Virtually Free

An online world embraces regulation.

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.