Ask any of World of Warcraft’s 11.5 million subscribers what the online RPG is about, and you’ll probably get an answer about wizards and warlocks teaming up to complete epic adventures. They are lying to you. I played WoW during Christmas break – at the request of my girlfriend, I hasten to add – and I’m happy to report Azeroth is a capitalist utopia that rewards hard work, perseverance and speculation. In the Auction House (market), players buy equipment (capital investments), raw materials (commodities) and mounts (signalling) which make them valuable assets to their guild (corporation). As much as people like to complain about speculators in the real world, the temptation to make easy gold eventually overwhelms the economic prudes (newbs). Say you’re auctioning mithril ore, and some troll rogue undercuts you. You could yell at him on trade chat or simply wait for him to get bought out, but if you have the money and the right attitude, you could speculate. If you’re sure he’s charging too little, buy him out and immediately put the goods back on the auction house at a higher price. Pundits like to decry speculators as providing no value for their risky profits, but ‘buying low and selling high’ is a public service. That troll wasn’t trying to screw you – he was trying to get some quick silver (liquidity). If you made the right call, buyers get their commodities at a price that reflects scarcity and you’re rewarded for your patience and risk-seeking. If you set the price too high, then you suffer for your mistake, and others are encouraged to undercut you. A lot is made of the bubbles speculators cause. Sometimes outsiders can correctly point to times when speculators are very wrong (see The Economist calling the housing bubble in 2008), but not always (see The Economist calling the housing bubble in 2003). In real life, competing airline companies don’t stow speculated fuel in netherweave bags. If they think prices will be higher in the future, they might agree to buy oil now at a set price, a futures contract. Other speculators might use contracts that give them the option to buy at some date or any other possibility. No goods need change hands – just let the negotiations bring the market closer to the real value. Speculators pursuing profit on the stock market indirectly decide how much capital companies receive. They can even prevent environmental damage in commodity markets. Future scarcity means higher future prices, an eventuality speculators can profit from by bidding up the current price – which will encourage conservation. Speculators’ ability to integrate data has recently been used in unconventional ways. ‘Prediction’ markets exist for everything from political outcomes to where the next hurricane will strike. Congress has made it harder for Americans to participate in this ‘online gambling.’ This is a very bad thing. I can’t understand the science of climate change, but I can respect proponents and skeptics willing to bet on their beliefs. If only those on both sides of the debate signalled their convictions and were punished for making bad calls. At present, that’s a dream as distant as warlocks in wonderland, but the good speculators do today is a comforting reality. Glory to those who chase truth and put their money where their mouths are. Shame on the haters who condemn voluntary transactions as they smear from the sidelines. The next time you disagree with someone, don’t waste breath arguing with them – make bets with them. Do it for the horde. Daniel Morgan is a 21-year-old economics major from Baton Rouge, LA. Follow him on Twitter @TDR_dmorgan. – – – – Contact Daniel Morgan at [email protected]