Thursday, October 19, 2006

Virtual Macro?

Edward Castronova has an interesting job as a MacroMind. Dr. Castronova, a professor of economics at Indiana University, studies virtual macroeconomics in synthetic worlds. Professor Castronova was interviewed this morning on the highly recommended Marketplace program on the subject of online gaming. Castronova is excited that for the first time we have big online societies with thousands of people in them that may allow us to explore “questions about how the macro economy operates.” He calls large online computer games "Petri dishes of macro economic theory." So far his research shows that economic theory seems to apply to the virtual as well as the “real” world. You can listen to the interview with Castronova here. I’ll have a lot more on virtual macro in upcoming posts. The subject would make for a fascinating Discussion Board post. Does anyone have a Second Life?

Back in the real macro world, the index of leading indicators for September barely budged. If you read Chapter 6 (pages 147-148) of your text you will find out that the leading indicators provide a rough approximation of what’s going to happen in the future. The index of leading economic indicators is rose 0.1% in September after falling in July and August. The leading indicators have been down in five of the past eight months. The index is down almost 1% in the last six months.

Will the macro landing be hard or soft? That is the question in Macroland these days. Stock market investors think things are peachy. The Dow Industrial Average reached another benchmark today, closing above 12000 for the first time.

Meanwhile China’s economy slowed to a still smoking growth rate of 10.4% in the third quarter. China has had the fastest growing major economy in the world for a generation.

Extra Credit: This question will likely be on your midterm. What has been the average annual rate of U.S. economic growth in real GDP since 1890? If you are the first student to send me an e-mail ( with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.


Javaman said...

There is another virtual world called Second life that has its own currency and economy. The currency in second life can be exchanged into real Dollars. I have not played this game but as I understand it has Reuters paying a group of reporters devoted to this virtual world.

macromind said...

Thanks for the tip, Javaman. We had a good chat about virtual economics last night.