There is a popular multiplayer computer game called World of Warcraft in which you go around killing dragons and pretend you're a wizard and all that. This is one of those games that has an ongoing virtual universe built around it. In the life of your character you need to make money to buy weapons and armor and things. One of the ways you can get some money is through "farming" for gold. (Strange term, but whatever.)
Now "farming" isn't as fun as duelling and casting spells and all that nerdological geekitude; it's a time-consuming chore.
Gold and other items in this game are transferrable from one player to another. You could do a ton of work to get some loot and then give it...or sell it, for real money, to a lazy player who just wants to have more toys.
Now the amount someone would be willing to pay for this virtual gold isn't gonna be worth your time. You're much better off working at White Castle than pulling shifts on Warcraft, so the farmer-for-hire thing hasn't taken off in American suburbia.
But some industrious entrepeneurs made a few calculations and learned a very valuable fact... The amount an American kid is willing to pay for this imaginary gold is well worth the time of a Chinese peasant. So the Warcraft sweatshop was born.
As you read this, there are rooms of rural Chinese sitting at terminals, farming computer gold in 12-hour shifts (each character has 2 people working it 24 hours a day), staying carefully out of the purview of the game's administrators, and trying not to bother the real players. Agriculture on planet earth can't provide them with the $150 (equivalent) check they recieve for a month of Warcraft farming.
That's 42 cents an hour, and low enough that the white middle-man can make a sweet profit when he resells these "goods" to his customers over here.
This process is the same phenomenon as clothing manufacture, and a million other tangible things. And you know what happens when a flood of cheap foreign goods suddenly becomes available on the American market? The value of the products plummet.
In Warcraft, it's the currency itself that's being overproduced, not just any product. That means it'll take more units of that currency to exchange for any product. Inflation. The price of everything goes up. Everything you worked so hard to save up suddenly becomes worth so much less.
The Warcraft economy appears to be on the lip of this plunge and administrators are taking steps to curb inflation. When they find a career farmer, they ban the character. Now the farming company has to re-buy the game and set up a new account. This makes the process of creating these goods overseas more expensive, and functions similar to a tariff (which is a protective tax).
With these tariffs, the price of overseas goods rises, and it becomes more worth the time of Americans to...well...farm their own damn gold. As it were.
But there are ways of getting around this barrier. One is through a black market. (This system is already a black market, though not illegal in the real world, and such an approach would only mean being more sneaky and stealthy.) Another is to increase productivity per dollar on the supply side. e.g. Xian used to get $150 every month (42 cents/hour), but now he only gets $100 and has to work 14 hour shifts, to counteract the effect of the tariff.
But however it happens, water finds its way to the ocean, and cheap foreign goods find their way to the American market. If it gets really out of control in Warcraft, then gold, and anything that can be produced through time and effort--anything that's not finite in amount will become worthless, and trade will occur among things that are finite, or require much greater skill to acquire...or everyone will turn the game off and read a book. Probably Dragonlance.
If that happens, it'll be like a factory shutting down. It'll put a bunch of rural Chinese out of work all at once.
There is a balance, which in the real world, the Treasury, and the Federal Reserve, and a bunch of International Organizations try to maintain. And by maintain, I mean getting as much cheap shit for themselves as possible without throwing the system completely out of whack. (In the finance industry, human rights is a footnote, if anything.)
What lies ahead for the Warcraft economy? Let's keep watching it in the future.
