Epoch Eclipse
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Epoch Eclipse

Rent-Seeking and the Free-Rider Problem

Dysfunctional people create dysfunctional societies.

Image by the author. More on Instagram.

The term Dark Triad refers to a trio of negative personality traits — narcissism, Machiavellianism, and psychopathy — which share some common malevolent features. The construct was coined by researchers Delroy L. Paulhus and Kevin M. Williams in 2002.

The dominant virtual world domains in today’s Metaverse seem to encourage the Dark Triad to such an extent that one can only wonder about the mental condition of those behind these dominant virtual worlds. Whether these virtual worlds are self-portraits of the psyches behind the virtual worlds or perhaps merely targeted towards the Dark Triad personality type in the belief that it represents the desired demographic, in any case, these dominant virtual worlds shelter common malevolent features.

The underlying incentive which generates the free-rider problem is explained by the application of the Prisoner’s Dilemma, one of the most well-known concepts in modern game theory, within the context of contributing to a public good. The free-rider problem is the burden on a shared resource that is created by its use or overuse by people who aren’t paying their fair share for it.

The shared resource, in this case, is the active and productive domain community.

Metaverse virtual world domains live or die depending upon how active and productive the domain community is.

Access to the community is an essential shared resource. Virtual land is not a shared resource in scarcity domains. Virtual land in scarcity domains is an asset leveraged for shrewd or potentially manipulative use, even overuse, of the domain community.

Scarcity programmatically built-in seems to be the dominant parameter included with virtual world domains in the Metaverse being originated today. Whether it is done by a centralized corporation or a DAO matters little for evaluating its effect upon the subsequent domain.

Programmatic scarcity is a choice. For example, built-in scarcity is a feature of $BTC (Bitcoin) but not a feature of $ETH (Ethereum). We must wait to see how this plays out with the cryptocurrencies but we can already see the effects of built-in scarcity on virtual domains in the Metaverse.

Right off the bat, scarcity domains usually require buy-in, either with fiat currency or external cryptocurrency which are converted in the domain to the domain’s own exchange medium. No one gets in for free and the greater the buy-in the more power one obtains.

The common rationale often comes down to some type of anti-inflationary ideology purported to stabilize the domain exchange medium and protect stakeholders from market vagarities. While this seems to fly regarding cryptocurrencies such as $BTC it also enables predatory financial activity upon the programmatic scarcity domain community.

This model of stakeholder capitalism is promoted by the WTO (World Trade Organization) for their Great Reset. Bear in mind that this Great Reset intends a defacto replacement of representative democracy with stakeholder capitalism that puts oligarchs and their corporations in unregulated control of all society.

The largest stakeholders are always either the centralized corporation owners or the DAO developer team members, who then control the domain financial reserves much like a central bank. The primary reason these domains were created in the first place was to provide income and profits on the initial investment through rent-seeking and normalizing the free-rider problem.

Often buy-in is tied to virtual land purchases. Here the scarcity is manifested and made obvious.

Often buy-in is tied to virtual land purchases. Here the scarcity is manifested and made obvious. While the whales immediately swoop in to buy up the available virtual land there is nothing stopping the domain’s management, whenever it suits them, from creating more virtual land, taxing the land, or opening the development of all the land to all domain participants.

This creates a conflict of interest between whales and domain management. Creating more virtual land would tend to deflate the value of existing land. Perpetual periodic ongoing costs resembling taxes would deter land purchase. Opening the development of all the land to all domain participants eliminates the potential power and profits inherent to exclusive use.

That domain management may be run by a DAO only means that buy-in is required to affect management decisions and permits whales access to the control of the domain. This is democratic only in the limited sense that votes are tied to affluence.

The buy-in requirement establishes a financial hierarchy guaranteeing income to the domain management at the top of the food chain.

All-in-all, the subsequent scarcity of virtual land promotes rent-seeking that spawns the free-rider problem. Seeking to gain wealth without any reciprocal contribution of productivity or wealth obtained through shrewd or potentially manipulative use of resources comprises part of the definition of rent-seeking.

Virtual land in scarcity domains is an asset leveraged for shrewd or potentially manipulative use, even overuse, of the domain community.

Nothing happens with virtual land in scarcity domains that isn’t financially extractive upon the domain community. I’ve seen no use examples of virtual land in scarcity domains that are not designed and engineered to produce ongoing profits through rent-seeking and enlarging the free-rider problem as an incentive.

Not only are rent-seeking and the free-rider problem responsible for climate crimes and social collapse in the real world, but they are also equally problematic in virtual world domains in the Metaverse.

I’d like to think that virtual world domains in the Metaverse can do better than replicate the dysfunctions of the real world. If we can’t imagine and build better virtual world domains in the Metaverse then there is little hope we could ever do better in the dysfunctional real world.

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Jay Greathouse

Jay Greathouse

Bootstrapping my work on DAO Data Unions Running post-scarcity domains in the Metaverse with NFT sales.