## Dust flux, Vostok ice core

Two dimensional phase space reconstruction of dust flux from the Vostok core over the period 186-4 ka using the time derivative method. Dust flux on the x-axis, rate of change is on the y-axis. From Gipp (2001).

## Thursday, September 12, 2013

### Game theory and the road to ruin

There's a nice restaurant on a certain beach in Africa, which, according to local lore, was started by a former mafioso who retired to a sunny spot for, shall we say, the good of his health. Of course, it's best to pay no mind to local lore; more likely he was a baker who wanted a nice spot on the beach.

Great lobster, too.

The world is full of criminals--in government, in finance, in journalism, in industry, and even in sports. And lately it seems that the criminality is increasing exponentially.

When pondering the mathematics of criminality, one issue is the nature of interaction between criminals. And here is where game theory has a say. One particular famous story is the prisoner's dilemma, a scenario in which that two criminals have been caught, and are being held separately. If both keep silent, they will only be convicted on lesser charges and face a short prison term. Each is offered a chance to testify against his partner, in exchange for being released (the partner will get a very long prison term). However, if both testify, they will both get long prison terms. There is a chance of improving one's position by testifying; however if both testify, then both will be worse off than if they had remained silent.

The above is a classic problem of game theory. Game theory is a study of human interaction. There is the potential of mathematical treatment, but the decisions are human, and there is no computable best choice that works under all situations. The possibility of strategy arises in any situation where there are interests at cross-purposes. In classical game theory, each player has some control over the situation, but there remain factors which are controlled by the other player(s), and there may be some factors under the control of none of the players.

In the prisoner's dilemma, neither player knows what the other will do. They can only control their own choice. The player's cannot influence the results of their respective choices (the payoff matrix). They don't know what the other is going to do. Moreover, larger society may influence the choices. If both prisoners are members of an organization that has a strict rule of omerta, which greatly increases the cost of testifying against their partner, they may keep silence.

Some problems in game theory involve an optimum choice among strategies. In some games, each player may find a pure strategy to use (meaning always do the same thing). In some games, either player may have to seek a mixed strategy (varying strategies).

Many interactions in society are similar to the prisoner's dilemma--interactions in which if both choose to cooperate, both get a greater gain than is the case if both defect. Since our interactions with our neighbours are ongoing--day after day, we remember how our neighbours acted in the past, and take that into consideration in future interactions. Given repeated interactions, it is overwhelmingly better to cooperate.

In life, we can choose to cooperate, by doing productive work within the context of the law, trading freely with our neighbours; or we may defect, by becoming a criminal, or perhaps a lobbyist, or something less productive and more coercive. Individually, we might benefit, but when the entire society heads down the path of criminal activity, then we are all worse off. To a large extent, society acts as does the criminal organization mentioned above--it is social norms that keep most people on the straight-and-narrow, not the fear of arrest by police.

But what happens if society no longer expects cooperation?

We are seeing the answer all around us.

Consider journalism--at one time one could count on news organizations to report on government with skepticism. More recently, we see the press acting as cheerleaders for the latest government outrage. Here is an example(may require free registration to read). We can see why it happens--newspapers that support the government get improved access: those that continue to treat government statements with skepticism lose accessibility and risk irrelevance.

Consider banking. A few decades ago, the bank made its money by lending responsibly. If you wanted a loan to expand your business, the bank manager would go to your location, and either check the books, or would visit surreptitiously, counting customers and estimating cash flow. Only when satisfied that your business was sound and your expansion likely to succeed would he lend you money. But since that time, the banks have become joined at the hip to government, and live off rent, or by packaging loans and selling them to trusting buyers, while charging heavy fees to customers for the privilege of keeping their money in the bank.

In many of these games--perhaps in all of them--each member of society maximizes his own benefit by defecting rather than cooperating. Tragically, the end result of everyone attempting to maximize his benefit is a society in which everyone is poorer. The mark of a civilized society is one in which the social pressures drive individuals to cooperate.

All this fits in to part of our greater theme of multistability. We can see two areas of stability for a civilization--one in which virtually everybody is engaged in productive enterprise, government is small; and one in which government is large, criminality and the rentier mindset are dominant, but everyone is poorer.

We are witnessing a form of decivilization, in where social weight favours defecting. The only way to return is through revolution--not necessarily violent, but revolution in social expectations. The criminality will only end when society expects and demands change.

1. "The mark of a civilized society is one in which the social pressures drive individuals to cooperate."

Maybe. Though someone to the right might argue that the mark of a civilized society is to create a framework in which the individual can prosper.

And then we have Javier Perez de Cuellar's "The test of of any society is how it treats its weakest members", probably further to the left than yours. That's less about pressures and more about responsibilities. For example, I recall the look of total bewilderment on the faces of my wife's family when I told them about the old people's home systems of industrialized nations.

2. I don't think we're as far apart as you might think. By "society" I don't mean "government". I mean the social pressure of friends and relatives and neighbours, which in the past was a more powerful force than the coercive power of the police. Society did not force you to conform--but if you chose not to, society could choose to have nothing to do with you.

1. Don't get me wrong, I think we're very close in viewpoint here and was just critting on "The mark of a civilized society is one in which the social pressures drive individuals to cooperate." It came across as strident. I know it's a blog post and not academia, but I'm still a fussy pain in the ass when I read things which are very good and in grasping range of great.

Replace "The" with "A", perhaps?

3. I'm not sure how a society focused on the private sector would lead to more cooperation. If anything, the profit motive would result in an even more greedy and individualistic way of life (just look at the Gilded Age *shudders*). What about a large government drives people to defect? If it uses its influence to educate and provide for the populace, it seems like people would have every reason to stick with it.