Land Value Tax in Online Games and Virtual Worlds: A How-To Guide

Lars Doucet and Dan Cook argue that virtual worlds containing land-like assets, including Ultima Online, Star Wars Galaxies, Final Fantasy XIV, and metaverse platforms, predictably suffer land crises. These crises involve speculation, divides between "landed" and "landless" players, reduced user-generated content and growth, black markets, and escalating costs, and they can cripple games where land is central. Without intervention, a three-phase cycle unfolds: early movers cheaply corner land, later arrivals pay premiums, and speculators profit from rising prices and rents. The authors propose a Georgist Land Value Tax as the remedy, taxing land but not improvements so that idle holding becomes costly and productive building is rewarded.

The case rests on more than 140 years of Georgist research and on virtual-world evidence, such as a holding fee that resolved EVE Online's land recession and housing crises in several games that matched Georgist predictions. Land-like assets are those that are scarce, non-produced, necessary for production or gameplay, and valued by network location. The more an asset has these traits, the more speculation it attracts. Value derives from the surrounding community, and improvements should be separated from land, which games make easier through transaction logging, movable structures, and fungible upgrades.

Implementation follows four steps: identify land-like assets, separate improvements from land, discover market value, and tax 85-100% of land rents. For price discovery, short-term Vickrey-auction leases rank first for simplicity and accuracy, though they expose owners to forced sale and are hard to retrofit. Assessment using separate land and improvement bids plus statistical models ranks second, and Harberger taxes rank last because of forced-sale and user experience concerns. Tax rates are calibrated by driving land selling prices toward zero, with a 3-10% capitalization rate as a starting guess and 85% as a safe floor.

Proceeds should be handled according to the economy type. Fake-money MMOs can delete them to counter inflation, while real-money economies can retain, reinvest, or distribute them as a citizen's dividend, with multi-account abuse a risk. Blockchain and NFT games gain no special advantage and face added disputes and hacks. Creating more land eases scarcity but does not remove location-based value. Games that pre-sold land, such as Decentraland, Axie Infinity, and The Sandbox, face a difficult tradeoff between landless users and landowners.