July, 2021

The Origins of Money in Diablo II

  • Solomon Stein

    Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
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Diablo II is a noteworthy game for a variety of reasons: it was a tremendous commercial success, one of the bestselling titles of its era, and along with contemporaneous MMORPGs, its online mode was among the first game environments to generate gray markets for in-game goods and the associated commercialization of “gold farming” (although in Diablo II's case, this is quite a misnomer). When it comes to political economy, however, it deserves a place of particular distinction because its virtual economy evolved in a distinct (and far more interesting) fashion than many of those in MMOs—a process related only indirectly to its associated gray-market item sales denominated in “real-world” currency. As became quickly evident to individuals joining the online player base, Diablo II's nominal in-game monetary unit did not function effectively as a medium of exchange for player transactions. With this default option proving nonviable, and no obvious alternative available, players looked to barter one item for another rather than acting as buyers and sellers of goods valued in monetary terms. From this initial situation in which, in the absence of a monetary unit, players fell back on barter transactions, the course of the game's history shows a gradual transition toward the use of an increasingly sophisticated system of commodity money. Diablo II's monetary standard is one remembered with sufficient fondness that the economy in one of its present descendants (Path of Exile) was designed to replicate it.

Diablo II is a case study of great interest for monetary theory, first of all because it provides a set of observable circumstances in which monetary exchange emerged from a barter economy. We can therefore use it to assess competing claims regarding what preconditions, if any, are required for the emergence of monetary exchange, and of the degree of correspondence between the properties expected of an emergent monetary commodity and their mapping into the game's environment. This allows us to evaluate the accuracy of theories regarding the mechanisms at work in the process of monetary emergence. More general questions can be asked as well regarding the institutional environment in which exchange in Diablo II took place and the relationship between these institutional features and the successes—and shortcomings—of the game's economic interactions.