In virtual economies, some kind of production of virtual goods (i.e. virtual items) and services usually takes place. Actually, I think a system in which production does not exist is not much of an economy, but it might be wise to leave that discussion to a later blog post. Now, if there is production - if the users can employ inputs to create outputs - it should be possible to form an aggregate measure of the production activities.
GDP is just this kind of a measure for a real-world economy. The system of national accounts is based on a set of basic observations that are, for the most part, rather directly applicable to a virtual economy as well. However, there are a some fundamental differences between a virtual economy, the EVE economy being the case here, and a real-world national economy. The most influential one is the lack of a foreign sector, and its replacement by a new sector. I'll illustrate this by an example of final good production.
In a real-world national economy, a produced final good, if consisting purely of domestically produced intermediate goods, reflects the value additions through the whole production process. Then, it is sufficient to include only the market prices of final goods and voila: there you have the value added in the whole production process of final goods. But if some intermediate goods were purchased from the foreign sector, their value would have to be subtracted from the total value of final goods. After all, the value of the imported intermediate goods is present in the value of final goods, but that value does not correspond to a domestically generated income.
This, in the extremely short, is the reason for the “domestic” term in the middle of GDP. SNA examines a national economy vis-à-vis the rest of the world. In GDP, the interesting thing is the value of production taking place inside a national economy, domestically. The relevant borderline runs between the national economy and the foreign sector.
I argue that the relevant borderline in a virtual economy runs between the users and the “game” itself. I call all the entities representing the game collectively the Environment. When users produce something, for example by gathering raw materials, refining them into intermediate products, and finally producing a virtual final good, the value of the final good represent, by assumption, all value additions through the production process. The value of the final good also represents all received incomes of the participants of the production process.
But what if an intermediate good was purchased from the Environment (e.g. an NPC vendor)? Its value would be reflected in the value of the final good, but there would not be a corresponding income received by any user. Therefore, there is a leak out, just like in the case of imported intermediate goods in a real-world national economy in the example above. Treatment of such purchases should be similar also: subtract the value of all intermediate goods purchased from the Environment.
This is where the “user” in GUP comes from. The GUP measures production by the users, as opposed to creation of new goods by the Environment. In other words, it is a measure of the economic activity of the users of a virtual economy.
