December 23, 2005

Federal Judge Throws Out Intelligent Design

District Court Judge Jones issued a 139 page opinion against a Pennsylvania school district regarding the teaching of "Intelligent Design." Kitzmiller v. Dover Area School Dist. (PDF)

Thanks to beSpacific: Federal Judge Issues Decision Against Teaching "Intelligent Design"

Posted by dougsimpson at 07:48 PM

December 17, 2005

Accuracy of Wikipedia Near Brittanica

With some exceptions, the accuracy of science articles in the collaborative Wikipedia is comparable to that of Brittanica, according to an article in Nature. Articles in Wikipedia are written by multiples of unpaid editors who are self-appointed and self-organized. A blind study used subject matter experts to compare selected entries from both encyclopedias. While some Nature reviewers criticized the readability of the Wikipedia articles, others commended the speed at which it could be updated. Internet encyclopaedias go head to head : Nature

Posted by dougsimpson at 07:20 AM

December 15, 2005

Linden Lab asks FBI help re Second Life DOS attack

According to an in-world journalist, Linden Lab, the operators of the virtual world Second Life have turned over to the Federal Bureau of Investigation (FBI) data relating to a DOS attack on the Second Life grid. Unindentified players have utilized software tools to interfere with the operation of the virtual world on more than one occasion.

So far, the operators of Second Life (known internally by the family name "Linden" to represent their connection with Linden Lab) have handled the disruptions internally with account suspensions and software responses. This represents an interesting opportunity for scholars of the interface between virtual worlds and "real world" law and law enforcement. The Second Life Herald Extra!!: Philip Calls the FBI. W-Hats Shit Themselves

Posted by dougsimpson at 09:45 AM

December 03, 2005

Advanced Economics in Virtual Worlds: Stewart Paper at Terra Nova

Dan Hunter points us to a work analyzing advanced economic systems in online game systems, by Bart Stewart, a regular commentator at Terra Nova. Terra Nova: Economic Stages of MMOGs. In his paper hosted on Terra Nova, Stewart compares the classic stages of development of non-virtual civilization and the corresponding technologies that make them possible. He then describes possible implementations in virtual worlds that would have comparable effects. In Stewart's analysis, he sees many virtual worlds riding somewhere in the Pre-Industrial stage of Mercantile (circa M.E. 1400) or Commercial Economy (circa ME 1600) and offers his thoughts on what is necessary to take them further.

The two biggest achievements for which he looks are enforceable contracts for future performance and the ability for players to create and add their own content to the virtual world.

(read more below the fold)

If we skip the not-fun grit of life in the Industrial Economy (circa ME 1800) we stand at the threshold of the Service Economy (circa ME 1900). "A Service economy depends on specialization, on there being someone willing and able to to do for you those things you can't or don't want to do for yourself," he writes.

That step, he says, awaits the development of enforceable contract rights: "The single most effective feature MMOGs could offer to enable the Service stage of economic activity is automatically enforced player contracts. Player contracts enforced by the game itself would allow players to engage in economic activity beyond the one-time personal deal available from prehistory days onward."

With a slight nod, Stewart passes over the possibility of contracts made and enforced by other than the hard coded mechanics of the virtual world: "letting players act as lawyers would be a cool feature in a MMOG. Personally, I see no way to allow this without opening up massive levels of 'legal' griefing, but that may be just a failure of vision on my part."

Stewart's view is the default position of virtually all those whose work I've seen in my shallow study of this field. However, I have also begun observing emerging experiments in consensual governance, contract formation, collateral security and enforcement with dispute resolution.

One of those is in the form of the player town of Neualtenburg, in Second Life, a democratic republic form of municipal government creating a simulation of a modern Bavarian city. The experiment, now a year old, includes equity ownership of virtual land rights, zoning and activity controls, digitally signed deeds incorporating restrictive covenants and municipal finance through the issuance of bonds. So far, the experiment has been succesfull enough to produce publicly disclosed financial statements and tenative plans to expand the player town by acquiring additional server space from the virtual world's operators, with additional bond issuance to interested investors.

The emergence of this phenomenon is perhaps the result of Second Life embracing what Stewart called "the most difficult challenges in multi-player game design: figuring out how to let players add content to the game." Second Life's experiment in doing that has involved its giving up a large part (but not all) of the control of the intellectual property in player creations, and allowing the creation of towns by players who bring new creative products and services such as those in Neualtenburg.

I suspect that as we explore further, we'll find additional instances emerging. Whether the experiment will succeed is yet to be seen, but in the meantime, it promises to be an interesting ride.

Posted by dougsimpson at 02:03 PM

Reviewing macroeconomics in virtual worlds

October brought significant changes in the virtual economy of the virtual world Second Life (SL), as noted by "Pham Neutra," the avatar name of one SL resident. Pham's comments drew on her observations of heated debates over an alleged Ponzi scheme and the fall of the virtual currency (the Linden) against the U.S. Dollar. Pham suggests economic and market psychology explanations for the drop in the Linden. Her article includes graphical depictions of the monetary exchange statistics. The SL Economy in Review - November - SLOG (Dec. 1, 2005)

Particularly interesting is an ongoing controversy between residents over the activities of an in-world enterprise that offers high interest rates in consideration of demand "deposits" of Lindens. The Linden is readily convertible into US Dollars and it appears that this enterprise now holds "deposits" aggregating millions of Lindens. Some are concerned that it may be a Ponzi scheme and its collapse could damage the virtual economy. The enterprise is unregulated and does not provide disclosure of its financials or investment plan, but its high payout rate has earned many supporters.

(read more below the fold)

Some SL residents are vowing crusades against what they see as fraud or dangerous speculation, others are outraged that someone is attacking the institution that is paying them such high interest rates. Spookily reminiscent of the emotions and controversies surrounding the speculative bubbles of yesteryear and of not so long ago.

Pham also commented on possible economic effects of a change by Linden Lab to the mechanics of transportation in SL. The map of SL is very large and includes impassible mountains, rivers and oceans. Residents move across SL's vast space by walking, flying or "teleporting." Even flying between distant places is slow, so two years ago SL management created teleporter hubs placed across the map. These hubs were spaced and acted much like local airports; travel from port to port was instantaneous, but a resident had to walk or fly from the hub to their final destination.

The hubs became natural focus points for retail development. Residents bid up the market price for virtual land surrounding the teleports and build retail malls there. To attract the attention of arriving teleport passengers, they built virtual towers with large, colorful signs advertising their wares. Arriving passengers had to walk or fly around these obstacles to reach their destination.

Responding to complaints from new residents, SL's management (Linden Lab) decided to allow "point to point" teleportation to destinations. This immediately diminished the need to fly into hubs in order to get to other destinations and led to an outcry from those who had bought and developed around the hubs. Pham comments on the economics of this change and its possible effect on leveling land values in SL and diminishing the economic fortunes of early investors in "hub land."

The exchange rate of the Linden dropped from 251 Lindens/Dollar to 266 Lindens/Dollar during October, and Pham suggests theories for the apparent short-term imbalance of Linden sellers over buyers. Pham provides currency exchange data in graphical format with her economic commentary. The Linden is traded on several electronic markets by both Linden Labs and independent market-makers in virtual currency.

What is fascinating to me about this analysis is how it is able to applies the same tools used in non-virtual economic analysis to the virtual economy of SL. This encourages my own optimism for using virtual worlds like SL for experimental study of principles of law and economics.

Posted by dougsimpson at 05:08 AM

December 02, 2005

Exploring Law and Economics in Second Life

For thousands of years, people have used games and theater for escape or to simulate fantasy and conflict. Sometimes it is for entertainment, sometimes as part of religious observance, sometimes for training or education. As powerful personal computers became more affordable, "games" have evolved beyond one-to-one encounters like Chess and Go and theater has evolved beyond plays in the Globe Theater in Stratford.

Now, thousands of people can simultaneously inhabit "virtual worlds" that persist independently of each participant's existence, and which can be permanently affected by the actions of each participant. Is it a game? Is it theater? Or is it a "new type of social order," as proposed by Lastowka and Hunter in The Laws of the Virtual Worlds (SSRN, May 2003).

Virtual worlds are increasingly becoming subjects of serious research by law and economics scholars as well entrepreneurs. Over the coming weeks, we'll be exploring a virtual world called Second Life, with the help of several embedded "avatars" living there, and comparing their reports with the thoughts of leading scholars in this emerging field.

(read more below the fold)

Early virtual worlds were text-based Multi-User-Dungeons ("MUDs"), then evolved into "Massively Multiplayer Online Role Playing Games ("MMORPGs" or "MMOGs"). Modern graphics capabilities and high-speed broadband connections now enable participants to inhabit "avatars" that have many of the characteristics of cyborgs, human-machine hybrids. These avatars can take the form of people, animals or fanciful objects and change at the click of the participant's mouse. They can move among each other in a visually rich "3D" environment experiencing the effects of simulated physics and showing emotions through facial expression and body language, while text-talking face to face or via Instant Message across virtual miles.

They may work, play, and acquire virtual property in the form of "game gold" (a.k.a. "plat" for "platinum pieces") or other virtual currencies and virtual objects of power or value. For "work," they may hunt resident monsters (and each other) for loot and "experience points," harvest and process raw materials, then manufacture and sell virtual goods to other participants or to the "government." Or, they may provide services to other players for pay.

As these virtual worlds have become more populous, detailed and complex, some became less like "games" and more like "simulations" of societies that are like our "real life' societies, but different. They develop true economies, markets that allowed exchange of their currency with "real world" currency, and measurable gross national products that appear to be larger than some developed nations.

They also precipitate real disputes over participants' virtual civil rights and law suits over virtual property rights that have reached "real life" courts. They have inspired scholars to study these virtual worlds for insights into human anthropology, sociology, economics and law. See, e.g., Unintended Consequences: Academics Experimenting With Virtual Worlds (November 28, 2005) for some references to some recent research by others.

I will not attempt to repeat or improve on the analysis of luminaries like Edward Castronova, Greg Lastowka, Dan Hunter, Robert Shapiro, Jack Balkin or James Grimmelmann. They bring far more intellectual horsepower than I do to the law and economics in and of virtual worlds. I will attempt to stand on their shoulders and explore the emerging sociology, economics and law inside one of the leading virtual worlds, Second Life.

Why Second Life is Different.

Second Life ("Second Life: Your World. Your Imagination.") is the creation of Linden Lab, a privately held California company founded by Philip Rosedale, former CTO of RealNetworks. Trying to find a niche, they have followed a path different than that of other popular Virtual Worlds such as Ultima Online ("UO"), or Everquest ("EQ") that focused on a culture of fighting and killing monsters and exploiting other virtual resources for gold and glory. They also have separated from the path of the more "residential" virtual worlds like The Sims Online ("TSO") which emphasize socializing, home decorating and fashion.

First, a Smorgasbord of Sub-worlds

First, Second Life has not required their participants to choose between the "sword and sorcery" games like UO and EQ and the "party and style" MMOGs like TSO. They have offered the opportunity for participants to do either, or both, or something they themselves have created, all in the same session. They have stepped out of the role of providing a prescribed game ready-made and instead providing the platform on which any number of games, societies or lifestyles can be simulated by their participants.

In part, they have done this by making their virtual world much like Disney World (r), in which you can visit the Magic Kingdom with the kids in the morning, tour the Animal Kingdom in the afternoon, spend the evening at the Boardwalk, then hop on the tram and zip back to your "themed" resort hotel for the night, all without leaving the Disney property or needing any payment medium but your Disney key card.

Linden Lab made their platform easily scalable and composed of discrete snap-together elements. Their virtual world consists of multiple "sims," each one an instance of their host operating system running on a separate server that interfaces seamlessly with all the other servers in Second Life. As a result, all sims work together as one network with common search, communication and monitoring tools and a common currency. Much like the Internet. Each sim can have different world dynamics, different permissions, different themes, different "realities" made possible by the Linden Lab operating system. If they need or want additional space, adding another sim is as simple as adding a server to support it.

Unlike Disney World or some competing virtual worlds, Second Life (or, as residents' say "SL") allows and encourages participants to "own," improve and visit plots of virtual "land" within SL. Participants "buy" or "rent" undeveloped "land" from the government or from other participants, and then can "build" structures and furniture to put on their land, using graphical tools built into the game interface. They can use those same tools to make clothing for themselves and perform virtual plastic surgery to make their avatars taller, thinner, bustier or more blond. Or they can pick up free clothing and furniture at various locations conveniently located throughout SL. With a click of a button they can switch their avatar from male to female and back again. None of this requires any "raw materials" or tools other than what is provided free to all.

Once all this is arranged, the participant, now appearing to herself and other participants as a uniquely clothed and accessorized avatar, settles in her virtual couch in her virtual cottage on her virtual plot of land in her virtual community, takes a deep breath and asks herself "what do I do now?"

"When the going gets tough ... the tough go shopping!" One of the first things our newly spawned avatar may do is to go shopping with the starter purse of virtual currency ("Lindens") provided to new participants. She won't have far to walk (or fly) before she is in front of one of thousands of virtual vending machines in virtual malls, ready to exchange her Lindens for virtual goods crafted by other residents. She will find a wide and diverse selection of affordable clothing, jewelry, and equipment made and sold by other residents.

Second, Letting the Customers into the Kitchen.

Which brings us to the second thing that Second Life does differently. They have open sourced the creation and sale of content by and to all residents. In Second Life, the variety of virtual goods is not limited to what the Linden Lab staff can think up and create. Residents are encouraged to create new things for themselves and to sell them or give them to other residents.

Linden Lab makes this a big selling point from the very start, describing their virtual world as:
"Your World. Your Imagination. -- A 3D Digital Online World Imagined, Created and Owned by its Residents."

Yes, owned. Not only has Linden Lab empowered their participants to create and manage the distribution of goods and services within SL, the Terms of Service ("TOS") document makes clear that residents retain the copyright on those original virtual items that they create and exchange. It also makes clear that the participant has the sole responsibility to police and enforce those rights, as Linden Labs disclaims any responsibility or intent to do so.

This contrasts markedly with positions taking by other MMORPG operators, which have reserved all rights in in-game characters, items and coin or "virtual goods". See e.g. Sony's EULA for its hit EverQuest virtual world, as discussed in Schwarz & Bullis, "Rivalrous Consumption and the Boundaries of Copyright Law: Intellectual Property Lessons from Online Games," 10 NO. 1 Intell. Prop. L. Bull. 13, 2005. (As hosted at Terra Nova: Terra Nova: Rivalrous Consumption of Virtual Assets)

Is Linden Lab Nuts?

So, how does Linden Lab expect to make money, if residents can make all the virtual goods they need and buy and sell them amongst themselves, without retaining some control over the intellectual property? Resident fees are modest, below $72 for a year paid in advance (which comes with a weekly stipend of $500 Lindens and a signing bonus of Lindens.

Linden Lab recently opened its world up to free accounts with limited rights, driving a 50% jump in their account numbers during October and November 2005 to 90,000 (up from 30,000 in June). Like other savvy welcoming sovereigns wishing to encourage a rising tide of eager, unskilled immigrants, Linden Lab has offered the one thing on which they reserve a creation monopoly. Presently, the chief limiting resource in this virtual world is virtual land.

Each new server hosts 64,000 square units of "land" on each sim. These grids of land can be created from nothingness and dropped into the virtual ocean that is the map of Second Life. They come pre-equipped with mountains, coastlines, roads, grass and trees. They can then be sold piecemeal or as a unit to individual homesteaders or to entrepreneurs who can customize them with little virtual bulldozers, add virtual trees or waterfalls and houses, castles, shopping malls or dance clubs and then either occupy them or remarket them to other residents in return for Lindens. An "in game" auction system makes land purchase and sale safe and efficient for those with the Lindens to pay the asking prices

How that land gets developed, sold and used is largely left to those who buy it. Linden Lab will step in if some instance of participant abuse is especially eggregious, but "the Lindens" are busy people in a fast-growing world, and they do not trouble themselves with trifles.

Land regulation, like the sale of virtual good and services, is largely left to the participants themselves to work out controversies. Like in the Wild West of North America or the early centuries of Eurasia, this freedom produces some dysfunctional behavior, failures of cooperation, fights over rights in virtual property, conflicts between residents over "individual rights," allegations of Ponzi schemes, vigilante behavior, "gangsta" shoot-outs in night clubs and outright wars between adjoining sims. It also produces serious efforts to create effective forms of representative municipal government, complete with public finance, financial transparency, zoning and dispute resolution.

Embedding Observers for Unintended Consequences

In his 2004 New York Law School Law Review article SSRN-Virtual Worlds as Comparative Law by James Grimmelmann (also v49n1p147-184.pdf (application/pdf Object)) James Grimmelmann introduced the study of the law in virtual worlds (as compared to the study of law of virtual worlds) as a study in comparative law, with rich opportunities for serious study and learning. I am accepting his invitation. I have opened lines of communication with several avatars in Second Life to serve as embedded reporters. As they get "satellite time" to report back, I expect to have something of value to share.

Posted by dougsimpson at 12:11 PM | Comments (0)