Let's step forward for a moment to a time a few years from now when virtual spaces are almost completely integrated into the lives of anyone with a computer. Second Life is but one of many platforms and sim hosters, and there is no 'novelty' value to owning virtual property or having your virtual 'stuff' accessible by the public. What values, then would a virtual presence have, and what sort of economy could these values support?
The thoughts in this post concern virtual land and its value. Land is not the only fundamental in an economy, but I would submit that it is the signature point of distinction between a 'real' and a 'virtual' economy. Who, what, where, when and why: although each of these undergoes some interesting tweaks in passing through to a virtual world, it is really the 'where' that is the defining factor. Of course, the metaverse is more than a "mirrorworld" in that many cultural and cognitive patterns of spaciality are open to significant transformation here, but its status as a place or places is still central.
Of course, there is a class of people who have their own private uses for virtual real estate, and are unconcerned with the problem we are looking at, i.e. valuing virtual property. They and their friends or visitors already know what, where and why, and they just show up and get on with it. I think as the metaverse expands, this group will shrink, or in any case will continue to be unconcerned with the 'value' of their properties, and if the cost to provide these backwater places is close to nothing, they will perform an important marginal function in the larger system.
It is easy to suggest that Linden Labs or other hosters can just mint new land like paper money, and that we will be awash in cheap places with no value. We already know our way around this issue -- blogs too are free and easy, but we only read ones with a certain critical momentum. Virtual real estate, (much like RL real estate, in truth) has little inherent value, but is made valuable by context and by the networks of people that come to visit.
It is also easy to suggest that one can just search for what one wants and visit it with a click, making context and proximity irrelevant. Certainly we have experienced this on the Second Life grid and indeed with the internet generally. But when we look closer, and especially considering the exponential scaling coming to us in the near future, this a-topic idea falls apart and reveals some significant values that successful virtual properties must hold. We know about this from Google. Earlier search engines bogged down under the weight of simple keyword searching, and Google pioneered searches based on context, proximity and reputation. These turn out to be reliable for searching purposes because they are real, inherent values held by the sites being searched.
It has become common recently for people to arrive in Second Life and set up shop, often at a grand scale, and assume that we will all rush toward their islands for the sake of the experience or the products. Skipping from Web 1.0 to Web 3.0, they fail loudly and blame the platform. When we look at YouTube, Myspace, Twitter and company, the attraction isn't the interactive features in themselves, but the open-ended possibility that it might actually be fun, and that user-created content and relationships will surpass the original functional values of the site.
Virtual land, then, has some basic values, like being findable, accessible, and useable for the intended purpose. Almost any or all immersive digital destinations will have these values in some measure, and it is likely that they will be commonplace and nearly free in the near future. But virtual land will have a second tier of values, including community, proximity, and reputation. These higher values will vary widely and will be the basis of an economy that can be studied and nurtured in mostly conventional ways. But I must insist, in response to Robert Bloomfield's comment during his Metanomics 101 presentation, that this will not be an economy based on scarcity. (We have to move past the cold war 'opposites' of Marxism/Capitalism. I would look to Ivan Illich and the appropriate technology and sustainable community movements for some leads here.)
In short, I believe that certain virtual properties in the near future will be immensely more valuable than others. Whether held as common values, supporting stakeholder communities, or whether commodified and held by stockholders, the value of these properties will be a fundamental of our 'blended reality' economy.
Community.
In community, in social interactions, in rituals of obligation and generosity, people satisfy needs and desires of a spiritual depth than economics cannot reach. In virtual worlds, social interactions bring value and meaning to places that is irreplaceable by any other means. The metaverse is a symbolic space where objects 'function' at a semiotic and psychological level, and meaning is overwhelmingly dependent on social context. The balance of power between space and time has been adjusted here; values are much more ephemeral and event-based, but place still has the role of holding the memory of past events and holding open the occasion for events in the future. 'User created content' is an awkward phrase covering the idea that 'places' in virtual worlds are really defined by the living now of creative activity, whether it is building, acting, writing, or simply enacting the fabric of the everyday. And creative acts in a virtual world are fundamentally generous acts -- contributions to the richness of the other's experience.
Proximity.
Geographic proximity still matters in virtual worlds. There is still a spillover effect, where visitors to adjoining properties walk or fly around to satisfy their curiosity. There are also intact cultural patterns such as courtship walks, rituals of escape and return, and demonstrating one's worthiness reflected in the neighborhood. And colocation is a straightforward way of representing network proximity.
Network proximity groups things in clusters by affinity, and is organized by a searchable indexes and group affiliations. A valued destination will be 'near' other similarly valued properties in the 'space of appearance' of group listings, advertisements, sponsorships and publications, even if it is not geographically near.
Reputation.
Reputation covers a group of values that help us find and choose among places to go among the millions of alternatives we will soon scale up to. Highly valued places will not only be characterized by the quality of their neighbors and affiliations, but also by their contacts in the 'vertical' supply chain. A club, for instance will be valued not just by the class of other clubs it belongs to, but by the quality and reputation of the photographers, furniture suppliers, DJs, designers and scripters it uses, and by the quality and social networks of its clientele, the businesspeople who use it for events, and the penniless writers who reference it in tommorrow's bestsellers.
I've avoided specifying land values as communal, commercial, or private, because the values underly the specifics of who uses a place and to what end. Virtual worlds will only further blur these distinctions, in that the lower frictional costs make virtual worlds more ephemeral, and the connection of place to use will depend much more critically on the interactions of private and common activities. For instance, I think very few corporate sites will be able to survive without the active participation and user generated content of an affiliated 'residential' community.
It will take much more anthropology to create and maintain an effective corporate presence in a virtual world, or indeed to monetize or commodify any aspect of the 'life' of a virtual world. Our virtual lives are light-footed and light-hearted, and can more easily shift to new locations and alliances. Business models will have to follow suite, and will always lag a bit behind the creative evolutions of our values. But we will adjust to this world, and find ways to standardize, risk-assess, and commodify the enduring values of community, proximity and reputation. We will arrive at a balance between the untrammelled creativity of a community based on generosity, and the necessary and stabilizing influence of capital.
We can't look past the "cold-war" distinctions of "capitalism and communism" because regrettably, they indeed pertain. And if you invoke Ivan Illich, you've only invoked a leftwinger on the socialist end of the scale, troping towards communism. The idea that Illich represents some harmony and new mode beyond capitalism and communism is silly; he doesn't. His ideas are profoundly Marxist, in fact.
What's amazing about the human being is that even when you brutally socialize him as the Soviets did with communism and collectivization, he still continues to value land. It's supposed to be bred out of him, but can't be. It's not only because of literally needing a place for a house and farming; the state can provide those things, and people still make their own garden plots. Those little garden plots wind up providing a third of the Soviet Union's produce, keeping entire families' alive, while the collective farms languish and are robbed of their equipment. Communism and socialism don't work; people need valuation; they put valuation in things even at the greatest odds.
Same for virtual world. You can make virtual land dispensable like toilet paper, but people will still find ways to make some of it more valuable than others -- you cannot breed this out of them with utopianism. In fact, as land is a server that has to be purchased, it *does* have at least some RW intrinsic value, and will go on being something in fact you cannot endlessly roll out like toilet paper.
The Lindens tried breeding land valuation out of people -- they let it be taken at will, but there were limitations on prims. People would put out high prim tables and chairs or warehouses or prim blocks just to use up a prim allotment and keep it in the bank to sustain the square meters they wished. The Lindens tried a prim tax -- it didn't work, people rebelled. They ended up replicating a real-life model of auctions for land to determine valuation (i.e. waterfront versus flat midland).
Tekkies and lefties terribly want to breed out of people their desire to value land, and to strip away land valuation and management from what they find more useful for social control -- design, content, communication, reputation. This is an old story -- so many socialist and communist experiments start first with trying to redistribute or devaluate land.
They want to create a society where tekkies controlling those tools for design and content, communication and reputational points, get to run the world. Land valuation is an important hedge against those creator-fascists, it creates a wedge against their powers, as in real life. Land barons, the worlds they create, their tenants, are a bulwark against the excessives of the elitist technocrats.
I'm glad you recognize that geographical contiguity matters, even in a world of browser like p2p. Not only for courtship walks or displays of male prowess in battle, other ingrained human behaviours. But for situating the body and consciousness in a comfort zone of time and space and familiarty. People do like to chat to neighbours and in fact like to get along with them and solve problems. In SL, the tekkies drone that you must do WTF you want on your land like a tired extreme religious dogma, and that makes people not get along. They should ask each other to changes things, frequently, and try to get along.
Communities can be terribly oppressive and limiting. Community can not be the only defining valuation for world or land. Individual contribution matters, and freedom for the individual recognition must always be ensured.
Reputation is also a controlling, mafia-like system that often is gamed and rewards the mediocre (for things like time on games getting quests done) and aren't real recognizers of merit.
People come on the world in droves and make contiguous geographical spaces with versimilitude to achieve a comfort level, and land and homes matter. Yet the chattering classes keep coming and stepping on this, fussing that people should move to valuing design and social control instead. Of course they won't do that, and thank God for it!