Virtual promises are easy to break

Robert Bloomfield posted a story at Terra Nova with the rather dramatic heading Financial Market Meltdown in Second Life? It’s a description of unfolding events that demonstrate how difficult it is to create security markets in virtual economies. Securities are essentially promises: exchanges of money now for money in the future. Problems arise when someone fails to keep their promise.

In the real economy, there is the legal system that can force you to keep your promises. In Second Life, there isn’t. Should there be? Is it just fun and games where you can make commitments and then break them with impunity (except perhaps social consequences, having to get a new avatar)? Or is it a business environment? To what extent does real contract law already apply? These are the issues being debated now.

Last year EVE Online introduced a “hard coded” contract system: a system that lets you make promises to other people that the system will then enforce. It has been criticised as being complicated and inflexible at the same time, illustrating the difficulty of turning law into computer code.