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I read this in 2003. It was either a quite short book, or perhaps a short story, although it was published in a paperback.
The main character was male, and I believe in his early teens. The characters were mostly human, although there were alien races represented as well.
The central focus was the idea that it had been decided to fight all wars virtually. Armies would be laid out on the battlefield, each person roughly a few inches tall, and commanders would physically nudge them around the field using their hands. The results of these battles would determine how resources were distributed.
The main character at one point spends hours, possibly days, leading these virtual soldiers to their deaths in battle. Afterwards, he is greeted with enthusiastic congratulations, but is emotionally scarred by the events, and describes the soldiers as "real people dying." He also describes the painful blisters he experienced while commanding.
I can't remember much more, other than I found the book in a middle-school book fair in the US. Also I believe the friend who congratulated the protagonist after the battle was some sort of strange monster, possibly a giant floating eyeball, or something along those lines.
edit: My persistent googling has yielded zero results, but I really wanna find this book. I've been wracking my brain for more details, but the only thing I can remember is that while the battles are taking place, the commanders (the teen boy) are in some sort of space station. I remember it being described quite like a cliche horse-race betting parlor (gotta be a better way to phrase that), with excited people waving tickets around and betting on the results of the battles. I think one of the friends of the main character had bet big on his victory, and the trivialization of what he experienced as a traumatic event was a source of contention.