Over the past few months, I've read a startlingly high number of game-design related articles which espouse socialism because "it worked in a game world" (or, just as often, didn't work in the game world). A lot of game designers seem to be of the opinion that socialism is a viable way of governing a world.
Socialism probably isn't what you think. If you think "providing for everyone's basic needs" is socialism, then every game is socialist because every game has no basic needs. Your avatar needs no food, no shelter, no medicine. Unless, of course, he chooses to go out and do things which make him require those items.
Real-world socialism is when a governing body chooses to provide for everyone's needs. Game-world socialism has no need for a governing body to do that - it is a core element of their reality, in the same way that no governing body is required to dole out your daily allowance of gravity.
Real-world socialism's failing is that it needs to take supplies to give supplies. Speaking very loosely, people will then tend to be "takers" rather than "givers", getting worse every year. In a game world, there is no need for a "giver" at all - everyone is a "taker". This means that game world socialism is not the same kind of socialism as real-world socialism in the slightest. (Although the fact that there are so many "takers" is probably one of the major reasons people are so childish in these games...)
The closest we get to a "real-world" socialist environment is in a game-world guild or corporation. These groups often take resources from the guild coffers to supply newbies with equipment that will help them succeed. This is largely successful because the makeup of the world is such that people who don't care about succeeding won't be playing. Another factor is that most guilds/corporations are quite small in comparison to even the smallest nation.
If you're designing your game world, don't think in terms of "socialism", because it's nearly impossible to get into your game, and if you manage it, your game will crash and burn. Chances are, you're either thinking "benevolent anarchy" or "benevolent dictatorship", depending on how much managing of your player base you plan on doing.
There's nothing wrong with a well-thought-out benevolent anarchy in a game world. All the negative stigma of anarchy in the real world doesn't apply to a game world if you design it right, especially if the world is limitless.
I suggest against a benevolent dictatorship, because power corrupts.
Either way, your economy will be mostly free market, NOT socialist. Even the games which those writers called "socialist" have free markets. This is because players like making money, and free markets are the only way to let them do that. (Free market with, in most cases, significant moderation.)
This post really doesn't have an awesome ending planned. I was just getting upset by all the "socialism GOOD" game design essays I've seen recently. :P