What is wrong with free money?

I keep hearing from the sleeper republican cells in Second Life, that free money is very bad and that people must work very hard for their money.

Well, I came to Second Life not to work but to have fun, to escape the real world because in the real world I have so many physical Health problems its not funny.

Linden Labs has ruined my fun by cutting pay. Furthermore their move to applease those few who whined about free money has now caused people not to buy very much and my business in Second Life has suffered. Infact, its Bankrupt.

I do not know why people complain. Those who were successful got money, those who were not were able to get money from high bonus and pay.

I think I must had missed it. Please explain why I should be so concerned with the economy. Afterall, I tried to run a good business with a large selection of goods only to have the Lindens change the economics which thus forced my business into bankrupcy.

So I ask you again. What is so wrong with free money?

Without condescending, I'll say first that it helps to have taken a college degree in micro- and macroeconomics to see some of the problems economies of this nature face. It's really not a simple problem, nor are the solutions simple.

Like the real world, economies in virtual worlds tend to:
1) Succumb to the laws of supply and demand
2) In many ways subscribe to the laws of the "Invisible Hand"
3) Do not exist solely in a bubble from external affairs, like the power of the US Dollar

Unlike the real world, economies in virtual worlds tend to:
1) Exist on laws of supply that are sometimes skewed, since data is (usually) infinitely reproducable
2) Be more difficult to manage in terms of monetary policy, because the mechanisms controlling the money supply are usually limited to where the money initially comes from and what "sinks" they go into.

Since economics is usually coined as dealing with scarce resources, dealing with it in virtual worlds is a more uncertain matter, as the resources are typically not scarce; they're just not equally distributed.

Anyway, without going into the long matter of virtual economies (a fiercly debated topic), the problem with "free money" is that new money gradually lowers the expected value of the entire money supply (inflation), forcing people to use more of that same currency over time. Much of the reason you see many countries where one needs a wheelbarrow of money to buy food (a more charicatured example, but a real one) is because the value of the currency has been driven down to the point of stupidity.

As such, it was seen by the Lindens that the current money supply was slowly headed toward such a scenario, so to protect the value of the Linden (if you must, also how it stacks against the US Dollar), they enacted one of the few mechanisms they have to control the money supply - they lowered the supplies and raised the "sinks."

In the short term, that means pain to businesses that were just scraping by, and even those that weren't. The moral of the story is, over time, that will return to business as usual.

Personally, I'm all for other controls of the money supply, like interest rates and bonds (and if you're a certain owner of the First Bank of Second Life, this idea is for you). Something more in line with what the Fed does in the United States would be an intriguing first in Second Life, and could also serve to control monetary policy.

To sum the actual question, though, think of it this way: What if everyone in the United States woke up with two dollars for every dollar they own? In the very short term, the result would be a lot of happy people, but in even the medium term - all that would do is halve the value of the dollar and create chaos. Such is the point of what they're doing - the Lindens wish to maintain a strong, stable currency without the threat of it suddenly (or gradually) losing its value.

1) Stipends are not pay. Pay is earned.
2) If LL suddenly gave everyone L$500000 the L$ would become worthless - suddenly expensive items are dirt cheap: Two things would happen;
a) People would get pissed off, and possibly stop creating objects. (A lot of content creators are in it for the money.)
b) Items would be repriced to L$500000 each. Effectively nullifying the gift.

-Adam

My experience with this argument is it cuts across political ideological lines. In RL, I believe in a safety net for the basic necessities of life: food, clothing, and shelter. I am willing to pay taxes to fund shelters, food programs, job training, and the like - in RL.

SL has no necessities. I think that the paying customers are tired of being asked to carry the nonpaying customer's resource usage. I think the feeling is "we pay, why shouldn't you." Just my sense of it.

This is actually a very strong case, I believe. In Second Life, we have a tendency to carry over our preconceptions from the real world, where the "free rider" problem is a rampant one. In Second Life, there's little or no economic impact on the part of free riders or inactive accounts, due to the lack of any need for social insurance, welfare, et cetera (and don't start with me on the L$50 weekly - even in aggregate that's spit in the ocean). Typically, that means little impact on pay cycles as well.

In this light, the preconception exists with many that Second Life equates to setting up a reputable business and running it, such that going bankrupt represents a pretty bleak picture for them. Thing is, Second Life does not need to be work.

However, that's a pretty broad take on the issue of "why is free money a bad thing?" The question becomes, bad thing from an economic standpoint, or bad thing in the minds of the community?

Don't forget that basic accounts are a loss leader... basically an extended trial. An active basic account user will cost LL far more in bandwidth than their one time fee of $9.95 covers. They're not just being carried by monthly account holders in the figurative sense but in a literal one. If there's no incentive to convert to monthly it's a bad thing in terms of SL continuing to exist after the VC money is gone.

It's not a "sleeper Republican cell", it's a bunch of people who at least have a tenuous grasp on how economies work. Take a look at hyperinflation in Weimar Germany to see what happens when lots and lots of currency is released into an economy. The Lindens, in cutting stipends, have ensured that this is far less likely to occur in the virtual economy.

There is nothing wrong with free money, we still get free money. The problem is too much of it.

Right now a nice airplane or a fine set of clothing can cost around L$500 or maybe L$1000. They are sort of luxury items. If you want them, you have to save up or work to earn the money for them. If everyone was just given L$2000 a week, everyone could easily afford these things and they lose their value to the creator, so these same items will leap in price to L$5000 or L$10,000.

But, while we currently have L$1000 luxury items, there are also vast numbers of freebies and lower priced items. No one has to go without, you just go with what your budget allows. Tons of free money floods the market and eventually we will see simple items that now cost L$30 leap in price to L$300.

There is a lot more too it, but thats my basic take on it.

There is no free money. You get stipends in exchange of spending time in SL. Note the word spending.

I'm sorry, but who cares what the $L is worth. Only the people who use SL to make RL Money. IT'S A GAME!!!! USE IT TO HAVE FUN!!! All the people out there using this GAME to make RL money are ruining it for those of us that just want to have FUN. The only reason I want SL money is to spend it frivolously (sp?) something I can't do in RL.

I see the weekly stipend as supporting those people who have only a few hours in a week to spend on SL, and/or who may only want to pop in and socialize without investing a lot of time and resources into property, building, and making money. For those people, a few hundred lindens a week is like an allowance or spending money from mom and pop Linden. However, I would not like to see an increase in financial support for many of those reasons already stated above by Jeffrey, Charlotte and Loki.

There are some opinions I've read (not necessarily in this thread) that try to compare SL economy with RL economy. Again, for some of the reasons stated already, I think it's ineffectual to compare the two. SL has different basic drives than RL, such as the lack of need for RL necessities. SL feeds off the desires for one to build, create, design ... whether to make money or not. Those diffences, along with others, are variables that are very different from RL. SL economy can be seen as a controlled experiment ... similar in construct maybe, but without the foundations of RL.

I respect, appreciate and understand the idea that many others have when it comes to less linden support in the form of "free" lindens. I think the drive to figure out how to make money in SL has resulted in wonderfully creative thinking. I didn't always like the manifestation of said thinking (in the forms of clubs clubs and more clubs) in the past ... and there are more malls than ever it seems ... BUT that's just one avatar's opinion among a large and diverse population. There are also incredible structures and builds that I admire and explore with awe and glee ... that have been built with money earned from an industrious SLer. And the clothing, furniture and textures designers out there offering their personal creations to the public for linden dollars ... sigh ... I don't know how you do it. So much energy and time were put into some of your wares and I support the idea of your earning money for that!! I don't think that there'd be such a wealth of incredible creations out there if people were financially supported any more than what's already being provided.

There may be a few people like me who build for building's sake. Making money is not my motivation. So I may be days and days away from SL because I'm not concerned about making money ... however ... I've been working on the same project now for over six months!! Can you imagine a SL world chocked full of half-finished creations like what's on my property?? I pay for that ... literally ... and buy lindens to support my "habit" of working on building projects here in SL.

To summarize my thoughts ... to each their own! Let everyone have the choice to figure out how to live in SL ... whether it be to grow into an industrious builder / designer of clothes / wares, whether it be to earn your way through providing services, whether it be to spend all discretionary monies to support your SL existance or whether it be to live off the small weekly stipend. Those choices depend on a variety of factors ... some people can only spend a few hours, if that, a week in SL. For them ... the weekly stipend seems to make sense, and I would hate to see that ruined for them. But any more free monies would perhaps result in decreased motivation to create ... and that would be downright sad.

- discordia

I would have replied, but Chip beat me to it.

If money were free, eventually it would become worthless. Even in a game.

Please tell me how I and others like me ruin your "FUN"? Indulge me

I use my earnings to pay the monthly bill I get from LL, buy software, hardware, and pay others in SL to support my creative endeavors. My FUN is in CREATING and experimenting with the world I have been given by LL, as I think it is for a large majority of SL residents.

No matter how many layers the onion has, peel them all away, and you are ultimately left with reality, or nothing! Maybe . . . (read signature below)

Please

Let me get this straight...you like to have fun in SL by spending money frivolously, yet you think the people exchanging Lindens for US$ are RUINING your fun? I hate to break it to you, but unless you are spending your money only on uploads and rating, you're PROBABLY buying something from one of those nasty Linden traders. Thus we can determine that all those people that are "ruining it" for you are the very same people that make the game fun for you!! WOW!

I am not sure what level you mean. Are you talking about those who pay a basic 9.95 fee and own no land? or are you talking about those who do not make things like clothing and cars as opposed to those who do.

The Lindens care what the L$ is worth. LL creates very little of the content in SL. They rely on quasi-open source scripters and designers to develop cool new items that subscribers will want. Since the subscribers find the new items cool, they stay in SL and pay LL fees.

The content creators, meanwhile, need incentive to create. If there is no incentive, why spend time doing hard scripting and prim modification work? Why not just order pizza and watch a movie? And if your a guy, maybe go out and get laid. But LL does provide the incentive - L$ to USD conversion. Content creators can get paid for their efforts.

If the L$ becomes worthless... the content creators have no incentive to create and they fly the coop.

This is a valid enough argument. I'd be interested in seeing the actual figures involved with something like this.

And, on that note, what about the Lifers? Are they SL's "idle rich" by comparison?

The real problem I see with beginner accounts is there's a very low barrier to (multiple) entry, making regulation of them all-but impossible. This has led to several interesting problems, up to and including neg-rate bots, instant identities, and so forth, that would be downplayed if everyone was on the payroll. While I'm a Premium Account Holder (and considered dropping to Basic!), I don't see the problem as "all basic account holders are bad," but rather "the barriers to entry should be changed for them." Lifer accounts, by comparison, are *really* hard to obtain, hence, something I don't feel the need to address.

Furthermore, I'm sure there are many content creators that live on Basic. Perhaps it would be good to establish an incentive against more of these (Basic) accounts like, say, $1 a month charged to your credit card. In-world solutions to the problem would be hard to maintain, and 30-day free trials, well - exist as hooks to get people to come to SL, anyway.

M.T.
I am having fun making things here and making money from what I make, I love being creative, many here do, that is part of the game also.

I came to SL to have fun and to be creative. I didn't come to SL to care about the economy as I can do that in RL. I'm sure most of you will disagree with my opinion but here it goes. I pay to play this game..My RL hard earned money. Why should I have to worry about the economy and all that? I can worry about it in RL where it really counts. I enjoyed getting 1500 a week before the bonus cut. Why shouldnt we get free money? We do pay RL money to play this game. But theres nothing I can do about it, so I might as well just accept the changes and hope for the best. Easier said than done though

I think the idea is to make basic account holders do one of two things... either they'll tier up to a monthly account to get more L$ to play with, thereby helping subsidize LL, or they'll buy L$ on GOM and subsidize content creators. The more high quality content there is in SL, the more there is to draw new people in. The more new people there are buying L$ on GOM, the more incentive there is for people to develop high level content that takes more time to create than a casual tinkerer is going to invest.

I'm a lifer but definitely not idle rich. I pay the full sim tier even though all my land is on the mainland. I also put in 20-40 hours per week creating or providing service to my customers. If you look at most of the hardcore content creators who make enough to have L$ to cash out I would guess a majority of them reinvest a good portion of it back into tier fees in order to have more locations in world or to create more elaborate content.

I think it's a pretty brilliant system all in all, but people expecting to be able to have everything for that one time fee is a fly in the ointment. Lowering the amount of L$ they get to play with down to pretty much nil gives them a kick in the pants to get involved in the economy, by either tiering or subsidizing content creation. If they do neither, they still get a great place to come play and lots of cool stuff to play with. Compared to any other MMO a basic account holder is still getting an amazing deal. The question of "what's wrong with free money?" ignores the reality of what it costs LL to run the world and the massive time and money investment of a small minority of the population.

I would advise caution. There are good points on both sides of this issue.
The problem is this. People use second life for different reasons. Not
everyone in here is here to support one another money wise. Many
come in for the soical meetings you can have here. Besides that Not
everyone has the Time/talent/ or desire to create content. It is not for
the content creators to say. You must pay us or because we own land
and you don't we should get more. To an extent I don't care about
those who sell linden money for rl money. Yet I will warn, There.com
had this very problem. You see earning money through creation, inworld
work, raffles etc. Was muhc more difficult in that online world because
it was designed to bilk people. Things we take for granted they have to
pay for. To make matters worse. The main economist now is the founder
of a there exclusive method of exhancaging Money for Tbux. So
designers have little reason to invest money in the game they just sell
the money they make at a slightly better rate then the company itself sells
money. Now Sl is FAR far far from There.com. Content creation is thankfully
MUCH cheaper. You don't have to pay a "wholeslae" cost on every item you make.
Nor be versed in outside 3d programs to build 3d objects. Sl also has greater tools
for people to have jobs in the world. Yet to bow to any group more then another.
You upset more and more people. I have sworn and I will uphold this. After being
at There.com and playing There I will not, for any reason purchase online money.
From Gom or anyone. If Sl grinds to a halt for me (Not now obviously) but in the
future. In terms money, well I may move on. Ive gone from tso, to there, to Sl and
even other worlds. I have seen the sun set, or begin to set on one world and moved to another and I will again.


One important thing to remember is. There are no Needs in avirtual community. there are wants. Many people here to, build, socialize, express themselves, find freedoms they don't have real life or find things they are missing in real life, Or have fun. Be respectful of all those around you. Know their goals and motivations are rarely yours.

Just to be clear I'm not advocating anything, or making value judgements about how anyone chooses to spend their time or money in SL. I'm just trying to point out what I believe is the overall dynamic LL is aiming for. I always think it's better for people to accept something for what it is rather than lament that it's not something else. When I buy things from other players it makes me feel good thinking that maybe I'm helping them put a kid through school, or do something nice for themselves they otherwise wouldn't be able to, or simply afford their hobby. That to me is what's so great about the SL economy. I'd still feel that way even if I chose not to participate in it or didn't make content.

Magnum, I'll explain this one last time.

Here's what was wrong with the free money situation:

(1) rate mining let people who did NOT pay for premium accounts have the ability to cheat the system to get a weekly stipend + bonus payment, in some cases, LARGER than people who paid US$10 monthly for premium accounts.

(2) If we ALL did that, instead of paying to receive the stipend you so desire for premium members, how would Linden Lab make make?

(3) If Linden Lab was losing tons of money, there would be no SL.

Easy enough? You gotta let this one go, mi amig0.

-Flip