I don’t play a lot of video games, but they are a nice diversion every now and then. I play the occasional RPG, but mostly racing games and strategy. I was originally going to buy the new SimCity when it came down in price, but after reading about their botched launch, I think I will vote with my dollars and only buy games that don’t treat its customers like criminals.
One of the fascinating things about video games, as with much else in life, is that if you pay attention, there are plenty of lessons about personal finance.
Economics of owning video games
The first lesson I learned from gaming had absolutely nothing to do with game play at all. Instead, the act of buying games has taught me valuable lessons. A fact easily missed by non-gamers is the fact that video games are expensive. A new game typically sells for $60! That is understandable considering most games these days have game play that last for days. If it takes 120 hours to play through Dragon Age, than works out to fifty cents per hour. That’s a pretty good deal for entertainment, on par with renting a movie from RedBox.
I’ve probably spent 500 hours playing Need for Speed: Underground over the last half a decade. Considering I picked it up with the GameCube at a yard sale for $10, the electricity has been the most expensive part of that entertainment!
The price of games, however, teaches about supply and demand. When a new game is released, the demand is at its highest. For a big release, stores can’t keep in on the shelves, even at $60+ per copy. If you wait a couple of months, the price starts dropping. A year after a release, it’s not uncommon to see a game selling for $20 instead. Even older games can be found at prices as low as $1. As time goes by, the demand for the game drops as more and more people who have any intention of ever owning the game do so.
What skews supply and demand even further in the buyer’s favor is that once a game has been beaten, many gamers will sell the game to make room in their collection for newer games. That’s how I was able to get Dragon Age for $10.
At the end of the day, you have to decide where you fall on the supply and demand curve. Every purchase you make in your life, be it a video game or a house, has this same decision. Do you buy when (or where) demand is great but supply is limited? Can you wait (or move) where there is less demand? From a straight mathematical standpoint, the answer is clear, but there is a lot more to personal finance than simple math.
Learning Budgeting from Video Games
Nearly every game I’ve ever played has had some sort of in-game economy. In racing games you can buy upgraded parts to provide more speed or better handling. RPG’s will let you upgrade you gear for better protection or more damage.
Budgeting in RPGs
In each of these games, you only have a limited amount of money to buy all this stuff. Unless you are a gold farmer, you have to pick and choose what you are going to buy to get the maximum impact. You probably won’t be able to afford the best sword available and the best armor available at the same time. Do you get the armor now and save up for the sword? Do get the sword first? Do you buy slightly upgraded gear first and save for the better stuff later?
You probably have limited inventory space as well. As you pick up treasure drops, you may run out of space and have to decide what is the most useful to have, either because you will be able to use it later or because it will fetch a better price when you later visit a merchant.
Budgeting in Strategy Games
Sim-type strategy games such as SimCity or Civilization have entire economies for your town or nation. Now here is real budgeting. One mistake that every new player of SimCity makes is spending all of their original funds building up the city and not being able to afford the recurring payments for the infrastructure. The key to success instead is to slowly grow your city so that your income can grow to afford more and more infrastructure.
In Civilization, building cities costs. There is the opportunity cost involved from a city not growing while building a settler. There is an additional military unit required to protect it. Cities require a recurring outlay of god. They bring more unhappiness to your empire. Plus, in the latest version, each new city means more culture points are required to adopt new policies. But more cities are required to be more productive, and the AI players will make fun of you for having a smaller nation. So a balance between growing individual cities and building new cities is required.
I also remember playing CivCity: Rome back in the day. In that game, you also had to build temples to the jealous Roman gods. Ignoring them or favoring one over another meant grave peril to your city. It was a good reminder that there often external factors that have to be taken into account when making decisions. In the short-term, it may be cheaper to not pay for car insurance, but getting caught without it can be expensive!
Video game economies help teach balance between earning money and spending it. Every dollar spent now is one that can’t be spent later and where are you going to put all that stuff? Certain games also help warn us against growth for growth’s sake.
Do you play video games? What lessons about personal finance or life in general have you learned from playing?