In the online world, effects of a reputation economy can be seen in various forms among different circles. For example, Google, one of the most frequently visited sites and arguably most popular search engine, is known for it's unique search algorithm that lists results in order of reputation. Sites or pages that are linked more frequently by other sites rank higher, with the assumption that such sites are more popular. Web logs operate in a similar manner. More popular sites and pages are linked to by web loggers more frequently, resulting in higher ratings in sites like Google and Daypop.
Yet other sites use reputation economy based systems to rate members. Two such examples include Slashdot and Kuro5hin, where users give moderation points to other users, and members with higher moderation points achieve a certain status within the community. In such sites, the system has the added benefit that comments made by reputable members and comments that have been "modded" up by other users have increased visibility.
Finally, hackers of all sorts and definitions operate under this value system. Site defacers usually leave behind some signature to increase name recognition. Programmers are given higher degrees of respect and recognition if they make considerable contributions to the community. Often times the value of a free OpenSource project can be judged only by it's user base, activity, and name recognition.
All such examples allow people or projects to be given a value (or indication of "worth") without the use of traditional forms of wealth (e.g. money). Unlike monetary based systems, in a reputation economy, members do not lose "wealth" by giving to others, nor do they feel the necessity to accumulate such "wealth." In many ways, such a system would appear to be a completely fair and democratic, since people can give without losing, and earn what they truly deserve.

Although it is certainly true that members may give without losing, it is not entirely true to say that members earn what they deserve. For example, on a site like Slashdot, it is theoretically possible for one to receive moderation points for making an intelligent, insightful, and/or knowledgeable comment. In reality, however, a comment made by a newcomer to the site will automatically be given an initial score of one, and will be listed among hundreds of other comments with the same score. It is simply unreasonable to expect other members to seek out high quality comments from among hundreds of other comments and reward them with the score they deserve. Often times, comments posted early (thus appearing higher up in the page) receive points more easily simply because of their visibility, even if the actual quality isn't as high as comments made later on after much deliberation and/or research.
Similar effects can be observed with Open Source software projects. For an example, this has been the case with the webmail project I have been working on. If one were to simply search for "webmail" on Google, my project would not be listed until the 10th page or so. By then, the searcher would have found half a dozen alternative projects, and most likely, found what he or she was looking for. Does this mean my project is of a lower quality and undeserving of attention? Possibly, but not necessarily. The simple fact that other projects have been around longer is enough to burry my project down, rendering it virtually invisible. Does my project still have an equal chance? Sadly, the answer to this question is "no". It has a chance, but not an equal chance.

Like market economies, reputation economies are ultimately market driven systems; that is, success weighs heavily on marketing. In the monetary world, this is evidenced by the advertisements and commercials we are constantly bombarded by. The logic, and reality, is that when faced with a number of choices, consumers will choose which ever product they recognize. With Open Source projects, people are also more likely to find and use projects they recognize. A project with a larger user base is more likely to attract more users and contributors from word-of-mouth advertising, and in turn, receive higher rankings in search engines and generally receive more attention. Similar to how wealth creates wealth, reputation and recognition help build more recognition.

Despite such pitfalls, there are fundamental differences between wealth-based economies and reputation based economies. Most noticeable is the fact that in a wealth-based system the primary goal is to accumulate wealth, with relatively little restriction on the methods used. In a reputation economy, gaining reputation is not the ultimate goal, but only a side effect or reward. In fact, one of the traits attributed with the reputable and authoritative figures in the online world is their ability to make critical decisions based on solid facts and logical thought. Even though celebrities can arbitrarily endorse products in the physical world, such practices would be questioned, if not frowned upon, in the virtual world. Perhaps this is supplemented by the fact that members of the virtual community are more likely to question authority and spot fallacies than the average member of the physical world. Because of this level of scrutiny and peer evaluation, in very few cases could reputation be used as a leverage in unrelated issues.

The free and open nature of the internet has enabled us to create perhaps one of the largest reputation economies ever known. Although some see the Internet as simply another capitalistic market, many of the members operate based on a different value system. Although this system is far from faultless, it generally provides a more even playing field that is more likely to reward members based on their true capabilities than is typical in a monetary economy.

Version 1.1: Modified Feb 17, 2003 17:50 PST - Cleaned up some typos and grammar mistakes, added link for daypop.