Video Games in Teaching Economics

Abstract

While economic education considers a large body of valuable classroom activities which demonstrate the efficacy of economic ideas, these activities mainly serve as illustrations and are constrained to the classroom. But video games hold even more pedagogical promise and to illustrate their potential, I present a working video game designed to reinforce students’ understanding of comparative statics. The game plays as if it was built solely to entertain but rewards players who have a solid grasp of how to shift supply and demand curves. It thus incentivizes command of the subject matter without the pressure of grades. And because the game is not obviously homework, students who have trouble would be encouraged to stay engaged as they practice shifting curves. Though the game lacked many features a final version would include, student test results suggested that the video game improved student learning.

Appendices

Appendix 1: Sample Instructions

Obtaining information is costly. Because relevant knowledge is spread out in different places and that knowledge is constantly changing, there is a need for people who focus on gathering information and using it in beneficial ways. The better you are information gathering, the more value you add.

Merchant of the Seas is a game about how costly it is to get information and how to anticipate informational changes. You know this as supply and demand curve shifts, or comparative statics. This game offers a chance to practice one of introductory economics’ most practical skills in an enjoyable setting.

In Merchant of the Seas, you are a merchant at the height of the Roman Empire, approximately 100 C.E. There are six cities to trade in and in each city, there are two goods to buy and two goods to sell. You start on a random point on the map with 100 gold to buy any goods you wish. But be careful how you spend it! Your ship moves only three spaces a turn. Click the ship and the game highlights the hexes you can travel to. Click a hex to go there. Whenever you proceed to the next turn (by clicking the End Turn button in the upper-right hand corner), you pay the sailors that help you run your ship two gold. You win when you reach 1000 gold.

When you move next to a city, you can see prices for the goods the city is buying and selling. Every unit you buy increases the price of the next unit you buy. Since you’re buying the good, the city is a producer and you can think of yourself as moving up the good’s supply curve (Fig. 2.1) with each unit bought.

Fig. 2.1

Supply curve

No city sells and buys the same good, so you’ll have to travel to a different place to sell your wares. When you sell, each unit you sell results in a lower and lower price. Since you’re selling the good, the people in the city in question is now the consumer and you can think of yourself as traveling down the demand curve (Fig. 2.2) with each unit sold.

Fig. 2.2

Demand curve

The profit you make equals the difference between the two curves: the shaded area in Fig. 2.3. In the beginning of the game, there will be many profit opportunities from buying low and selling high, what economists call arbitrage. But the game remembers how many times you’ve bought and sold every good; these arbitrage opportunities will soon be exhausted. On their own, it won’t be enough to get to 1000 gold. That’s when you have to be clever!

Fig. 2.3

Demand and supply

Every three turns, you get news about something that happened in the Empire. These news events, called shocks, shift a demand or supply curve for one or more of the goods. This creates new profit opportunities for you to exploit! Figure 2.4 illustrates how an upward shift in demand makes trading a fourth unit profitable, when before it wasn’t.

Fig. 2.4

Shifting demand curve

You can find out which prices have changed by traveling to each city but traveling is expensive. It’s far better if you can determine which goods have become cheaper to buy (from downward shifts in supply) and which goods have become more expensive to sell (from upward shifts in demand) by interpreting these shocks as they appear. But be aware: demand can also shift down and supply can also shift up. Understanding these shocks not only tell you which cities to visit if you’re trading a particular good but also which ones to avoid.

Figure 2.5 is a sample screenshot which includes the user interface. It depicts your ship docked at Salamis with the window on the upper right displaying current prices. The window at the top center displays the latest shock. The inventory on the left displays current money and current inventory; this player has 49 gold and two units of pottery in the ship’s cargo hold. The window in the upper left displays the current turn and includes the button players click to proceed to the next turn. The purple hexes represent the ship’s range this turn. The red circles are an artifact of the game’s engine and have no in-game consequence.

Fig. 2.5

Screenshot of Merchant of the Seas

You can view the entire map by zooming out (pressing CTRL while using the mouse wheel) and you can scroll by pressing the arrow keys. Each city displays what you can buy in that city (the good’s supply curve in that city) followed by what you can sell in that city (the good’s demand curve in that city). In Byzantium, you can buy Fish and Incense and you can sell Cloth and Wine.

Appendix 2: Goods Equations

See Table 2.4.

Table 2.4 All goods’ supply and demand equations

Appendix 3: Game Shocks

See Table 2.5.

Table 2.5 All shocks in the game and their effects