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I think the "what's it used for?" question is a good one. I think of RPG Theory as being the way to understand and design games in the same way that Aeronautical Engineering is the way to understand and design aircraft. This was historically complicated by the fact that early RPGs didn't necessarily supply the full game design to the players -- at the very least the GM was expected to design dungeons or adventures, if not figure out how to make a disparate bunch of subsystems interact usefully at all -- so a lot more people needed to be interested in the stuff of game design than just people who called themselves game designers. Also, a lot of early discussions were framed in terms of "How to be a better GM" or "How to be a better player", so there is some expectation that RPG Theory should speak to that. That's kind of at the core of the "System Matters" vs. "System Doesn't Matter" debate -- if each game is its own thing then naturally each game would work differently and would need to be understood on its own terms, but if each game is but a particular flawed attempt to instantiate True Roleplaying then claims about how "roleplaying" work are potentially relevant to everybody.

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I like your definition and that does clarify things - then all my design conversations are theory conversations. I think most people think of theory as somehow more abstract than that - and would be happy to know that its not. So to answer the post's original question, design conversations are doing fine - wherever they happen. It's just they're usually focused conversations about systems - and rarely get more abstract than that. Does that make sense?

My understanding is that in the Forge, there was a lot more High Theory - more Theoretical Physics than Aerospace Engineering. I don't think I would've enjoyed those conversations very much.

(And yeah, the historic split in "system design" or "adventure sign" seems irrelevant to modern indie games. But the difference between invisible and visible rulebooks is still relevant - analogous to system and "play culture".)