The Agenda

Pascal-Emmanuel Gobry on the Virtual Goods Economy

Pascal-Emmanuel Gobry has an excellent post at Business Insider on an annoying complaint we often here about Zynga, the social gaming juggernaut:

It seems that every single story about Zynga from the past several years talks about virtual goods as a novel and strange concept, as this exceedingly weird thing, that people would be willing to pay for virtual goods. Of course, the reality is that our economy has been based on virtual goods forever. 

As Pascal goes on to argue, virtual goods run the gamut from a song on iTunes to physical goods that serve as status markers:

Nobody buys a $1,000 handbag for the value proposition of carrying things from point A to point B. They buy a $1,000 handbag because of how it makes them look and feel. There is nothing “real” about the value of a $1,000 handbag. It doesn’t mean it’s a scam: if the pleasure you get out of owning a $1,000 handbag is worth more to you than $1,000 in cash, then no one should stop you.

It does mean that a $1,000 handbag is a virtual good. $50 of the value of the bag comes from the value of being able to carry things around, and $950 of the value comes from how the bag makes you look and feel. It’s just as virtual as buying a skyscraper in CityVille… because of how it makes you look to your friends and feel entertained. 

This column is so right that I want to tattoo some selected excerpts on my forehead. I’ve touched on some related themes in this space, including this post on the idea of “socially useless” economic activity:

But the idea that “there’s no social defense for this practice” strikes me as foolish. One has to wonder where the entertainment industry fits in, or the panoply of news outlets available to U.S. consumers. Given the nontrivial sums we devote to professional sports, foods rich in high-fructose corn syrup, clothing that we don’t need to protect ourselves from the elements, and virtually all of the goods and services produced in a post-modern economy that speak to our desire for self-expression and recognition rather than brute survival, I’d suggest that the question of what is and what is not “socially useful” is a hard question to answer.

Perhaps Cassidy has a keen sense of what kinds of consumption can be defended on “social” grounds, and I imagine he considers the pleasure of reading long-form narrative journalism very socially useful indeed — more useful, clearly, than mumbo-jumbo financial speculation. I’d love to see a comprehensive list of the activities Cassidy deems socially useful and those he considers socially useless. 

The automobile industry, the paradigmatic example of the “real,” blue-collar, manufacturing-based economy that we continue to fetishize, is profoundly virtual when viewed through Pascal’s lens. When we spend 10x rather than x to get from Point A to Point B, what exactly are we driving at? 

Our economy is identity-driven, and that is at the heart of our employment crisis. More on this theme to come in my next column. 

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