[MUD-Dev] The State of Play: On the Second Life Tax Revolt

[J C Lawrence]

http://research.yale.edu/lawmeme/modules.php?name=News&file=article&sid=1222

The State of Play: On the Second Life Tax Revolt
Posted by James Grimmelmann on Sunday, September 21 @ 19:11:48 EDT Governance

This November 13-15, Yale Law School and New York Law School will
jointly present The State of Play, a conference on the intersection of
gaming and law. The conference program has been announced, and it should
be a thrilling program. The keynote address by Raph Koster, lead
designer of Star Wars Galaxies, will kick off two days of panels with a
star-studded lineup of gamemakers and academics. LawMeme, of course,
will be there in force, with plenty of on-the-spot coverage.

In anticipation of the conference, I'll be writing a weekly series here
on interesting legal and social issues coming out of gaming. Today's
topic is the Second Life tax revolt.

The Background

Second Life is one of the most recent generation of massively
multiplayer online games; it features a strong focus on creative social
interaction. Its setting is modern, with twists of surreal whimsy; its
design is among the most open-ended of such games. Players aren't
restricted to acquiring objects defined for them by the game. Instead,
they can build their own objects -- from teakettles to nine-bloit-high
statutes of Dimwit Flathead -- and then use a custom scripting language
to bring these objects to life. So Second Life, in part, solves one of
the major problems facing online games -- how to keep the game
interesting for players with new features -- by letting players
themselves contribute the new features.

The other feature of Second Life that's relevant for our purposes is its
response to another "classic" problem of online games: runaway
inflation. Edward Castronova documented a steady and striking decline in
the value of goods and money in EverQuest (relative to dollars). The
economics are interesting and complex, and perhaps inevitable (and I'll
return to them later in this series). What matters for now is that game
worlds and inventories have a tendency to become "littered" with
increasingly worthless junk. Gems that were rare in a game's first month
become useless rocks in its second year; once a sufficiently large
number of players are experienced enough to mine them, whatever market
in them there once was becomes hopelessly glutted. Even worse, for a
social, environmentally-rich game like Second Life, the landscape
becomes littered with them.

Second Life chose to deal with this problem proactively by imposing a
tax on all objects, payable in in-game currency. The "Linden tax," named
after the game's developer, gives players an incentive to get rid of
things they don't really want any more.

The itself tax is somewhat complicated, measuring both an item's "cost"
in terms of processing time, and also something of its "value" to
players. Big things, prominent things, things with scripts -- they cost
your more in tax to hold onto.

The Revolt

Second Life, in its way, is more remote than Iraq. I can't just point
you to newspapers with daily coverage of events. I can't send you to the
web site of the Second Life Public Library. These things don't exist in
a form that can easily cross the border back to reality. Instead, I can
only point you at two dispatches sent back by Wagner James Au, Second
Life's official "embedded journalist." He wrote one piece back in August
on a tax protest movement that had recently broken out and another in
September on the resolution.

In essence, some "Lifers" decided that the tax system unfairly burdened
major projects. People who put up skyscrapers or designed especially
complex toys were being charged more -- even though these audacious
constructions were greatly responsible for making the game fun for
others. Sure, anyone could build a house, but not so many people benefit
from a house, goes the argument. But if I build a baseball stadium, lots
of people can enjoy it. Why should I be paying more in taxes than the
homeowner? I've given so much more to the community already.

Having thus decided that the tax system was unjust, they launched a
series of highly symbolic protests. Clothing themselves in American
icons, they replaced a model Washington Monument with tea crates, donned
shirts saying "Born Free: Taxed to Death" and put up "Don't Tread on Me
Billboards." They even slipped Au a copy of their manifesto, which
borrowed phrases from the Declaration of Independence in railing against
"Mad King George Linden." Au closed his first report by noting that a
loyalist movement had emerged and that "the die is cast."

The next few months saw a whole welter of role-played rebellion, from
mock-authentic broadsheets to disputes carried out in colonial garb. And
the result? Hard to say. The revolt itself " evolved from protest to
party;" Linden announced some tweaks to the game's economic system and
praised the creativity of its player-protesters.

Protests, Parties, and Politics

Dan Hunter, over at TerraNova, has exactly the right instincts about
such protests:

  Oh, yeah, Second Life is "just a game." I wonder how long this line
  will continue to work, and how long the revolutions will continue to
  be peaceful and creatively anachronistic.

On one level, these sorts of protests are parties, and we miss the point
of them if we think of them only in rational, structural terms. There is
an affinity between the Second Life tax revolt and the spirit of
creativity that leads Second Lifers to create fantastickal items subject
to tax in the first place. Playing at being revolutionaries and redcoats
is a form of acting, of socializing, a form with a wonderful whiff of
intoxicating fourth-wall breaching. Pulling the basic features of the
game itself into the protest has a bit of absurdist joy to it: no matter
how hard the players shout, the game's code will continue to deduct the
tax from their accounts. So, yes, perhaps it is inevitable that the
protest became a party.

But all protests are parties, in a sense, and it is a logical fallacy to
think that the people in the streets outside the WTO aren't making a
serious point just because they have samba drummers and big-head
paper-mache puppets. The drummers and the puppets are there, not to
supplant the politics, but to put the politics into practice. Protests
in real life are expressive events: the point is to bring the protesters
together in a spirit of solidarity and to impress upon observers images
that will linger with them. If that solidarity comes from samba and
paper-mache makes for good pictures in the paper, so be it. Once you
have their attention, perhaps they'll listen.

Turning back to games, there's been a remarkable consistency to in-game
expressions of political protest. When things get tough, the tough get
silly. Ultima Online had a nude sit-in to complain about runaway
inflation in the aftermath of a counterfeiting bug. There, the money
supply had been completely swamped, and the game administrators stepped
in to drain off most of the "surplus" gold pieces by introducing new,
pricey, and otherwise completely useless consumer goods. The oversupply
of gold was ruining the game for many players, and they vented their
anger within the mechanisms available to them.

Lacking any kind of democratic control over a game's rulers, protesters
need to work with a different vocabulary. Indeed, because the game's
itself so strongly constrains them, many forms of what we recognize as
civil disobedience in the real world are utterly ineffective. Just as
you can't vote the Second Life programmers out of office and you can't
overthrow them with in-game muskets, you can't stop paying your taxes or
withdraw from game society. It just doesn't work that way.

Other than quitting the game entirely (the threat which lurks behind all
such protests), a street party is just about the only action you can
take that will even come to the attention of the authorities. Making it
fun enough to drag in fence-sitting players is a necessary tactic. If
your protest doesn't give them a compelling narrative in which to
participate, they'll go fly a hyper-kite or find some other way to
entertain themselves. A core of people are genuinely concerned about the
tax structure may well attract to itself a penumbra of people there for
kicks. Even the "loyalists," in a sense, are part of the protest
game. They certainly legitimate the revolt by their presence; they are
implicitly buying in to this idea that Second Life has a public
sphere. They're framing their own arguments in the very terms that
Second Life's public sphere permits.

And, make no mistake, the underlying dispute here is very real. In Au's
words, "much of the original anger over the high tax rates was genuine." 
Yes, these taxes are payable only in in-game money, but that shouldn't
fool us for a moment. In the first place, converting virtual assets into
hard currency -- cash money American -- is not a complicated
proposition, as more or less every game designer has discovered. So
these taxes affect the value of things to which we can almost certainly
assign a very real price tag.

Moreover, these taxes, just like taxes in the real world, have very
complicated and politically explosive distributional consequences. The
choice to tax some objects more heavily than others makes the owners of
the first kind of objects poorer and the second kind richer. If it costs
more to maintain big houses than small, the tax exerts an inevitable
leveling effect on the fortunes of players. "Rich" avatars who sit on
their hands will be gradually impoverished; the "richer" they get, the
more effort they need to put into paying off the tax man just to
maintain their status. So although the tax revolt was phrased as a
complaint about arbitrary government, the demands of the protesters
amounted to an insistence that the government do more to promote the
particular economic interests of one segment of society.

In this, of course, virtual protests are hardly different from real-life
ones. The Boston Tea Party was the expression of mercantile anger at
taxes: the protesters wanted was a revision of British tax policies to
favor colonial merchants at the expense of merchants in
England. Economically speaking, the entire American Revolution was a
scheme to improve the fortunes of colonial elites. But to convince their
future countrymen to go along with their tax revolt, they developed one
of the most inspiring ideologies of liberty and justice the world has
ever seen. "No taxation without representation" is a slogan that
transforms "mere" economics into egalitarianism. There are plenty of
thinkers who will tell you societies as a whole can often reap enormous
benefits by letting one particular group get rich; these benefits are
hardly confined to material wealth.

And this argument, note, is exactly the one the tax revolters in Second
Life were making. Yes, their buildings were larger, their gizmos more
gizmoriffic. But these edifices were benefits to Second Life
society. Encouraging the grand builders to go off and be grandioser and
grandioser makes everyone happier, because it drives a process of
creative competition in which they develop ever more wondrous monuments
and toys. And all they ask is a favorable tax policy.

True? False? Would easing Second Life's tax rates make it into a
stronger loving world? Or would it cause them to overburden its servers
with complex scripts and private robot armies? As in real life, these
are empirical questions, ones that can only be answered by close
analysis of the particular conditions of Second Life and its
workings. This is exactly the sort of analysis Second Life's designers
are carrying out; or at least it's the sort of analysis they've been
telling Wagner James Au they're carrying out.

One last way, then, of looking at the Second Life tax revolt is that
Second Life's citizens took some time out from their second lives to say
that close analysis alone is insufficient. They wanted their subjective
feelings about Second Life's tax structure taken into account, no matter
whether the designers in their expert wisdom thought things were
whirring along just fine. I am a player, and I am unhappy with how
things are, they said. Listen to me.

Where online democracy does not yet exist, it will be necessary to
invent it.

--
J C Lawrence                
---------(*)                Satan, oscillate my metallic sonatas. 
claw at kanga.nu               He lived as a devil, eh?		  
http://www.kanga.nu/~claw/  Evil is a name of a foeman, as I live.

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