What role-playing video games can teach us about monetary policy: Designers of massive multiplayer role-playing games (MMORPGs) have lately started applying economic theory to tackle in-game inflation, as broken down in a YouTube video by Extra Credits (watch, runtime: 8:43). MMORPGs (think World of Warcraft) are games where players are constantly generating unlimited quantities of currency through feats such as killing monsters or completing quests. This is a sure route toward hyperinflation and would send any real world economy to ruins.

The solution: keep FX reserves. Real world economies have for years kept foreign reserves in the bank to prevent their local currency from plummeting beyond a certain level. This is equally true in MMOs, where some developers now allow players to buy “real-world value” using in-game gold coins. They created a channel for a stash of a bn coins in WoW, for example, to be worth some amount in USD. The realization that in-game economies essentially mirror the real world ended the previously used “money sinks”, which worked by forcing players to pay in-game taxes and fees to drive money out of the system. The gamers realized there is no way to build a sink that is wide enough without making the game less enjoyable, and so got creative.