Tag Archives: economics

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Death and taxes – IRS advises taxing metaverse economies

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raining money in Second LifeNo one but their creators can be entirely sure of how much money is sloshing around in the economies of MMOGs and metaverses like World of Warcraft and Second Life, but given the sheer number of regular participants in both (and the brisk markets for in-game items using real world money) it’s certainly not pocket change. [image by Ravenelle]

That’s probably got a lot to do with why the United States IRS is being advised to start taxing virtual economies:

“Economic activities associated with virtual worlds may present an emerging area of noncompliance, in part, because the IRS has not issued guidance about whether and how taxpayers should report such activities,” Olson wrote in her report. She points out that almost all income is subject to tax—even prizes, winnings, and barter exchange. She also acknowledges, however, that tracking and reconstructing so many tiny transactions would be a huge burden, and that attempting to place a value on virtual transaction could present serious challenges.

No kidding; brief and silly scares about terrorist money laundering aside, the potential of black and grey economies lurking in the metaverse is pretty obvious. But considering how easy it seems to be for the meatspace megarich to slip through the net, is this going to prove too tough a nut for the IRS to crack?

For example, when does the money become taxable – when it leaves the virtual space in question, or as soon as it is earned by a citizen? What happens when exchanges operate between virtual worlds? Will the new offshores be based on server farms as opposed to Caribbean islands?

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While the economy falls, local currencies rise

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Is the local currency an idea whose time has come – or rather, has come back? In the Berkshires of Massachusetts, a local currency called Berkshares is being buoyed up by the current economic crisis, and receiving a lot of enquiries from other communities interested in replicating its success:

Since the currency’s launch two years ago, five local banks have printed more than 2 million paper notes. About 185,000 are currently in circulation, according to Susan Witt, a Berkshare co-founder.

It’s in no way ready to replace regular money just yet, but it seems to work well as a supplementary system during hard times. The problem is the admin – there’s a lot of work involved for what is usually a small volunteer organisation, which is why the Toronto Dollar is moving to an electronic version to simplify the management procedures.

As the strength of the nation-state concept atrophies, will we see an increase in local communities making their economies more sustainable and autonomous? Given the rising cost of transportation for both people and goods, it doesn’t seem too implausible.

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Migration controls: the new apartheid?

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border control signIf you pay attention to the tabloid media in the US and the UK, you’ll be familiar with the idea that immigration is a terrible problem that must be stemmed at all cost, with hordes of desperate foreigners waiting beyond our borders to steal away scraps of our hard-earned prosperity and run our public services into the ground. [image by mockstar]

According to Fred Pearce of New Scientist, however, there’s another way of looking at the present system which doesn’t portray those of us in the richest nations as the victims: it’s a form of legitimised apartheid.

It has always struck me as odd that we are so keen to allow the flow of cash and goods across borders without let or hindrance, but try so hard to deny the same rights to people. That is both unfair and a denial of the free-market theories on which much of the world’s economy is built.

Surely if free trade and the free movement of capital is so good for an efficient global economy, then the same should apply to the free movement of labour?

I can’t see the fault in that logic. And for the apostles of the free market to deny it reeks to me of racism and xenophobia. Worse, the stench is disguised by a cheap perfume of do-gooding development theory and environmental hand-wringing.

Pearce goes on to suggest that strict border controls actually give us what we really want – economic disparity, and an easily cowed pool of illegal immigrant labour to do the jobs that no citizen will take for the money we’re willing to pay.

There are definitely some big holes in Pearce’s theory behind the rhetoric, but he’s also pointing at some rather uncomfortable truths. So here’s your challenge for the comments: argue against Pearce without falling back on arguments such as “why not make your own country as great as the one you want to move to”, and without making sweeping generalisations about people based on their race or nationality. Go!

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eBooks overpriced? Well, they were just a moment ago…

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Sony ebook readerIt seems like we’ve been talking a lot about ebooks in the last few months here at Futurismic, which is surely a sign of the times. The thing that’s been bothering me about ebooks for a while (and the principle reason I’ve not really started buying them myself as of yet) is that the pricing has seemed a little… unreasonable. [image by shimgray]

It’s not just me, it would appear. Yesterday, Kassia Krozser of Booksquare laid the boot into publishers trying to gouge the same price from their ebook customers as from their dead-tree buyers:

Let’s go through this one more time: ebooks are a new, different market. You, dear publishers, have been given that rarest of gifts: a new revenue stream (think: home video for the motion picture business). These books are not competition. While there are more than a few readers who would love the luxury of choice of format/style/device when it comes to purchasing and reading books (you’re reading one), the ebook customer is different than the print book customer. Even if your ebook sales are growing by leaps and bounds each quarter, they’re nowhere near the volume that print achieves.

You’re dealing with a different animal, and — wahoo! — you now have the opportunity to change how you do business. Let’s start with smarter pricing. No, let’s start with the idea that you, publishers, are not the only game in town.

Tough love indeed. However, hot on the heels of Ms Krozser’s screed (and far too close to have been a response to it, I might add) came an announcement at SF Signal: genre fiction publishers Orbit are now offering a different ebook from their backlist each month for just US$1.

Now, this is still far from ideal; it’s just a handful of titles in a handful of formats, and the inevitable and much-loathed DRM is involved. But it’s a start. I suspect as the tough times dig in over the next year, we’ll see the start of a race for the bottom in ebook pricing… especially in the genre scene, which seems to tend toward a more tech-savvy readership.

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What will become the next non-monetary economy?

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Chris “Long Tail” Anderson has an interesting guest post from Adam Gurri that discusses non-monetary economies, like the acting profession:

The thing about acting is that the labor force (actors) actually value the ability to do work in that field that they are willing to take on work for nothing and take on other jobs as a sort of cross-subsidy.  There is a sort of demand for employment in theater, which makes competition among actors so fierce as to actually drive down wages (at time of entry at least) to zero or near zero.

His argument continues that many content-creation jobs (like blogging about your profession, for example) have such low overheads that they’re cutting the feet out from under journalists, who were paid to have the time to research topics they probably didn’t know much about to start with. There’s still ‘room at the top’ for good writers with deep knowledge (whether they started as journalists or experts), but the old career path from copyboy upwards seems to be gone for good.

Whether you see that as a good thing or a bad thing probably depends on what sort of work you do, but I think we can all agree it’s happening. The question is – after journalism, what will be the next to fall? And might the flow of money be supplemented by some sort of reputational currency, like whuffie?