It is gacha more than anything that is hurting the economy IMHO.
Not only does it create an endless supply of cheap resellables for some (maybe more than a few) unethical individuals who use the (not yet fixed) exploits to make duplicates of no/copy items but it floods the market with cheap stuff.
Not cheap in quality though because a lot of decor gacha items especially are downloaded from the web or outsourced to 3rd world freelancers who then .. wait for it.. download it from the web anyway.
The end result is that people expect high quality at rock bottom prices.
Merchants who are doing well, do it in one of two ways.. massive quantity low, low price items of dubious provenance or by finding a niche market that is hard to compete with.
I can't stand gacha's. Gacha's are a money grabbing tactic. They lure people in with pretty items to collect but you wind up spending thousands trying to get anything decent from them. I am almost certain they're rigged so you have to spend a certain amount before a rare even pops out, not to mention those hair companies that make NORMAL hair colors the RARE ones and the common ones the lumo crap that make you look like a walking traffic light. I refuse to use them anymore lol. If there's something in a gacha I fancy, I'll look on the marketplace to see who's selling that specific item / set. Gacha's should go same way as gambling in SL.
I'm pretty sure everything my avatar wears was a freebie or a onebie. Would you rather see us broke n00bs all wandering around in the same handful of default avatars instead of a mix and match of free finds?
I would argue that freebies, if handled properly by the store, can be an extremely effective way to promote a brand. For example, an attractive, well-made free item placed at The Free Dove (which usually includes a SLURL in the package) will often prompt my visit to the mainstore location to see what other products are for sale.
I think Freebies, as in literally $0L items do not hurt the SL economy, but in fact helps to promote paid products.
I use my free items to promote other items, by releasing a good quality free product that will reflect the workmanship in the paid products.
As far as I can track what happens (I can only browse transaction history), there appears to be people who grab the free items, and do in fact return to buy the paid items.
I've also noticed that just because you offer something for free, doesn't mean it will lead to other sales. Sometimes people just want stuff for free.
I will always offer things for free, as I very much appreciated being able to get myself up and running in SL with freebies, so at least give back in that respect in some way.
What DOES hurt the Second Life economy is lack of new users and returning users. There are built in issues within SL (particularly lag caused by downloading massive images and scripts on a sim), that kill people from staying, high expensive land rentals, etc.
I think the biggest threat to the SL economy is Sansar. Not as a competitor, but as a distraction for Linden Lab from updating SL.
I wish High Fidelity would quit faffing around and start taking the idea of having an in-world economy seriously. Conceptually it seems like the closest thing to a "new SL", and I get the same kind of vibes from the HF employees that I used to get from the in-world Lindens.
I firmly believe that they have hurt SL in the past. They were overused as a marketing tactic, and there were a few too many people using FabFree to not participate in the SL economy at all. In the old old days before that, while freebies were a thing the quality was low and you couldn't have a nice looking avatar on just freebies. It's balanced out a bit now, so I don't think they're hurting the SL economy currently.
It is difficult to talk about what is good or bad about the SL economy without defining a baseline of what a healthy SL economy should look like.
I think it is frequently discussed in terms of whether a small percentage of the population who are merchants are generating revenue. That's nothing that interests me, since I'm not a merchant. (Though I am absolutely happy for anyone who makes money through their creations or services.)
It could also be considered in terms of whether customers are getting value for their expenditures, and whether there are enough things on which customers want to spend their SL budget.
Marketplace is challenging to use, in terms of searching or browsing for things one wants. There may be thousands tens of thousands of products in any category, variety and diversity of products is always lacking. Truly evaluating available products requires a decent knowledge of the complex/quirky technical underpinnings of Second Life, which most users find daunting. Buying things in Second Life is very much a frustrating, time-consuming, perilous process.
If one spends a significant amount of time and money shopping, and comes up with enough disappointing products, it is easy to be discouraged from participating.
To get to the question of freebies, getting a good freebie or cheapie is an encouraging, positive experience that is a good thing for Second Life, whether it encourages someone with the budget to spend to go shopping, or whether it encourages someone with no money to spend to continue to participate in Second Life.
Having a population in Second Life is important, whether or not a certain segment is spending money. Ultimately, the heart of the Second Life experience is meeting and interacting with others. If Second Life is desolate, there's no reason for users with money to spend to actually stick around and spend that money.
Here is the philosophical question: If you are wearing the hottest mesh avatar and sexiest clothes that money can buy, but no one is around to see you, are you actually pretty?