Beware Navel-Gazing Straw Men on Second Life and in Real Life

Yesterday I came across this article on MSNBC that claims a bank crash that took place in the virtual world Second Life foretold the current economic crisis. The author says Second Life can provide "real-life lessons on the patterns of free markets and unfettered capitalism." Maybe it can, but be careful what conclusions you draw from those lessons. There are physical costs and incentives associated with the real world that a virtual world like Second Life cannot duplicate.

MSNBC's chief source is a highly credentialed professor out of Cornell, who also authors the blog Metanomics. However, comparisons between the real world and the virtual world to conclude financial markets cannot simply be left alone to self-regulate is a straw man.

The conclusion this straw man enables is tempting for two groups of people:

• Second Life fanatics
• Those who are inclined to believe that the problems in this economy can traced back to insufficient regulations.

So if you fall into one of those two groups (or worse, both), beware bias that might prematurely lead you to MSNBCs conclusion without a thorough vetting.

No market is unregulated in Second Life or in any other life -- especially the real world, where banks and businesses are under such stringent regulations that they hire teams of consultants and accountants to ensure they won't be fined, fired, or thrown in jail for misreporting their numbers.

On top of that, at some point in world history, before law and order were established mainstays of organized society, real life bankers really had to fear being tarred and feathered by mobs with pitchforks if they did not behave honestly. That's a pretty convincing incentive to not rip anyone off.

I won't say the same mob justice isn't possible on Second Life, but it doesn't sting as much when it happens to your avatar.

Now, at least the law gives people some recourse if they have a grievance due to fraud. And this is true no matter what life the promises are made. Then it's just a question of jurisdiction. And if all else fails, Second Life can ban access to its platform or certain types of transactions -- that in itself is another form of regulation that puts to rest the premise that Second Life represents life without regulation.

It's complicated and it makes for an interesting academic discussion, which is probably why an academic is exploring it. However, we need beware of hasty conclusions. - Cam Beck