Second Life Economy is in a Recession

by Jessica Holyoke on 14/02/08 at 8:22 am

Residents with a positive monthly L$ cash flow declines for second consecutive quarter

by Jessica Holyoke

JessicaAfter the banking ban, there are commentators who state that the Second Life Economy is in a recession and then there are the opposing commentators that say that the Second Life Economy is not in a recession. 

According to Wikipedia, a recession "is a decline in a country’s gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year."  Linden Lab does not have figures on GDP or economic growth.  But the Economic Statistics page does provide two numbers that can assist in seeing if there is a recession, Positive Monthly Linden Flow (PMLF) and total User Hours Logged. 

PMLF is the number of unique users that showed profit over a particular month.  On the statistics page, they are grouped by number of users that have experienced a degree of profit in U.S. dollars.  This number is better than the other monthly spending numbers because it eliminates any Alt effect.  For the resident transaction numbers, if I gave an Alt any amount of money, it would be counted in the totals, even though I was not spending money, just shifting it around.

Second Life users with positive monthly L$ cashflow getting harder to find

PMLF does not include land sales.  According to the source, land sales are investments and not receipts.  So they do not get counted as business receipts.  This makes land comparisons more isolated and it takes out any land businesses, like land barons and banks.  PMLF covers the buying habits of everyone who is not in the land business.

In looking at the PMLF, I took the mode, or the central number, of each category except for the $5000 and above category.  For that category, I used $5000.  I then multiplied the amount earned by the number of users in that category.  I then added all of those sums to create a monthly total which is an estimate of the total PMLF.  I was then able to compare the average PMLF for a calendar quarter and track percent growth within that particular quarter.  Growth is measured as the difference of the starting value and the ending value divided by the starting value.

Quarter 3 and Quarter 4 2007 both saw negative PMLF Growth. The percentages were not more than 2%, but they were both negative.  Negative economic growth for two calendar quarters is an indication of a recession.

Total hours logged also decline

THL also avoids the alt effect because it measures how much total time is spent in world.  While certain content creators do not need to spend any time in world, people searching, purchasing and using their products do need to be in world to use their purchases. 

THL growth was negative for Quarter 4 2007.  The only other time it was negative was in Quarter 1 2005.  In talking with wise resident Gwyneth Llwellyn, around that time, the Lindens stopped paying L$500 for each host of an event.  This may have created a negative use rate.

In dividing the quarterly values of PMLF by THL, you get an index I will call the Quarterly Profit per Capita (QPC).  Because of the lack of historic PMLF values, QPC cannot go back before quarter 3 2006.  While QPC is lower now, it is not dramatically lower.  QPC was 0.26 during the Quarter 4 2006 boom and 0.20 for Quarter 4 2007.

Quarterly Profit per Capita

So while total profit might be down, and showing recessionary signs, the strength of the economy based on the people who use it have only slightly slipped.

Total positive monthly L$ flow

30 Responses to “Second Life Economy is in a Recession”

  1. Penance Sautereau

    Feb 14th, 2008

    Yeah, business is slow, rates have dropped, but it’s the post holiday slump I think. SL’s like RL that way. It’ll pick up eventually.

  2. EB!

    Feb 14th, 2008

    Last night I wished Jessica a Happy Valentine’s Day (give everyone a hug…You never can be too sure if the person at the keyboard is the right gender even if their avatar is not!) and I mentioned that SL may more be riding into the trough of the Hype Cycle. So it might be a traditional recession…but I think it’s more that we’re in the middle of disillusionment. The drop in total hours logged may be the telling statistic.

    I think the The next 6 or 12 months may be very interesting in SL–2008 will be a lot different than 2006. I’m cautiously optimistic. Until something else replaces SL, this is the biggest MMO where you can build your own stuff. There are small groups doing some real things here, mostly in education–the librarians and educators are the core from which the “new SL” will grow.

    (Wouldn’t it be wild if the next group of politicians embraced SL as a way to connect with the constituents? The PotUSA (currently Pres. Bush) can’t travel anywhere without a bubble of security–but here in SL he’d be free to dance with everyone!)

    The gambling ban did a lot to hurt the SL economy; though its effects weren’t fully seen until 3Q07 the graphs show problems starting 2Q07. Gambling also let people spend a lot of time doing something here in SL; now all that’s left for the basic-member-masses is dancing. IMO, banking wasn’t a factor in the real SL economy–just another part of the game like the casinos where the house had the advantage. I think the 1Q07 flatness and 2Q07 drop was SL falling into the Hype Cycle trough.

    Some links:

    Hype Cycle explained:

    Articles from 13 months ago:

    From August, good discussion:

    103,000 more pages:

  3. Prokofy Neva

    Feb 14th, 2008

    I disagree that the economy is in any kind of RL-like recession, if that can be said about an artificially-constructed entity like the SL economy.

    There are other indicators that completely contradict these arbitrarily-chosen signs:

    o sale of Lindens — there was a whopping 96 million Lindens sold on the LindEx the other day, the highest I’ve ever seen in years, and even for now, where it is 60-70 million tops. While you can posit that this could be bankers cashing out, the purchase came well after the banking closure dates and likely represents something else (I don’t know what). Even if someone is heading for the doors and failing, the fact that there are people around to *buy* these Lindens shows us that there is a good economic sign, not a downturn

    o And it’s not Supply Linden selling the Lindens only; he’s had to make a *lot* less money since the banking collapse and has something like half his revenue in US dollars, would have to check.

    o The traffic at all infohubs and welcome areas is increased, and there are a lot of new customers, businesses anecdotally report.

    I’m happy to concede that big dramatic actions have a knock-on effect felt sometimes months later, but I’m not sure “recession” is the right term, as the ability to cash out Lindens at 265/$1.00 within 24 hours remains — so the Lindens knock themselves out to keep it stable.

    As for this crazy Positive Linden Monthly Flow, which sounds like some sort of ad for Kotex products:

    a. The Lindens are heavily ideological in leaving out the land business, that’s just plain retarded. However, they aren’t leaving out the *rentals* business on the mainland, and most private island operations which rely on paying objects in world for rent or tier, and which are indistinguishable in PLMF terms from, say, a dress vendor.

    b. There aren’t a lot of these PMLF folks at the higher end of the spectrum, I think like 2,000 who make more than $2000. I’m one of them. However, I’ll be the first to tell you that this crazy PMFL crap does not account for the *expense of tier*. So if they had to report those who had profit AFTER tier, there’d be less of us.

    c. I can tell you just my own story of the last 6 weeks so you can see how a long-standing PMLFer gets turned into something that looks “recessional”:

    The Lindens suddenly, without discussion with anyone or indications to the community, as so often happens, decided to deal with a long-standing thorn in the side of land owners — abandoned property. So suddenly, 6-10 entire sims or more of little 512 or 1024 or more parcels went on the auction all over the place. If you were unfortunate enough to have some of this purple land next to you, you had to scramble and buy it pronto, to avoid either a ad-farm extortionist buying it and griefing you with it, a griefer griefing griefing you with it, or, as happened in my case, moving to prevent Club XTC, which sits on only 4608 of land on a sim where I and another person own the rest of the sim, from getting more primland and therefore lengthening its stay on the sim. (It’s hugely annoying that a club that bought and moved to an island would leave a store behind that it would then suddenly convert to a club again sucking up the 40 avatar places and the entire FPS of the sim night after night).

    In my case, I had to pay a whopping US $187 for a mere 1,536 of meters on that sim, which is just inexcusable — the Lindens really should work out some more fair procedure for trying to solve this problem of abandoned land. So after I’ve shed $187 US (in Lindens, on the Linden-denominated auction), and also hustled around to buy another couple hundred dollars worth of newly-abandoned land either off the auction, or inworld at even more extortionist prices, my profits are wiped out.

    Why are my hours less? My operating theory about the massive increase in hours in recent months has been a better indication of an economy in trouble than anything else — because with downturns, I, like others creating experience in SL, if not content, have to log on way more hours to try to get customers, hustle to change things to try to get better advertising, etc. etc. Longer user hours means people having to work harder to make the same money.

    Perhaps that’s a natural corrective, however, because we may have been living in a bubble where we imagined that we could log on for only an hour a day and the till would keep ringing without us (I find that one of the biggest fallacies of SL, perpetrated by lots of kids who make lots of automated scripty thingies).

    So…why less hours? Because SL isn’t working. It just doesn’t work. Not only does it crash — that I can live with — it’s just down, rolling restarting, jamming, freezing, not teleporting, not putting through transactions, not opening notecards. And when SL doesn’t work, you log off and see if Raph is done tinkering with Metaplace yet…I’m looking now to diversify into and need someone to stake me to a month of high-octane predictions in the World section…

    So ironically, in this “recession,” I had to spend more Lindens, tier up to engulf this sudden glut of abandoned land, and hustle to find more customers, so that next month might look better — or not. Time will tell. I wish the Herald — well *some* decent newspaper — would *report* on what actual people in this PMLF thing are actually doing.

    «Жить стало лучше, товарищи. Жить стало веселее»

  4. Duh

    Feb 14th, 2008

    Oooh, look, the Herald pretends to be an economist, and blatantly ignores the gambling ban and it’s PREVIOUS REPORT two years ago about how gambling artificially inflated numbers 80%+

  5. SqueezeOne Pow

    Feb 14th, 2008

    Ironically the last few months have been pretty good for my shop. I guess the first thing people rush to buy in order to cope with a “SLRecession” is robot avs!

  6. Ann Otoole

    Feb 14th, 2008

    hey squeeze you got any mugger mob robots that operate as a NPC mob if “agro’d” (EQ/WoW speak for proximity triggering a mob attack)? we need NPC mobs in sl. we need to do something to make SL interesting. Given any content you create will be stolen (and LL will do exactly zero about it) it is time to develop different business models based on entertainment value.

  7. Nacon

    Feb 14th, 2008

    “The gambling ban did a lot to hurt the SL economy;”

    ……It’s gambling ban, ya dolt! Of course it did, talk about late report to notice anything at all?
    I’ve noticed it since 1 bloody freaking week after the gambling ban! FUCKING DOLT! GO TO COLLEGE!

  8. my dream come true

    Feb 14th, 2008

    EB! Said:

    It would be great to watch the subsequent videos of griefers dressed as terrorists “assasinating” the president. Rofl.

  9. SqueezeOne Pow

    Feb 14th, 2008


    All my stuff is avatars. I’m kinda script-tarded so my stuff is relatively simple in function.

    There ARE zombies that come after you and bite you. It kills in damage areas, too! Not sure who makes them but they’re pretty easy to find.

    You could unleash them at Hope Capital Island. Then there’d actually be some activity there!

  10. Francoise Fairey

    Feb 14th, 2008

    The large amount of Lindex purchases could be Euros paying tier to private estates, as that way they avoid up to 26% Value Added Tax!

  11. Mony Markova

    Feb 14th, 2008

    Well you are mocking your self. The only thing makes me tick more than SL addiction is the people thinking that there is a SL Economy as such, in my opinion it is simply better to play this aspect as a game, SL economy it’s in its infancy and you (vendors and their clients) are paying for it to grow. Here is why.

    First of all, the metrics offered by Jessica simply will not help determining if there is a recession or not, secondly SL Economy is a CLOSED economic system, meaning that it does not have EXPORTS. Exports and imports are important aspects affecting GDP.

    In other words if your bucket does not leak water, everything remains inside. SL GDP is always within its closed system and therefore it cannot be compared to a regular economy at this point or with those metrics. Most of your expenses are going lastly into the direction of… guess whom… right Linden Labs… it is like a one way highway. Does LL put back in circulation (into the economic system), all the lindens it captures, and for instance the 10L you pay to upload a picture? Or keeps them as profit for the sake of maintaining servers?

    What affects the vendors economy and prevents them from making money, (besides the super high prices virtual land and all LL “taxes”) is the imports or real dollars into the economy and the artificially price of Lindens towards a 270L rate. Vendors are forced (by offer and demand) into selling their items, even quality items at a tiny value. But this dollar rate is needed and understood to attract new citizens in order to one day create a real economy or better said a MARKETPLACE. SL is better analyzed as a marketplace than as an Economy at this point, especially if we lack proper metrics to do so. A better indication of such an economy is the purchase of lindens, that is the metric you are looking for.

    Needing more people or more cashflow into the system reminds me of the need to have, a sufficient amount of eyeballs, (remember that in e-commerce?) The only solution, I can figure out, is to create islands where another currency, exists, where very high quality products are sold at a premium prizes. Other than this vendors and business hopefuls, please remain patient, maybe for years.
    You need very high prized items to make a profit, considering what you have paid for your virtual land, your broadband, and your time in-world.

    Until this or other solution exists… Fellow SL´s I am afraid you are playing Barbie and Ken economics. Stop fooling yourself and sorry Jessica I mean no mean to you, your analysis is very misleading and poorly conceived.

    Linden Labs is not helping on this matter and data for that source is incomplete, also misleading and with metrics that point only to the best interest of that company.

    Of course a note on those highly savvy and dedicated ones making profits. Kudos to them. My belief is that they achieve those results by managing their own business not as a result of an economy or marketplace.

    For most, breaking even (you will need to add the broadband cost and other “hidden” cost to that). For instance the time you lose by being connected versus making real dollars off-world; This is only a game, play it as such, or tag the price of your items at a rate that will give u a profit, except that if you sell that wonderful item you make at 50,000L and your competition sells a similar one at 450L… well u know how many of those you will sell…

    Lets play Barbie and Ken economics. Mmmm your rule to measure SL GDP… SL GLLP (Gross Linden Labs Product) HOHOHO… a better name is GSLP (Gross Second Life Product) could be…
    Add the value of all purchased lindens, dollars to lindens + all commerce transactions, including land – money that goes into LL and does not return into the system.
    That would give you and interesting GSLP proposal. It should be discussed if dollars to lindens should be included…

  12. IntLibber Brautigan

    Feb 14th, 2008

    Jessica, I’m not sure where you’re getting your economic stats, but LL’s current stats show a 10% increase in PMLF avatars from 50k to 55k between Dec and Jan, and 55k is an all time high.

    Your Quarterly Profit Per Capita is misleading, one way to lie with statistics, because what it actually means is that the lower to middle classes of working residents is growing, while the upper class working residents, those earning over $500 US per month, has remained static. What this means is that economic growth is widely distributed among those at or below the median, but not to those above it. This is actually a healthy sign, because it means there are more working people inworld building wealth rather than just whipping out the credit card.

    The lack of growth in the upper classes is indicative of LL making it more difficult for the traditional wealthy, i.e. the estate owners, to compete against the land glut produced by the LL reposessions of Casino sims to repurpose into continents of new land. Another hit the upper classes in SL have taken is having to compete against sweatshop chinese labor selling 10 L$ items for Anshe Chung.

    We do see widespread deflation in the economy: reduced land prices, reduced product prices, reduced service prices, etc. and yes, working residents do have to work harder to make a buck now, no matter how much they earn. This, coupled with widespread IP theft means content creators have to produce more new content, landowners need to hustle more to keep sims filled with tier paying customers and have a much much longer return on investment term.

    With the competition from Central Grid, other grids, and other virtual worlds, its no wonder this is happening. It’s also happening because the new Linden Lab, one produced by the rantings of PTA-fascists like Prokofy Neva and Ben Djuranske demanding gambling bans, banking bans, and adfarm bans, who think that telling others what to do with their property equals freedom, is turning SL from a utopia of liberty with high economic growth into a regulatory fascist hellhole with low economic growth.

    Perhaps LL is purposely doing this as an experiment, or as a lesson, to teach everyone what happens when you start screwing with a previously free economy: it turns to crap. Some of us didn’t need that lesson, comparing SL to RL is education enough.

  13. Just Me

    Feb 14th, 2008

    “SL Economy is a CLOSED economic system, meaning that it does not have EXPORTS. Exports and imports are important aspects affecting GDP. In other words if your bucket does not leak water, everything remains inside. SL GDP is always within its closed system”

    Not really. I sell a variety of products and a few times each month, I convert the Lindens into US Dollars and send them to my PayPal account. So, there is a way to ‘export’ currency/value, if not products.

    As for ‘imports’, what about things like SLexchange where you can purchase items with money that is NOT in your ‘in world’ account and then have the items ‘delivered’ to you in world. Isn’t that an ‘import’ system, even tho rudimentary ?

  14. Prokofy Neva

    Feb 14th, 2008

    Anshe Chung’s workers aren’t in sweatshops; they’re in Photoshops, maybe, but not sweatshops. And if you’re going to be pro-market, and extreme-capitalist like the anarcho-capitalists, you can’t bitch and moan about $10 furniture. People make and sell $10 furniture because…they can.

    I find it absolutely hilarious that these “information wants to be free” people have named themselves “Central Grid”. More like central casting ROFL…I fail to see how they are “competitions”.

    BTW, what a ridiculously false claim. I never called for gambling bans. It just isn’t my thing. I ignored them. I got rid of casinos on my land years ago simply because it seemed a) sad for newbies to be flushed out of all their cash by these casino objects that I couldn’t be sure were crooked b) sad for me to be flushed out of all my cash by people hacking the casino objects. I don’t see any reason why I need to oppose something that is US law, however. If enough people don’t want it, they’ll get Obama to change it or whatever.

    As for banks, I definitely never called for them to close. I figure people are grown-ups, and they walk into a risky investment knowingly on most of these bank prims, because they have notecards. The context alone lets you know it’s a literal gamble. I did not feel it was anything at all I should campaign on. So that’s a false statement, because if anything, I heavily critiqued Duranske for being so quick to prosecute businesses he really did not have any knowledge or documentation about, and not acting upon a client.

    As for ad-farms, I sure as hell campaigned heavily against them for the last 2 years. They aren’t ads, for one. And they’re the fascists, telling ME I can’t use, rent, sell, or develop my land in any way because they are uglifying an entire swathe of sim and forcing me to buy back the view. That’s not free enterprise; that’s criminal extortion. Let’s be clear on that.

    BTW, I never go to PTA meetings. They’re usually *appalling* especially in public schools. I try to deal with the teachers on a one-on-one basis.

    SL isn’t a free economy, and is an experiment by Linden Research, Inc. that you can either walk around, or participate in, but it’s not free, that’s a given.

    I think it’s particularly silly to keep harping about how SL is a game, that it’s a Ken and Barbie economy, that it’s not real, blah blah blah. It’s not like that isn’t obvious. The point is, you try to push the limits of it as it is the next big thing. You try to work with its limitations.

    SL is a remittance economy, as you have to keep wiring your hard-earned money to the folks back home so they can survive.

  15. SqueezeOne Pow

    Feb 14th, 2008

    Just out of curiousity, does anyone take into account the non-english speaking sections of SL and the socio-”economical” dynamics they have going on?

    I visit Brazilian sims somewhat frequently (I speak portuguese and have some brazilian friends) and also go to Japanese areas on occasion. Both have very low prices and a completely different approach to SL than the average english-speaker that’s concerned with economics and overall consumption as the basis for the game.

    Brazilians in general either can’t afford to buy L$ or have their own sim full of cheap shops and camping to cater to those people. Camping is accepted as a means to make money and from the looks of it everyone involved is content with that

    Japanese content seems to sell for much less than english speaker content as well. There are some crazy, highly detailed products being sold for a fraction of what similar content is priced by english speakers.

    With both of those groups it seems to be that the overall attitude is more “it’s a game let’s enjoy ourselves” than the “this is a viable business platform let’s quit our jobs and sell land and get mad when LL changes things on us” that I hear from a lot of english speakers.

    On a personal note, hanging out in these areas gives me more of a feel of what SL was like back in late 2005 and 2006 when there were a lot more casual users and not so many “serious business” fanatics trying to make a buck as there are now.

    Now, this can’t be applied to every single person in SL regardless of residence but the surge of other language groups (Brazilians among one of the biggest ones) has definitely had an impact on these numbers in ways that I don’t see being discussed…especially not here.

    I think what’s happening is that SL is only being compared to the US, Canada and EU (which all have similar economic systems essentially) while the various non-english speaking groups are going un-noticed because they don’t hang out in the same areas. While I don’t think it’s due to racism so much as a natural language barrier, it’s still a mistake that’s leaving out a sizeable chunk of the overall picture.

  16. California Condor

    Feb 14th, 2008

    Just like at the turn of the millenium there was all this hype about the World Wide Web. So many dot-com businesses starting up with the idea that all they have to do is go on the internet and they will make a lot of money. So, we saw similar go on with Second Life. Call it a recession or not, still, we do all witness the same changes.

    Now we are the past the hype. Businesses that used Second Life for mere advertising and lacking proper business strategy have folded. Enough of us saw this coming. Old lessons relearned. Now is the time for solid business to be built in the Metaverse just as was done with the World Wide Web.

    Dot-com fallout and international outsourcing have not stopped business on the World Wide Web. Neither will these changes halt the developing Metaverse. Work smarter, not harder. The future of Metaverse is not some possibility but is an eventuality.

    How the Metaverse unfolds, though, we will have to see. For that, place your wagers but keep perspective.

  17. Alyx Stoklitsky

    Feb 14th, 2008

    Ofcourse, less users making money means more money for Linden Labs….

  18. Tragada DoumDoum

    Feb 14th, 2008

    Less users making money means that the social classes are getting more clear cut, I think. Less users making money, but those who make money make way more money than before?

  19. Prokofy Neva

    Feb 14th, 2008

    As usually, SqueezePow is full of shit. Normally, I don’t bother with him anymore as he rants on and on with half-baked nonsense, but this is too erroneous to let stand.

    There’s this nasty, vicious myth that war-gamer SOP thinks MUST be true of SL, in the usual fascistic fashion — you MUST not treat it as a GAME, you MUST NOT have any other relationship to it than the one HE thinks is appropriate. Blah blah blah. The end.

    This nonsense about the foreign sims is just wishful thinking, which he can spout knowing that since he doesn’t actually speak any foreign languages, and since those people aren’t going to come on the Herald, that no one will ever know if he just co-opts these people into his back pocket and spouts nonsense about them “knowing how to treat SL as a game and not make a buck like all these Americans” and “playing SL the way it was meant to be played” blah blah blah.

    Except, it’s all fake. The “foreigners” (the English speakers are really the foreigners, in the minority lol) may accept less pay, charge less for products, and set their goals lower in keeping with resources, but they are just newer entrants. And they work hard, and they do not go around hammering on heads screaming YOU MUST TREAT IT LIKE A GAME OR ELSE I WILL CLOBBER YOU.

    In fact, they make money, and some even make their living. The people on the Brasil, Moscow, Japanese, etc. sims which I constantly visit and even have rentals in, and have customers from, are all working at *business*. They may also do rp or have fun or dance or whatever but they are WORKING and cashing out that money because they want to make a profit. My God, there is nothing wrong with this. It’s normal, and it’s SOP who is the niche geektard here playing war games in the wrong place, not people who wish to make a buck.

  20. Jessica Holyoke

    Feb 14th, 2008

    After reading some comments, a few things stand out.

    No one’s really convinced me that land sales are a better indicator of economic strength for anyone but the Lindens. Land has three possible uses, Grid business, Off Grid businesses/purposes and Recreation/Residential. The people buying land for Off Grid purposes, like the American Cancer Society, are not contributing to the residential economy.

    LindeX sales don’t help because you don’t know where that money is going, hedge funds and money launderers come to mind. At least with PMLF, you know that the Lindens are going to people in the grid.

    The source for all of the raw data for this article is the economics statistics page with the help of the Internet Wayback Machine. But the raw data can be misleading or interpreted in different ways. For instance, IntLibber’s comments about how the Middle class is booming because the Land Barons are losing influence as seen by less people in the high range of PMLF and more people in the low range. Its just that this might also mean that the high end people are making less and entering the lower brackets.

    While this may be a game, have you seen a sports fan and how many statistics they recite? Game fans love statistics. From a Barbie and Ken point of view, having these statistics is still important.

    Exports may be possible once IP protections are available. I can see that happening if the technology to protect it is there, not necessarily Linden side, but from any provider. I can see buying an outfit in SL and wearing a primless version of it in Red Light Center.

    As far as the Non-English sims, it may not matter so much in this context. They are included in the statistics used and if you are judging how strong the in world economy is, if they don’t behave in similar ways as other residents, then that is part of the analysis. You can say there’s 12 million residents, but if only 1 million want to buy your product, then that fact is something you need to know.

  21. Qubius

    Feb 15th, 2008

    I was a “resident with a positive monthly L$ cash flow” until Linden Labs shut me down and took my money (

  22. IntLibber Brautigan

    Feb 15th, 2008

    Actually Jessica, the stats say the upper class population is static. Its not dropping in numbers, it just didn’t grow from december to january, however it did grow about 17% between august and december, a growth rate that was common to all levels of PMLF population for that period as the economy recovered a bit from the hit taken by the gambling ban and the ginko collapse. So I interpret this to mean that the upper class recovered at the same rate as the others from august to december, then started spreading the wealth to their staff as they prepared new content and services, however one could also say that the January numbers being flat reflect the financial impact of the bank interest ban on WSE and JTF, which are for all intents and purposes defunct organizations. If JTF recovers as SLWallet that would be helpful for the economy, but these rule changes, passed with claims of protecting peoples money, wind up causing more economic damage than they prevent. WSE wont even be operating with L$ if it ever opens again, its investors will get stuck with WICs nobody wants, which is why so many WSE CEO’s are looking at moving to ACE.

    Meanwhile, deposits at ACE have increased by 2.3 times since the bank interest ban. The number of listed companies has grown to 10, and our trading volumes have increased massively. The investing public is recovering, and they value that ACE was prescient in establishing its zero interest, full reserve, no withdrawal limits policy from its inception.

  23. Mony Markova

    Feb 15th, 2008

    This is too interesting. Still some of us might agree that this is still a puzzle.

    Given the complexity of this topic I would refrain only to comment on the metrics to determine if there is a recession and to measure the size of the economy. Comments of socio-logical nature, os share of wealth among the classes and nationalities, well, I mean -too deep for my poor little brain- I am only trying to process the metrics issue at this point.

    My 2 cents say that TOTAL dollars converted to lindens DIVIDED by active population… in a given time has to be the best metric to measure the size of the economy…

    This will give you $Lindens in world per capita… u can also use the same metric without diving it by total active population… giving you a total lindens in the marketplace, but since there are new people coming in… the econmy tends to have a growth driven by population growth. This is why to meausre its behavior you need PER CAPITA measures. Dont loose your sleep if an unknown number of them are ALTs. Ok instead of population divide it by unique IP addresses if u can get that data…

    What happens to that money inside the system? It does not matter, it is only a metric, only an indicator, not a perfect know-it all follow-up all measure. Economists and business analyist use metrics to help determine an unknown situation… and determine the health of the economy… or best strategies…a shared and understood metric is what is needed, even if it is imperfect.

    I bet there is NO recession in SL. Maybe there is a lower total spending per capita… now that is interesting for business owners, but again terms will be confussing, we are in baby-diapers here.

    By the way to those internationally interested… I am not english speaker an not a U.S. national, I dont get why that matters anyhow… we are talking economics, no socio-economics, dont complicate your self over an already complex matter.

    Cheers anyway :D

  24. SqueezeOne Pow

    Feb 15th, 2008

    Yeah, Prok is just mad that I shut her the fuck down on her blog. We all know she can’t admit when she’s wrong so she just turns it into the half ass insults and accusations we’ve all come to expect from her. Hell whole groups of people even seek that response out of her for entertainment value!

    Se voce quer saber se falo portugues so tem que viajar pro meu sim e fala comigo! Mas, provavelmente ela nunca vai chegar ai por causa da realidade que ela so’ fala merda e nao atualmente faca nada com valor. Que pena que a vida dela e’ gastado em nada importante.

    As far as Mony, I totally agree that this is a puzzle. Unfortunately LL doesn’t exactly give us all the pieces to work with so the picture tends to stay incomplete.

    As far as non-english speakers and all that, all I’m trying to say is that there are more dynamics to consider than just the people that we see everyday. You have to take into account all the economic dynamics in different countries on an individual basis if you are to understand the world economy. It would be foolish to deny that one country’s progress from 3rd world to 1st world (terms I find somewhat ethnocentric) would have an effect on the overall numbers of the world economy. In SL, this means the growth of Brazilians in SL (for example) and the comparatively recent boom in money circulating in that community would definitely have an effect on SL’s overall economic numbers and should be taken into consideration when looking at this puzzle.

  25. duh

    Feb 15th, 2008

    Prok got screwed on a land deal, therefore the economy is doing just fine. In fact, radical anarchists have taken it over, and the market is unstoppable. It’s a crime what you have to do, just to buy a piece of land because it doesn’t fit your aesthetic purposes.

    “I’d have it all, if it weren’t for those pesky Leninists……”

  26. Prokofy Neva

    Feb 15th, 2008

    My blog is pitched over the heads of low-lifes like SOP, it makes them fuss and fume and go into a terrible frenzy, beating their wings against the windshield like furious black flies but then they give up.

  27. Prokofy Neva

    Feb 16th, 2008

    >zero interest, full reserve, no withdrawal limits policy

    Why would you put money in a box like this, giving it to another person through a prim who might take it? Why wouldn’t you just put it in PayPal money market?

  28. Expletive Acronym

    Feb 16th, 2008

    Maybe it’s not the SL economy that is slightly down. Maybe it is transparency of the figures that has slipped.

    LL has lately been taking their sweet time processing payments (5 full working days, which means you might get your money after 7-8 days counting weekends). Some content creators I’ve talked to have started refusing to take Lindens for jobs and instead do paypal directly. While this represents only a small margin of overall users, content creators make the most money and this could explain why “the strength of the economy based on the people who use it have only slightly slipped.”

    The total number of users will always rise and fall periodically but it’s the strength of the economy based on the people who use it that matters and whether money is changing hands or not is not always apparent.

  29. Expletive Acronym

    Feb 16th, 2008

    Maybe it is not the strength of the economy that has slightly slipped, maybe it is the transparency of money changing hands.

    LL has lately been taking their sweet time processing payments. They take the full 5 business days now. That means you get your money after 7 days, or 8 days if you posted your payment late into the first day. Some content creators I have talked to are now refusing to accept lindens for jobs and only deal with paypal directly.

    Though content creators represent only a small number of the people, they represent a large margin of the economy. If more of them are recently starting to shy away from accepting lindens, it would be reflected by an apparent slight slippage in “the strength of the economy based on the people who use it” when you are looking strictly at LL’s figures.

    One way to cause a recession for sure is irresponsible media coverage and fear mongering. Enjoy your aids.

  30. Gwyneth Llewelyn

    Feb 16th, 2008

    Note that the grids based on OpenSim don’t have an “economy” (yet) since “money” is not supported (yet) by the OpenSim software…

    Needless to say, the auctions for land at Central Grid are totally speculative — since nobody is able to deploy any sort of highly-interactive content on OpenSim-run grids yet (scripting is partially supported), and inventory transfers between avatars don’t work :)

    So it’s too soon to say that all the OpenSim-based grids are “hurting LL’s economy”… they will, eventually, as OpenSim slowly improves and acquires all features of the LL-run grid. But this is something that will take a couple of years yet… and *then* we can measure the impact it might have on LL!

    Alas, Zero Linden has already announced that LL is planning a common effort to join all these grids… so by the time OpenSim becomes “mature” enough to run real alternatives to LL’s own grid, it might happen on an already-integrated SL-compatible metaverse ;)

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