Monday, August 1, 2011

The economics of the Fallout universe

I'm a bit of a latecomer to the Fallout franchise. Perhaps a redolent streak of ludditism (or student-enforced poverty) kept me from opening a Steam account or perhaps I'm just slow on the uptake. Either way, once I discovered these games on the urgings of friends, I was immediately hooked. I've found that the standard game reviews usually do the design team justice: the games (and I refer primarily to Fallout 3 and Fallout: New Vegas) are large, immersive, and well-balanced, suitable for novice as well as experienced players, with elements that appeal to the classic traditions in FPS and RPG gaming. Despite a host of often annoying glitches, gameplay is flexible enough to accomodate a fairly wide range of styles and the faction system employed in New Vegas ensures that repeated playthroughs need never be mere rehashes of previously beaten games.

But like in any sprawling fictitious universe, game designers are obliged to mimic a functioning economy. The extent to which this effort proves convincing showcases a strange tension between what is plausible and what is, for lack of a better term, fun. Writers must optimize along a much different objective function than actual merchants (or central bankers, or currency arbitrageurs, or what-have-you), and it shows. Similarly, players' derived utility function has wide margins along the killing-the-naughty-faction frontier, but not much along the trade-with-isolated-population-centers region. Let me explain by way of describing typical mid-game play.

The setting of the games is a retro, 50s-style post-nuclear wasteland. Living as I do in Northern Virginia, Fallout 3 appeals to my sense of familiarity, set as it is in the Washington D.C. area. Many of the place names are ones I recognize (or are close derivatives thereof), and the Metro stations are lovingly rendered to more or less resemble the real thing. Having worked for a season in Death Valley, I find the stylized Southwest of New Vegas more or less congruent with my memories of the place. Consistent with the finer traditions of post-apocalyptic literature and film, roving bands of raiders patrol the wasteland, indulging in cannibalism, slavery, and mayhem. In addition to these Mad Maxesque raider enemies, there are two flavors of modified humans: the ghouls, humans transformed by extended exposure to radiation; and Super Mutants, humans exposed to a virus that has an effect not expecially dissimilar to that of gamma radiaiton on mild-mannered physicists bearing the Banner surname. Various mutated flora and fauna abound, some tame, some hostile. The wasteland itself is rendered to appear as bleak and hopeless as one might hope: the color palette is dark and muted, nothing shines (and when the few noteworty exceptions are found, the effect is startling), and vegetation is generally sparse. Indeed, the player finds, immediately following the brief opening sequences, the wasteland is unforgivably harsh. Oddly, however, this seems to pose no significant problem to the main character.

Curious indeed that the player's character can find copious food, drink, ammunition, piles upon piles of working pre-war technology, weapons, armor and components from which to fashion makeshift gear that rivals the best technology available before the bombs fell. How is this possible? Now, before I continue, let me briefly explain an economic theory often (mis?)characterized as "there is no such thing as a 20 dollar bill lying in the middle of the street." This points to a key tenet of microeconomic analysis: the no-arbitrage condition. Basically, if there's a way to make a free buck, someone's already done it. Prices reflect true scarcity, and where else would you find scarcity than in a post-nuclear wasteland, especially 50 years or more on? There shouldn't be boxes of insta-mash, sugar bombs, cram, and salsbury steak lying around, nor should there be stores of abandoned medication, surgical equipment or arms and armor, not with hostile creatures roaming about. It doesn't take much imagination to conclude that some enterprising individual would have organized well-armed scouting parties to scour the wasteland for all these unguarded (or lightly guarded) troves and warehoused them somewhere secure. The only things one might reasonably expect to find in a well-populated wasteland like the one portrayed in the game are trash (spent needles, junk metal, scrap electronics, broken wood) and naturally grown comestibles: apples, wild barley and the like. Some hardscrapple farming might be possible, but only on hard-to reach escarpments or other highly defensible positions. The lavish abundance of cheaply obtained resources present in the games beggars belief.

On the simple evidence that the player's character (a naive teenaged vault dweller in FO3, a feckless courier in FO:NV) is able to amass an enviable fortune while traveling alone (optional companions notwithstanding), it is clear that everyone else living in the environs is criminally lazy, bafflingly stupid, or inhumanly generous. The larger factions (mixing game factions here, the Brotherhood of Steel, the Enclave, the NCR, Caesar's Legion, the Great Khans, et al) would have pilfered every single tidbit of useful stuff within their grasp and stuffed it into some abandoned vault or safehouse or somewhere and posted well-armed guards at the entrance. So supplied, the faction in question would then face the ages-old economic question: is this stuff for sale or not?

This fundamental question isn't as facile as it seems. After all, we all, each of us asks this question routinely day after day. Take milk--milk is just some stuff you squeeze out of a cow. Yet for some folks, they have less milk than they want, so they'll give up consumption of other stuff to get some milk. Other folks have a lot more milk than they want in order to consume stuff that isn't milk. That's the line that separates dairy farmers from everyone else. A more convincing wasteland economy would have fewer goods strewn about and more rough-and-ready market commerce, so long as prices accurately reflect relative scarcity and the currency is stable. Fallout treats these conditions only slightly better than most games of its ilk.

Prices. This is usually the big cock-up in games. Almost all games prevent direct player arbitrage, preventing players from buying low and selling high (there are occasional exceptions, and a few games that feature exploitable production opportunities that can result in functionally infinite cash, these features are probably a result of the difficulty of anticipating player cleverness) though the real flaw in most games is a fixed-price scheme. Fallout allows players to purchase costly skills to narrow the bid-offer spread, but this is still somewhat suspect in a world where the price of ammunition is the same regardless of whether or not there is a pending war between heavily armed and armored antagonists. I can forgive a game for failing to program agricultural futures contracts, but to ignore price "gouging" seems an odd omission. Well, at least the writers are sensible enough to have decent monetary policy.

Currency. Ah, the joys of free banking. The currency of choice in the Fallout games is the humble bottlecap. Popped fresh from the top of a delicious Nuka-Cola or a refreshing Sunset Sasparilla, caps are the legal tender of choice in the wasteland. I suppose we're meant to take for granted that there isn't much in the way of seigniorage with respect to the gutted factories that produced the beverages of choice and that counterfeiting is sufficiently difficult (indeed, New Vegas boasts a side quest that allows the player to shut down a counterfeiting operation) to prevent unwanted price inflation. The game, intentionally or otherwise, neatly sidesteps Gresham's Law by effectively declaring a competitive, non-specie fiat currency (for more on free banking, see The Theory of Monetary Institutions by Lawrence White). You can't clip or shave caps, so that's nice. Using caps ensures stable nominal prices, but the games fall flat when the situation demands that real prices should shift.

The world of Fallout appears to be saying something like: "here you are in a world of nuclear devastation, please enjoy the endless bounty that half a century of banditry was unable to capture. While you're here, please take advantage of a degree of price stability that a century of central banking was unable to approach. Mind the radiation." So sure, the relative scarcity is ludicrous, and the indifference principle is busted (this suggests that in this simplified world, the player should be roughly indifferent between purchasing goods from a vendor or scrounging from the wilds), but for all that, nothing in the trade system makes the game any less fun to play... even for an economist (this is, of course, making the rather wild claim that economists are capable of "having fun").

I do wonder though, how the enjoyment of the game would change if the economics were modeled better. Players would be obliged to become merchants or farmers (or tradesmen of some other stripe) as well as warriors, and would be required to defend hoarded booty against thieves. Prices would fluctuate, asset bubbles or speculative frenzies might erupt, and bond vigilantes would be nearly as dangerous as armed mercenaries. I don't imagine this sort of gameplay to be palatable for everyone, but if Obsidian makes an MMO version, I can imagine allowing players to pursue some sort of merchant or financier option.

So, why won't games more closely model a real economy? The chief reason is probably that it needlessly complicates gameplay. If all they did was to include fluctuations in the real price of ammunition or guns, players might resent the additional constraint or just feel cheated. More complicated financial innovations would probably detract from what is basically a souped-up shoot-em-up game. Moreover, even though modeling real economic shocks in a video game might help gamers get a better grasp on real-world economics, including appropriate expository dialog would be tricky for writers, complicated by the fact that younger players usually just flick through dialog blindly anyway. Still, I think there might be a good way to pass along good economic intuition inside a fun video game. Imagine including elements of the Russ Roberts/John Papola Keynes vs. Hayek videos in a setting where you have the Bloody Mess perk. I'd have to laugh my ass off if I saw such a thing.

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