Monetary Heterodoxies

Even though Felix Martin’s Money chiefly chronicles money’s past and Edward Castronova’s Wildcat Currency more obviously addresses its future, the two books have much in common. Both announce themselves as heterodox works and largely reject the assumptions about money that undergird mainstream economics and dominate political discourse today.¹ Although neither book is clearly Marxist or avowedly Keynesian—that is, neither identifies with a named, alternative “school” of economics—both are largely chartalist in outlook (they see states playing a necessary and legitimate monetary role) and are especially attuned to conflicts between private and public money. That both books are also in some ways about technology is another important similarity, albeit one that highlights their differences in focus—for whereas Castronova’s book considers online games and virtual realities conventionally defined as “high tech,” Martin sees all money (from coins to banknotes to debit cards) as constituting a social technology. Castronova does not deny that money is socially significant any more than Martin ignores changes in material form, but the two books emphasize very different points. That they come to structurally similar conclusions is, therefore, all the more significant.

Wildcat Currency takes as its inspiration the “parallel” economies of online games and virtual realities. For those of us who do not play EVE Online (a game of battling spaceships set in the distant future in a free-market galaxy far, far away), have never had a Second Life avatar, and have amassed nary a DKP (Dragon Kill Point), SIK (Sturdy Iron Key), or ISK (the currency used in EVE Online), Castronova’s specific examples are, at the very least, intriguing. If nothing else, the book effectively makes the point that millions of people worldwide have emotional and monetary investments in forms of wealth and sorts of productivity (better armor, stronger love potions, faster warp drives, and so on) that are not part of any country’s GDP. In one sense, these game currencies are, like frequent-flyer miles or the points issued by various retailers’ reward schemes, a “special-purpose” money—a currency that can be used to acquire only one specific set of goods. Insofar as money is usually defined as a general equivalent, then one might say that these virtual currencies are not really money at all.² Castronova’s more striking point, though, is that these alternate realities are not completely isolated from the day-to-day economy: Game players who want DKPs or other such currencies can either earn them in the game or they may buy them from other players outside the game in transactions denominated in “real” money. In the latter case, some sort of exchange rate must be established between the two currencies. For a game’s developers, the rising or falling value of its currency on these exchanges is an important economic indicator—one that, according to Castronova, they interpret in quite orthodox, quantity-theory inspired terms (falling value means too much money in the system, rising value means too little). Whereas a central bank’s response to high unemployment or rapid inflation is always mediated by politics, no such dynamic is at work in the absolutist state that is any game world. If there is too little money in the system, developers can easily inject more by releasing an update in which each slain dragon is worth twice as many gold pieces (or by increasing the number of dragons in the system); if there is too much, the update might introduce a bounty hunter’s fee to be paid by a player whenever he or she kills a beast.

In this fast-paced work, Castronova quickly describes a variety of privately produced, crypto- and otherwise non-state currencies (of which Bitcoin, interestingly enough, is not his...