Using Nash Equilibria to Explain Climate Change
A Nash Equilibrium is defined as a solution to a game in which the players choose strategies that are best responses to each other, so that no player has an incentive to choose an alternative strategy if the strategies of the other players remain unchanged. The author of the linked article describes the current state of Earth’s climate as being in a Nash Equilibrium — no person or group has an incentive to change their behaviors unless they know that other people will change their behaviors as well. We might benefit if we coordinate our behaviors with others, but if we make decisions about our behaviors alone, then it benefits us to keep our strategies unchanged.
The author provides the example of taking the bus instead of driving in order to reduce the effects of climate change. If only a few people take the bus and others don’t, the people who take the bus will lose doubly because enough people didn’t take the bus to have any effect on climate change, and they lost the luxury of being in their own private vehicle. Thus, people are less likely to make such choices unless they know that a large enough population of people will also make that choice so that there might actually be some effect on climate change. A larger scale example also provided is that if the United States imposes strict regulations to reduce the effects of climate change, but no other country does the same, then the United States is left with tough laws and hardly any effect on climate change. In other words, it will take collaboration on a large scale for any progress to be made in the fight against climate change.
This example highlights the fact that a Nash Equilibrium is not always the most socially optimal outcome. Although the entire world would be much better off if every person changed their behavior, we are stuck in a Nash Equilibrium in which no person has an incentive to change their behavior unless they know that others will as well. The author of the article states that this Nash Equilibrium is one where “it is individually rational to do something that is collectively irrational.” Collectively, we need to adopt behaviors that reverse climate change, but it’s difficult to get people to adopt these behaviors individually. The author of the article says that one way to break a Nash Equilibrium is to “make it individually rational for unilateral action to take place,” and he introduces his blockchain and cryptoeconomics company Nori — which will pay people for pulling carbon dioxide out of the atmosphere — as a possible solution.
https://medium.com/nori-carbon-removal/how-to-break-the-climate-change-nash-equilibrium-f4ca3354cb8b