Are they necessary? Maybe, maybe not. If I were a VC, I'd hesitate to invest in a vw that didn't feature one. A vw's economy usually dovetails nicely into profitability for the site, whether through subscriptions, micro-payments, or retail-tie ins (like Bella Sara and ToppsTown.) The earn-reward effect of money is too powerful, or too obvious, for most vw's to ignore.
A money free economy would be cool. Barter as the only form of transaction would be very entertaining within the correct setting (think desert island or caveman) You want that coconut, well, you better find out what Richard342 wants for it. The lighter? Is he insane?
Rather than the traditional capitalist model, I wonder if a communist model might work. What if everyone got an equal income based on contributions of the site's entire population. Would people contribute? I think they would in the context of an engaging game or game-world tailored to that model. How would people act in such a world?
It could be that I just ran out of money building my ourWorld shrine to the Big Lebowski and as it's a beta, there isn't an adequate way to earn more, yet. If anyone with a SmallWorlds account sees this, The Dude's Room could use a couch and some candles. Donations accepted!
The Dude's got no money in the Small Worlds beta.
It's the Economy...you know.