We have to turn back the clock a few years, to the time Linden Lab introduced the stipends. Every Basic Account used to get L$50 every week they’ve logged in; Premium Accounts got L$500 every week, no matter if they logged in or not.
This set the reference for the price of things in Second Life: content creators targeting newbies (who would start as Basic Accounts) would know that if they priced it from L$0-50, they would get newbies to buy their content. If they wished to go upscale and sell to Premium Accounts, up to L$500 would mean that they’d get a sale per week. That’s why the first generation of outfits (usually just two pieces!) would cost up to L$500, since you expected residents to buy one per week (hopefully!). Skins, or other items that wouldn’t be bought every other week, like vehicles or animation overriders, would cost around L$2000, since you wouldn’t expect them to buy a new one very often. So that’s why things cost what they do 🙂
When GOM first introduced their currency exchange for Second Life, a similar question was asked: what would be the “fair” price to charge, in US$, for a handful of L$? Again, we needed a reference. Since the easiest way to get L$ in-world was by being a Premium Account, and that costed US$9.99/month (less if you paid annually!), and this got you L$2000/month, it meant that LL “valued” (indirectly) L$200 to be worth 1 US dollar. Well, almost: since the cheapest way to get L$ was to pay an annual fee — for US$72 — this meant that you could get L$333 for 1 US$. There’s your range — from L$200 to 333. Average it, and you get L$266/US$. Now you know why the L$/US$ ratio has been floating around that “magic” value for so long 🙂
Finally, land is also valued used similar baselines, although here the concepts of “speculation” and “location” play a huger role! Still, like in real life, you can see that the cost of land can be compared to the “base welfare stipend” (the original L$2000/month) which included 512 m2 of tier on the mainland. The value of land overall is tied to this and is not totally arbitrary.
So knowing the base metrics that define why things cost what they do in Second Life, we can ask ourselves next: what will be considered a good, successful SL-based business? And what will distort the market? And this will finally let us ask us the last question: should Linden lab attempt to “regulate” the market (in the good, European sense of the word) or just let it do whatever it pleases and whatever the results are (in the American sense of the word)?