Game theory does not concern itself with good and evil. It seeks to predict not which strategies are just, but which are most effective. John von Neumann, a Hungarian-born polymath with a sideline in predicting the blast radius of an atomic bomb, co-authored the discipline?s seminal work, Theory of Games and Economic Behavior, in 1944. He then began thinking about war-game scenarios that weighed the likelihood of an exchange of nuclear weapons. ?Early in nuclear negotiations,? says Steven J. Brams, a New York University professor of politics who worked under former Defense Secretary Robert McNamara during the 1960s, ?we didn?t know that they were not meant to be used. It took a few years before strategists digested this.? At the height of the Cold War, the application of game theory convinced leaders of the two nuclear-armed superpowers ?that if we?re thinking of using them, we?re in deep s?t.?
This summer?s negotiations over raising the debt ceiling seemed to present Democrats and Republicans with a similar dilemma. Failure to reach a deal threatened to bring on the economic equivalent of a nuclear winter. The leaders of the two parties, Barack Obama and Speaker of the House John Boehner (R-Ohio), appeared to grasp this, but a vocal band of ?Tea Party hobbits,? as their fellow Republican, John McCain of Arizona, dubbed them, refused to go along. They made it clear they were not only willing to bear the catastrophic consequences of a U.S. default, but that they might actually welcome it. Trapped in a classic game of ?chicken??a term game theorists use, too?in which both players entertain the option of killing everyone, the President did what game theory suggests a rational actor would do. He recognized his potential maximum losses were greater than his opponent?s. He caved.
Obama?s decision to agree to a deal that calls for $2.1�trillion in spending cuts over 10 years, with no increases in revenue, was greeted with scorn among his own supporters and disdain from global markets, which plunged at news of the accord. Meanwhile, Tea Party Republicans complained that the agreement didn?t go far enough. The outcome of the debt ceiling talks left everyone in a foul mood, not least the President himself, who signed the final legislation on Aug.�2 in the Oval Office, alone and grim-faced.
And yet for all the collective self-loathing that attended the debt ceiling talks, it?s important to remember that, like just about everything in human behavior, it was still reducible to a game. Looked at through the prism of game theory, it?s hard to see how the outcome could have turned out any other way.
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Biologists have adopted game theory to describe successful adaptations. Labor arbitrators have used it to ease negotiations. And Brams, who has many books on game theory to his credit, has drawn a decision tree for God?s last discussion with Cain in which Cain can choose to admit, deny, or defend his crime and God, in turn, can choose to kill or punish him. Looking back over the Summer of Debt, Brams can?t find a single move by any party that?s inconsistent with predictions from his discipline. Crucially, game theory assumes that no one is crazy, and it?s true in life that almost no one ever is. There?s also a pragmatic reason to treat your opponents as sane: You can?t make predictions about their behavior unless you do.
Almost everyone?even members of the Tea Party?knows a hawk from a handsaw, and the best strategy is to assume the other player has a rational goal and try to figure out what it is. People act crazy, but they?re at their craziest when they want something. All you can do in response is to make your most honest estimate of what the crazies actually want, and respond as if they are methodically pursuing it. There is no advantage to be gained, for example, in pointing out that Kim Jong Il is a potbellied nut job in a bad suit. Everything he?s done during his reign as North Korea?s leader suggests he?s an amoral, but sophisticated, negotiator. Unpredictability, says Brams, can be a smart strategy.
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