Why the video game industry needs more economists.

Video games are becoming more and more complex to develop: between AAA games reaching ever higher stratospheric budgets (Destiny is scheduled to cost 500 million dollars) and the mobile market facing ever stiffer competition, there is an increasing need for formal analysis and the theoretical toolbox economists can provide. The main blockade against economist is simple: most people don’t have a clue what we do. We are usually bundled up with the administrative elements of upper management with nary an extra thought. This needs to change.

I am an economist, and this is my manifesto.

What does an economist do?

Economic theory starts from the most basic premise: what do people want? That answer is actually simple: everything. Unfortunately, there isn’t enough resources to fill that want. This forces people to make choices, and that’s what economists do: we study how people make choices. Any choices, all choices: what to buy, how much to pay, who to hire, what to eat, who to date, the list goes on and on.

So, what can an economist such as I bring to a video game company?

We can bring plenty. Here’s a small sample of what we can do:

1.    We can do cost-benefit analysis.  CBA is a very useful tool used to evaluate whether a project (or an idea, or a decision) is viable or not. It’s a structured and well documented approach that helps make enlightened decisions. One of the better feature of CBA is risk assessment: being able to determine the level of danger taking a certain decision will bring. You want to invest 50 million dollars over two years to outsell Call of Duty? CBA will tell you you’re nuts! Ok that one was easy, granted, but you get the idea.

2.    We can bring the economic simulation of your single-player games to more than a mere afterthought. Almost every game nowadays has a certain market aspect built into it: you get loot, you buy armor and potions and houses and stuff. The problem with 99% of those games is that there is no value in the choices you are asked to make because there is always almost infinite amounts of money. Think about it: most games would rather limit you in the items you can carry than in asking you to pick the items you want to buy carefully. Some people will argue that people do not want to bother with being broke in-game, they suffer through it enough in the real world. I disagree. I think the payoff to make the right choices given limited resources is what makes a great game. Which brings me to my third point…

3.    We can greatly increase the payoff to players in multi-player games. When you think about MMOs for example, not only do you see yourself killing a mighty dragon with 19 of your best online friends, you also see the added benefit of selling your unwanted items to help you purchase those weapons you need to kill that dragon’s dad! Or brother. Or mother. Whatever. Playing the online version of ‘Pimp my character’ is nowadays a national hobby, and an economist could make that part of the game more interesting and rewarding.

4.    Not only can we make trading better, we can also make crafting better. Let’s see: acquiring scarce resources, creating items and supplying what players need, nay demand, all this to make a profit... Sounds pretty economish to me! We can help make crafting a more rewarding experience.

5.    We can help teams working on game understand the advantages and shortcomings of the different ways a game can make money: free-to-play, micro-transaction and subscription-based are the most used business plans to turn a profit.

6.    We can teach the basics of game theory to decision-makers and decision-takers so that everyone talks the same language. Imagine, when the time comes to take a decision between people with different backgrounds, what it would mean if everyone had the same operational language. No more having to explain every concept before using it. Even better, having a simple language so that everyone can understand what you want and how you want it: an end to people trying to do something and failing because they didn’t understand the command. Game theory states that every social interaction or decision can be viewed with the exact same tools as every game known to men: players, strategies (according to the rules) and payments (consequences to playing the game a certain way). Everyone does this at an unconscious level, an economist takes those intuitions and draws them on a board so everyone can see and input their expertise to get a better picture. It’s magical!

7.    We have a toolbox full of concepts and theories that can help make video game making easier, faster, more transparent and more fun! Network externalities, monopolies, standards, cooperation, information asymmetry, DRM management and piracy impacts, efficiency evaluations and a whole plethora of other bits of information that can add value to your game company.

8.    And there is so much more! Controlling inflation (for example finding what we call money sinks to remove excessive coinage made by looting and questing), anticipating and using devaluation of older items post-patch, providing insurance for expensive items, assuring the game is balanced when it comes to rarity of items, the optimal level of surveillance end penalties for in-game crime, managing and sustaining user-generated content, the list is endless.

Economic theory is here to stay, and economists are the specialists of that toolbox that can make your business an even bigger success.

So don’t wait, hire an economist. We’re the cowbells of the gaming industry.

P.S.: well not just any economist. Get the one that really understands it.

P.P.S.: I meant me. Take me.

Simon Cadorette