‘Pokemon Go’ Represents The Best Of Capitalism

‘Pokemon Go’ Represents The Best Of Capitalism

The fact that people are voluntarily choosing to play ‘Pokemon Go’ means the benefit of playing is more than the cost.

A recent article uploaded to Vox.com by Timothy Lee, “Pokémon Go is everything that is wrong with late capitalism,” has caused quite a stir, since it was fairly critical of the “Pokémon Go economy.” Given the popularity of the game and our concern that some players would be alarmed that their lighthearted entertainment was somehow destroying the economy, we wanted to offer a different perspective on some of the points made in the article.

In fact, we think “Pokémon Go” actually represents the best of capitalism. In less than a week, the game topped 15 million downloads and the 21 million active daily users spend an average of 33 minutes a day playing. That amounts to more than 11.5 million hours of playing per day, and those numbers only look to increase. The app doesn’t cost anything to download and play, which means Nintendo and Niantic (the game developer) are essentially giving away tens of millions of dollars of value to the eager players.

We know that’s a bold statement. But this is why it’s true: A person’s time is scarce and valuable. Every moment he spends playing “Pokémon Go” he could instead be doing something else. The fact that people are voluntarily choosing to play means the benefit of playing is more than the cost.

At Least $11.5 Million in Value Every Day

Economists call this the “consumer surplus” — the difference between a customer’s willingness to pay for a good or service and the price it actually costs. It’s a measurement of the dollar value the consumer gains in the exchange. If a person were to buy a game of bowling for $5 that he valued at $7 instead of playing an hour of Pokémon that he valued at $3 for free, that person would lose out on value that would have made his life better.

So even if the average consumer surplus is only a measly dollar an hour, consumers are getting $11.5 million in value each day. The fact that customers are buying special items to use in the game, spending upwards of $1.6 million each day, implies that the value players receive from the game is actually higher.

The article laments local economies are harmed because people are turning toward forms of entertainment that don’t have high production costs, like movie theaters or bowling alleys that need expensive buildings or numerous employees selling buckets of popcorn. It misses that the economic activity associated with traditional entertainment options represent the costs of providing the entertainment. The reality we have now is much better, since we not only gain the value of the entertainment, but we have the money we would have paid for it to purchase other things as well. It’s almost like getting something for nothing, and our lives — and the economy in general — are better as a result.

Yay: Less Scarcity!

This is the core of economic growth — decreasing the scarcity of goods and services that limits our lives. The article makes it seem as if economic growth comes from simply spending money. This view can lead us astray because it ignores the importance of entrepreneurs, whose role is critical in creating new products and services that improve everyone’s well-being.

“Pokémon Go” is actually a great example of this. The game developers and their investors thought they could make something customers might like, and they took the entrepreneurial risk to create the game without the certainty that it was going to be a success. Obviously, it was a good gamble, but we’re sure even they are amazed at the results. Imagine if the game development funds had been used to build some bowling alleys instead. Wow. What fun.

Think of what would have been lost to society if entrepreneurs didn’t have the funds and the freedom to take that gamble. Their success has also spawned a sub-industry of “Poképreneurs” who are selling drinks and providing rides to Pokémon players. Economic growth — and our increased social well-being — depends on this kind of permissionless innovation.

In short, “Pokémon Go” represents the very best of capitalism because it’s premised on voluntary exchange — no one is forced to download the game, players can stop playing any time they like, and if they value the special items available in the game store they can buy them to enhance their fun. Furthermore, the entrepreneurs who had the foresight and the guts to dare to make the world a better place are being rewarded for their accomplishment.

Most importantly, that success only comes about because they have made people’s lives better in the process. That’s something Team Rocket could never learn to do.

This article originally published on Medium.

Michael Farren is a research fellow in the Study of American Capitalism at the Mercatus Center at George Mason University. He’s a proud member of Team Instinct, because he likes a challenge. Adam Millsap is a research fellow in the State and Local Policy Project at the Mercatus Center at George Mason University. No team will allow him to join, because all he can catch is Pidgeys.
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