The Amazing VooDoo Economics of Farmtown

My obsession of the month has been Facebook's Farmtown. I am particularly impressed with the way the Farmtown designers have bent economics to match the goals of the game, leaving real-world economics behind.

It's Pumpkin Season!

Like most virtual world-type games, the value of Farmtown money isn't based on supply and demand. The supply of both money and goods is, of course, limitless, so the prices are arbitrary. The demand has no impact on price, so the goal is to maximize demand (i.e. players) as much as possible by increasing the size of the player-base. Attracting more players is the baseline goal of all games, and Farmtown uses all of the Facebook viral tricks to achieve that goal. In addition, they use a novel approach to employment economics, which, while simple, is new to me.

If you are a Farmtown farmer, these are your costs to grow crops:

• Plow
  
• Buy seeds
  

Once the seeds are grown, you harvest and get paid:

• Harvest and sell immediately OR
  
• Harvest and store, selling at the Market for +10% price*

Here's paradigm shift. The Market is full of people who want to work for you, and getting that bonus 10% is how you find those players in the first place. Players who work for you get paid BUT:

Unlike in the real world, instead of the farmer giving the workers a cut of the farms income, the farmer gets paid MORE when using a worker and the worker gets paid by the game, NOT by the farmer. That means the farmer's choices are:

• Harvest and sell immediately for the least money OR
  
• Harvest and store, selling at the Market for +10% price OR
  
• Hire somebody else to harvest, selling at the Market for +20% price, plus the worker gets 20% value of the harvest. Note: Harvesting becomes a bit of a chore, so you're saving time and effort as well as making more $
  

Hiring somebody to Plow your fields also is 25% to 50% cheaper than doing it yourself in addition to the worker getting paid. Again, it's a chore you get to avoid while saving money and the worker is thanking you for the 'free' money.

The game simply doles out more money for the cooperative behavior they choose to encourage. Unlike the real world, there's an infinite supply of cash, so this works with no side effects. I've always thought of virtual economies as trying to replicate supply and demand of scarcity based real-world economies, but Farm Town has proved that there are other options, depending on the goals of your game.

* note: I'm totally estimating the % benefits, but the gist remains valid.

-Adam!!!