the company kept dropping hints that it was about to let enterprising programmers and companies link their own virtual-world servers to the “official” world. If and when that happens, users would be able to host virtual Second Life islands on their own servers but still remain connected to Linden’s mainland. It’s possible, then, that Linden Lab’s new regulations are part of the preparation for an open source era, when Second Life’s most controversial residents will be able to run unregulated banks and have public sex in adjoining nations.

The Lindens might not be ending Second Life’s libertarian era as much as creating a gated community in a far larger metaverse that remains fundamentally free. Then again, gated communities may be libertarian on paper, but considering all the conformist regulations required to get and stay in one, few would say they are libertarian in spirit.

Wagner James Au is the author of The Making of Second Life: Notes from the New World (HarperCollins). He blogs at nwn.blogs.com.

Comments

Some guy|5.9.08 @ 12:02PM|#

Broken Link

Guy Montag|5.9.08 @ 12:32PM|#

Link fixed, but now I don't have time to read it :(

|5.9.08 @ 12:57PM|#

Did the Lindens reject laissez faire as a failed experiment? Maybe. From the summer of 2007 to early 2008, the number of active users gradually plateaued at a population of about 550,000-large, but nowhere near as large as tightly regulated virtual worlds such as World of Warcraft or Habbo Hotel, which boast millions of users. Complaining about the ugly casinos or sexual perverts they had to share Second Life with, many residents voted with their feet and left.

It's difficult to compare Second Life to Warcraft, for the simple reason that WoW is a game. That has a point to it. Habbo Hotel is marketed expressly as a chat room for teens, which explains the censorship.

I admittedly haven't tried Second Life, but it just seems pointless. Perhaps down the road such an online interface will be more universal, but an online experience based around creating avatars and imaginary spaces seems dull--and an economy based around them illusory.

|5.9.08 @ 12:58PM|#

0 for 2, huh?

Maybe somebody will start a game called Third Life.

Episiarch|5.9.08 @ 1:03PM|#

I admittedly haven't tried Second Life, but it just seems pointless.

Agreed. In WoW or any other game like that you have the incentive of building your character. Though you gain nothing real other than entertainment, that feeling of accomplishment as you gain more powers and in-game items is very satisfying, and also adds to your entertainment as you kick more and more ass.

In Second Life, there seems to be little if any of that kind of "reward".

Any virtual world that wants to be successful needs to be a place where teenage boys are willing to spend hours upon hours. Which basically means WoW or the porn version of the holodeck. Sex or violence or both for the win.

Bingo|5.9.08 @ 1:05PM|#

Maybe you guys would feel differently if you were a hermaphroditic dragon trying to impregnate an anthropomorphic unicorn.

Episiarch|5.9.08 @ 1:07PM|#

Bingo has touched upon the true Second Life demographic: furries.

|5.9.08 @ 1:10PM|#

Then again, gated communities may be libertarian on paper, but considering all the conformist regulations required to get and stay in one, few would say they are libertarian in spirit.

What is more libertarian than gated communities? In the absence of government regulation, the natural progression is for people to voluntarily band together with mutually agreed upon restrictions on land use.

Brandybuck|5.9.08 @ 1:12PM|#

Why? Because the people behind it are leftists. As with all leftists, they like to talk about the wonderfulness of freedom, but once any real world [sic] problem crops up, no matter how minor, they start clammoring for government solutions.

This is why I get so annoyed with pseudotarians. They cheapen the movement by advocating government intervention in the name of libertarianism. Recent examples "libertarian" promotions of net neutrality and carbon taxes.

Bingo|5.9.08 @ 1:16PM|#

Everyone knows that EVE Online is where the real anarcho-capitalists hang out anyways. When they aren't gaming the market in WoW that is.

Guy Montag|5.9.08 @ 1:21PM|#

pseudotarians

Love that one!

stephen the goldberger|5.9.08 @ 1:30PM|#

Hmm so externalities do exist.

zoltan|5.9.08 @ 1:32PM|#

What's net neutrality?

|5.9.08 @ 1:36PM|#

Wait a minute, Brandybuck, the GOVERNMENT is regulating Second Life?

|5.9.08 @ 1:49PM|#

and carbon taxes

Most economists worth their own weight in carbon support a Pigovian tax on carbon output. One of the better characteristics of most libertarians, in my opinion, is that they tend to pay more attention to what economists say. Why should they make an exception in this one case?

jimmy|5.9.08 @ 2:10PM|#

these people need to get a first life

|5.9.08 @ 2:12PM|#

Most economists worth their own weight in carbon support a Pigovian tax on carbon output.

So somewhere over 50% of economists support a new tax? And, in a totally unrelated coincidence, most academics are left-leaning? Wow, then we all better support it, because when over half of people who purport to be experts endorse something, it MUST be a good idea. No need to discuss the actual merits or lack thereof of the the proposal. Hell, why not settle all scientific debates via a vote!

|5.9.08 @ 2:18PM|#

Educated people lean left? Particularly on issues related to their areas of expertise?

Hm.

|5.9.08 @ 2:19PM|#

No need to discuss the actual merits or lack thereof of the the proposal.

Hell, no! That sounds like something a bunch of economists and scientists would do.

|5.9.08 @ 2:33PM|#

O'Sullivan's First Law: All organizations that are not explicitly conservative become left-wing over time.

|5.9.08 @ 2:37PM|#

Apples to oranges.

And WoW isn't tightly regulated in any way shape and form. You can't DO a lot of the stuff you can in 2nd life, but its not like there is a game masters riding around stopping you from ganking the crap out of lowbies in Stranglethorn Vale either.

|5.9.08 @ 3:18PM|#

Wait a minute, Brandybuck, the GOVERNMENT is regulating Second Life?

As far as Second Life goes, Linden is the government. So yes.

Ken Hagler|5.9.08 @ 3:31PM|#

"Wait a minute, Brandybuck, the GOVERNMENT is regulating Second Life?"

The casino and banking bans did come about as a result of government intrusion. It wasn't so much the government passing new regulations as a case of "do what we tell you or the men with guns will be paying you a visit."

Taktix®|5.9.08 @ 3:37PM|#

O'Sullivan's First Law: All organizations that are not explicitly conservative become left-wing over time.

That should be "Bill O'Reilly's Law"

|5.9.08 @ 4:05PM|#

Most economists worth their own weight in carbon support a Pigovian tax on carbon output.

CO2 production is only an "externality" woth taxing if you believe that anthropomorphic global warming is occurring and will be catastrophic.

How many economists are on record saying they don't believe in catastrophic AGW, but still think CO2 should be taxed?

robc|5.9.08 @ 4:09PM|#

Most economists worth their own weight in carbon support a Pigovian tax on carbon output.

Im betting Ronald Coase doesnt.

|5.9.08 @ 4:15PM|#

Keep in mind that it is possible to support different theories regarding how to approach pollution.

I might support a property-rights solution ala Coase and a Pigovian tax as well since neither approach is currently being pursued with much enthusiasm. Both approaches have their merits.

robc|5.9.08 @ 4:21PM|#

mk,

How is a Coasean solution not being pursued?

To quote David Friedman:

That analysis was accepted by virtually the entire economics profession prior to Coase's work in the field. It is wrong--not in one way but in three. The existence of externalities does not necessarily lead to an inefficient result. Pigouvian taxes, even if they can be correctly calculated, do not in general lead to the efficient result. Third, and most important, the problem is not really externalities at all--it is transaction costs.

The transaction costs may be too high, but that doesnt mean a solution isnt being pursued. Im also not sure that the Pigovian tax approach even has any merit. Its based on a flawed principal.

Paul|5.9.08 @ 6:12PM|#

"Linden Department of Public Works"

You had to know it was over then.

"We do the work, you do the pleasure..."

Bet you need a twenty seven b-stroke-six to complete any duct repairs.

Oh, joe wins the thread with his 12:58 post.

John Tabin|5.9.08 @ 7:17PM|#

Complaining about the ugly casinos or sexual perverts they had to share Second Life with, many residents voted with their feet and left.

I'm pretty sure that said foot-voting has a whole lot more to do with SL crashing all the time, and Linden Labs wasting resources on stuff like the Windlight viewer and the Department of Public Works when they should have been working to stabilize the grid.

Paul|5.9.08 @ 7:36PM|#

crashing all the time, and Linden Labs wasting resources on stuff like the Windlight viewer and the Department of Public Works when they should have been working to stabilize the grid.

Your Linden dollars at work!!!

|5.9.08 @ 10:08PM|#

libertarian in spirit

You misspelled 'libertine'. C.f. Walter Block's comments on totalitarian--but voluntary--organizations.

Chad|5.9.08 @ 10:47PM|#

robc | May 9, 2008, 4:21pm | #

The transaction costs may be too high, but that doesnt mean a solution isnt being pursued. Im also not sure that the Pigovian tax approach even has any merit. Its based on a flawed principal.

robc, I don't think you get the point of the quotation you cited. There are cases where Pigovian tax will not lead to the optimal solutions, cases where it will not. But assuming the tax is reasonably correct, even in the sub-optimal cases, it will still lead to BETTER situations than doing nothing. Go back and look at the examples from the article you cited. Pigovian taxes beat sticking your head in the sand every time.

There are several fundamental flaws with Coase's solutions, and one of them is particularly egregious in the case of non-local polution.

First, Coase's method may ensure that the most efficient solution is reached, but it fails entirely to ensure that the right party(s) pay for it. Is an efficient but unfair solution a good one?

Second, Coase's method only works when the number of people involved is very small. As soon as a large number of parties appear, not only does the number of agreements required go up by a square factor, but the chances of free-riders and stubborn fools who refuse to compromise goes through the roof.

|5.10.08 @ 6:02PM|#

"rom the summer of 2007 to early 2008, the number of active users gradually plateaued at a population of about 550,000-large, but nowhere near as large as tightly regulated virtual worlds such as World of Warcraft or Habbo Hotel, which boast millions of users. Complaining about the ugly casinos or sexual perverts they had to share Second Life with, many residents voted with their feet and left."

Please, James, all the long time residents, especially estate holders like me, know the true reason of the plateau: the irritating streak of database failures, the banning of all hasard games and investment joints, the VAT debacle that increased all prices by 20% (or 42% in some cases) for european residents (it forced me to resell all my land save for one island), combined with the blunt price increase of private islands by 50% flat and lastly the series of viewers riddled with crashing bugs.

These are the real reasons people voted with their feet.

ron|5.12.08 @ 3:06PM|#

oh god no, wagner james au, the most pretentious douche in gaming journalism, has invaded reason :(

Marc Woebegone|5.13.08 @ 7:27AM|#

Ah yes, the end of an era.... "era"? you must be joking....

http://secondlife.typepad.com

MW

unhyphenatedconservative|5.13.08 @ 1:04PM|#

Huh. When libertarian paradise exists, the crap that bubbles to the surface makes people not want to play any more. That's why conservatives don't want to impose it on the real world.

Plant Immigration Rights Suppo|5.19.08 @ 10:11PM|#

"That's why conservatives don't want to impose it on the real world."

Freedom is not an imposition. You can have your own conservative community if you want and defend your values with property rights. No libertarian will tell you where to educate your child. No libertarian will force you to buy from a cable company that has the Playboy Chanel in its standard package. So long as you alow us the freedom to live as we wish we are happy to alow you to live as you wish.