Algorithms, Unreality & Macroeconomics in Vidya


The above image came up on my Tumblr dashboard a couple of days ago. Quite correctly, it is being circulated with the understanding that it is humorous. The humour here is derived from the artificiality of the question posed to the player, complemented by the rudimentary attempt to systematise a “Communist society” within a game-space. In point of fact, the humour is derived from an extremely important observation on the nature of video-games as systems

Accepting that what we are laughing at is, in essence, the “gamification” of a world economic & social system – its reduction to “industry & atheism” – reveals something rather important about the construction of possibility spaces in video-games. Displayed, quite nakedly here, is that video-games are based upon coding. In other words, video-games are based upon mathematics & algorithms. Therefore, the choice actually presented to the player here is reducible to a simple mathematical equation – that is, working out the 50% increase to their score in “city-production” & deducting any “cultural” score represented by temples & cathedrals. If the result is equitable in order to progress within the game-space, the player will adopt a “Communist” form of society. If it is not, they won’t. The system of mechanics adopted entirely determines the player’s agency within this scenario. As what is ultimately a system constructed by algorithms, the solution to the problem posed is purely mathematical. 

What is starkly shown by this example is the difficulty that an algorithmic system – ie a video game – will face in an attempt to reflect, with any degree of accuracy, the real world. Whilst the example shown is absurd, crassly crafted & ludicrous – a reductio ad absurdum of the point it is being used to highlight – it is a fairly foundational understanding of the artistic labour involved in video-game design & programming. The purpose of aesthetic design in this medium has, as its primary focus, the obfuscation of the mechanical processes of programming. The decision offered above has its basis within coding & an aesthetic which is inadequate in disguising this fact. It is entirely impossible to reproduce this question within concrete reality. Consider, for example, what does the “cultural” score which features in the game’s resource interface represent in reality? Is that reducible to mathematics?

Video-games, therefore, operate by algorithms which translate into mechanics – or “rules” – within the possibility spaces they construct. Essentially, they are built from pure mathematics, abstracted from reality, to render an artistic product. There is a very important reason that so much stress is given to programming & mathematics. If it is not done correctly, things like this happen:

I think it is also pertinent to highlight, here, that the purpose of video-games as works of art is not to replicate reality. The purpose of video-games is the purpose of art, to systematise emotions & to communicate something of social-value.

I have written before on mechanics within the unity of form & content of video-games; however, the consideration here is to highlight a different point. Obviously, Marx’s observation that ‘[it] is not the consciousness of men that determines their existence, but their social existence that determines their consciousness’ (Karl Marx, Preface to a Contribution to the Critique of Political Economy, 1859) is correct &, therefore, like all art, video-games reflect their material surroundings & society. However, in the consumption of video-games as artistic commodities (not to be divorced from production), in the realisation of the aesthetic & use-value of these commodities, players inevitably enter into a form of “unreality”. To be clear, this refers to the player-state within the video-game – ie the way in which the player interacts with the mechanics & aesthetics, the form & the content, of the digital world rendered. It does not refer to the effect of aesthetics upon the player – which are concrete & real. Whilst these 2 things are dialectically joined at the hip, it is necessary to compartmentalise for the sake of explanation.

To put this as bluntly as possible: the material conditions of reality, which you experience, are different from the material conditions within the possibility space of a video-game, which your avatar in the game experiences & you experience ludically, aesthetically etc – the 2 states are controlled by 2 different sets of “rules”. What follows from this is that the human behaviour within these 2 states will differ – different contexts giving rise to different ideas & modes of behaviour. These differences are qualitative. To put this in simple terms: in real life, would you attempt to slide down the roof of a building then flip to the next , like you would in Mirrors Edge?

You wouldn't go trying this either, would you?
You wouldn’t go trying this either, would you?

So, we have 2 observations: video-games are built upon algorithms & mathematics – with which it is difficult (not impossible) to replicate reality; the possibility spaces offered in video-games give rise to different ideas & modes of behaviour. It is with this in mind that we turn to consider the application of economic theory & modelling on massive multiplayer online games (MMOs).

On 28 September, 2012, The Washington Post, published an article entitled ‘The economics of video games‘. The article reports on video-game companies, which run MMOs, hiring in-house economists to help them manage player-based economies. Take, for example, this paragraph describing the role that Eyjólfur Guðmundsson now plays at CCP Games, regulating the EVE Online economy:

It’s a sprawling economy, with more than 400,000 players participating in its virtual market — more people, in fact, than live in Iceland. Inflation, deflation and even recessions can occur. Which is why, from his office in Reyjkjavik, Guðmundsson leads a team of eight analysts poring over reams of data to make sure everything in Eve Online is running smoothly. His job bears more than a passing resemblance to that of Ben Bernanke, who oversees the U.S. economy from the Federal Reserve. (Washington Post.)

Whilst 1 can, perhaps, see the validity in a games company hiring an economist in order to keep their MMO balanced, what is worrying is the response of the economists to this. Both Guðmundsson & Yanis Varoufakis, the in-house economist at Valve, seem to be under the impression that video-games offer a potential for developing macroeconomic theory. Guðmundsson tells us that ‘For all intents and purposes, this is an economy that has activity equal to a small country in real life. There’s nothing “virtual” about this world’, whereas Varoufakis states ‘The future is going to be in experimentation and simulation — and video game communities give us a chance to do all that.’ (Washington Post.) Varoufakis goes further on his blog, in a post entitled ‘It all began with a strange email‘. Note his use of quotation marks: ‘My intention at Valve, beyond performing a great deal of data mining, experimentation, and calibration of services provided to customers on the basis of such empirical findings, is to to go one step beyond; to forge narratives and empirical knowledge that […] transcend the border separating the “real” from the digital economies’. (Varoufakis.)

Now, there is a lot to criticise here, both in terms of macroeconomics in general & in terms of Guðmundsson & Varoufakis specific theories. However, for brevity’s sake, we shall focus upon that which holds the most weight.

Karl Marx, in a chair.

In the 1st volume of Capital, in its 1st chapter, Marx lays out an understanding of commodities. Commodities, he tells us, are ‘the economic cell form’ of Capitalism (Karl Marx, ‘Preface to the First Edition‘ (1867), Capital, Vol. 1.):

The wealth of societies in which the capitalist mode of production prevails appears as ‘an immense collection of commodities’; the individual commodity appears as its elementary form. Our investigation therefore begins with the analysis of the commodity. (Marx, Capital, Vol. 1.)

The commodity, in its 1st instance, is an object external to us, which satisfies a need. Marx is quick to state that the ‘nature of these needs, whether they arise, from the stomach, or the imagination, makes no difference.’ To simplify this, both a sandwich & a painting, as objects outside of us, fulfil human needs; therefore, they both hold the potential to exist as commodities. Equally, ‘it does not matter here how the thing satisfies man’s need’. Marx provides the example of direct & indirect forms of this, in the example of ‘an object of consumption’ (direct) & the ‘means of production’ (indirect). Another example: both a pork sandwich, as ‘an object of consumption’, & the knife that slits the pig’s throat, as the ‘means of production’, can satisfy a human need; they both, as with the painting & the previous sandwich, hold the potential to exist as commodities. What is important is the manner in which commodities satisfy human needs – this constitutes their use-value: ‘The usefulness of a thing makes it a use-value.’

A further discussion of use-value is, at present, irrelevant. Whilst Marx moves through a description of use-values, we shall rejoin him when he enters into a discussion of exchange-value:

Exchange-value appears first of all as the quantitative relation, the proportion, in which use-values of one kind exchange for use-values of another kind. This relation changes constantly with time and place.

What this means is that exchange-value denotes the proportion against which commodities may be exchanged against each other. For example, exchange-value is that which tells us that x amount of sandwiches is equal to y amount of painting. Marx moves from this discussion – that exchange-value is a quantitative relation between various use-values – to identify that there must be a commonality between commodities which allows us to determine their exchange-value: ‘Both are therefore equal to a third thing, which in itself is neither the one nor the other. Each of them, so far as it is exchange-value, must therefore be reducible to this third thing.’  What is, therefore, ‘this third thing’? The answer is not to be found in the use-value of commodities.

This common element cannot be a geometrical, physical, chemical or other natural property of commodities. Such properties come into consideration only to the extent that they make the commodities useful, i.e. turn them into use-values. But clearly, the exchange relation of commodities is characterised precisely by its abstraction from their use-values. Within the exchange relation, one use-value is worth just as much as another, provided only that it is present in the appropriate quantity.

To put this argument in simple terms: the exchange-value of a commodity cannot be determined by its use-value. As we have already highlighted, in our treatment of what constitutes use-value, the uses of commodities are different, they are qualitative. The use of a sandwich stems from the body’s need for nutrition; the use of a painting stems from a social need, manifesting within a socially recognised form; these use-values are entirely different. The 2 uses are not comparable upon the basis of exchange-value, which is a quantitative relation. In Marx’s words: ‘As use-values, commodities differ above all in quality, while as exchange-values they can only differ in quantity, and therefore do not contain an atom of use-values.’

Once we have disregarded use-value as the basis for exchange-value, we must then locate what Marx has referred to as ‘this third thing’ – that which is common to all commodities &, therefore, provides the basis for an exchange relation. Marx has already told us that this thing is not located in either of the commodities exchange as inherent through his understanding that use-value is not the basis for the exchange relation. Instead, he locates this commonality within labour-power.

If we disregard the use-value of commodities, only one property remains, that of being products of labour. But even the product of labour has already been transformed in our hands. If we make abstraction from its use-value, we abstract also from the material constituents and forms which make it a use-value. It is no longer a table, a house, a piece of yarn or any other useful thing. All its sensuous characteristics are extinguished. Nor is it any longer the product of the labour of the joiner, the mason or the spinner, or of any other particular product of productive labour. With the disappearance of the useful character of the products of labour embodied in different concrete forms of labour. They can no longer be distinguished, but are all together reduced to the same kind of labour, human labour in the abstract.

Marx’s abstraction from the commodity as a concrete use-value, with ‘sensuous characteristics’, is extremely important to understand his wider point. Marx tells us that the basis of exchange-value is human labour, that what determines the value of a sandwich is the labour-time imbued within it: ‘As exchange-values, all commodities are merely definite quantities of congealed labopur-time.‘ (Italics Marx’s.) The basis for this, within society is taken from Marx’s abstraction here. Using the example of a lazy worker, he tells us that this exchange-value must be considered in a totality:

It might seem that if the value of a commodity is determined by the quantity of labour expended to produce it, it would be more valuable the more unskillful and lazy the worker who produced it, because he would need more time to complete the article. However, the labour that forms the substance of value is equal human labour, the expenditure of identical human labour-power […] Socially necessary labour-time is the labour-time required to produce any use-value iunder the conditions of production normal for a given society and with the average degree of skill and intensity of labour prevalent within that society.

Therefore, the exchange-value of a commodity derives from the socially necessary labout-time required to produce that commodity.

To reiterate our considerartion of the commodity: a commodity appears as the ‘economic cell’ of a Capitalist soiety. It is an object outside of uswhich fulfills some need – this is fulfilled by a use-value. Use-values are qualitatively different. Commodities must also possess an exchange-value – that is, the a value by which they are exchanged. This is a quantative relationx sandwiches for y paintings. Use-value cannot form the basis for this exchange relation; they are not comparable, but different. Therefore, exchange-value must be reducible to a 3rd thing. This 3rd thing is human labour-power. This is measured by the socially necessary labour-time required to produced a given commodity.

In contrast, the commodity in a video-game economy takes its value, precisely from its use-value. Due to its basis as an algorithm, it is entirely reducible to a numerical value. Rather than a multiplicity of use-values, each distinct, the economy of a video-game is charted by an ever increasing effectiveness of utility – ie the guns shoot better, the mining-drills mine faster. In other words, a gun that does 4 damage per second is more valuable than a gun that does 2 damage per second by a multiplication of 2; a mining-drill that secures 5 ore per minute is more valuable than a mining-drill that secures 1 ore per minute by a multiplication of 5. Furthermore, in a well-balanced MMO, all styles of play are equally valid, despite their difference in utility. The algorithm provides a comparable basis for exchange – a factor of 2 can be taken as equal to a factor of 2 irrespective of what function that factor contributes toward. Instead of what is common to commodities under Capitalism – that is, abstracted human labour-power – the commodities in the digital world of an MMO have in common their numerical value in the algorithms that constitute their existence. The determining factors of value in a Capitalist economy & the digital economies offered by MMOs are, therefore, qualitatively different.

We are, therefore, presented with the study of economies – by Guðmundsson, Varoufakis & their ilk – which exist within an entirely different material context. The basis for the economy of, say, EVE Online is entirely different from the basis of the real & actual Capitalist economy. Ergo, as with our previous understanding of “unreality”, behavioural patterns will change, the basis of exchange will differ; fundamentally, the economy will not function in the same manner as that our own at its most basic level – the commodity. These economies are being created within a reality abstracted from matter – in essence, they are economies of “unreality”.

There's an extremely lucrative market in space cannons. Invest now before it becomes over-saturated!
There’s an extremely lucrative market in space cannons. Invest now before it becomes over-saturated! Or the planet gets blown up!

This serves a political purpose. By obscuring the nature of the commodity within an algorithimic data-set, what is fundamentally obscured is the source of exchange-value, the source of wealth – that is, human labour. The political consequences of this are very clear: the political & economic role of the proletariat is obscured. In point of fact, the very existence of the proletariat is obscured. There are arguments that can be raised against this objection – ie that in EVE Online, players mine resources to build objects, & that this could be concieved of as human labour. However, these arguments are, by & large, specifically empirical & separated from the general trend. Video-games are designed as artistic products, largely as entertainment. 1 cannot imagine that a game accurately reflecting the overwhelming toil & misery of Capitalist waged-labour economics would find itself with much of an online community. The general trend is that the proletariat is removed from the video-game economy. The political significance of this should be quite easy to grasp. Guðmundsson & Varoufakis’ models are pertinent examples neo-Ricardianism.

That is not to say that the study of MMOs as serious spheres of social-interaction, or even digital economies should be ignored. They must, however, be treated with a thorough skepticism & an awareness of their basis within “unreality”. In ‘It all began with a strange email’, Varoufakis shows an awareness of the problems posed in general to his field of macroeconomics – econometrics to be precise: ‘Econometrics purports to test economic theories by statistical means. And yet what it ends up testing is whether some ‘reduced form’, an equation (or system of equations), that is consistent with one’s theory, is also consistent with the data. The problem of course is that the ‘reduced form’ under test can be shown to be consistent with an infinity of competing theories. Thus, econometrics can only pretend to discriminate between mutually contradictory theories.’ (Varoufakis.) What he has identified, here, is that economic models can be used to prove whatever point 1 wants in the field of econometrics. As we have stated before, video-games are made up of algorithims. They are created by design. The prospect of bourgeois economists having access to data-set entirely malleable to their desires, justified by its active participation of players endowed with a relative agency, is a terrifying 1. Given the anarchy of Capitalist production without this interference, & the ideological nonsense spouted by all kinds of bourgeois representatives in reality, it is important that we thoroughly question the application of macroeconomics to video-games, whatever results it may yield.


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