Game Theory in Literature and Life
“The old view that ‘private greed and private rationality’ is compatible with collectively sub-optimal outcomes has again gained credence through developments in the mathematics and economics of Game Theory.” – S. Subramanian
As the writer of the article noted, the most intriguing thing about social sciences and economics is that “heterodoxy can become orthodoxy, and orthodoxy heterodoxy.” In other words, previously rejected idea becomes the new standard of the field, and the mainstream logics can turn into an obsolete idea again. The idea, proposed by Adam Smith in the ‘Invisible Hand,’ that disproves individual selfishness leads to collective beneficence, is one major example that regained the strength after the emergence of Game Theory.
In order to clarify how private virtue links to public vices and vice versa, the Prisoner’s Dilemma has to be introduced. Assume that two prisoners are suspected of a crime and are separated into two cells. If one confesses and the other doesn’t, then the confessing one will be free of charge while the other one will receive a sentence of 10 years. If both confess, then both receives 5, and if neither does, then both receives 1. If Prisoner A confesses, then B should confess in order to receive a sentence of 5 rather than that of 10, and if Prisoner A doesn’t confesses, then B should, again, confess in order to be free of charge rather than receiving 1 year sentence. Same logic applies to Prisoner A, and therefore, the “Dominant Strategy” for both prisoners is to confess. And this state is called “Nash Equilibrium (NE),” a pair of strategies that are Best Responses to each player.
It is easy to wonder why both prisoners confess and choose the “worse” outcome of 5-5 sentence rather than 1-1 sentence. However, in real life, private greed and private rationality play the major role when it comes to decision-making process, and according to Game Theory, such decisions might lead to collectively detrimental results to every participant in the game. Therefore we draw an important feature of NE: NE outcomes are not necessarily the good ones to the players. And this is how private virtues, which are beneficial (Best Responses) to individual, are linked to public vices.
The writer introduces several examples from literature and economics where we can apply this idea. Joseph Heller’s famous novel, Catch-22, introduces a character Yossarian and his interesting reasoning. Yossarian says “From now on I’m thinking only of me.” Supposing that everyone feels that way, then Yossarian will “be a damned fool to feel any other way.” On the other hand, Yossarian would be “an even bigger fool to feel any other way if nobody feels that way.” This logical reasoning is a short example from literature that shows that selfishness is the dominant strategy equilibrium, for Yossarian and everyone around him.
The situations, in which two competitors use an increasingly dangerous arsenal of weapons simply to remain evenly matched, are often referred as arms races. Even though there exists a better outcome for both, each player will try to stay in his/her dominant strategies, which inevitably bring worse payoff for both players. Private greed and rationality, a narrow-minded decision for personal benefits, come back as collective harms, as Game Theory shows.
Link: http://www.tribuneindia.com/news/comment/game-theory-in-literature-life-and-sport/288770.html