On 4/18/07, Julio Huato wrote: >... I just finished the draft of a paper in which I use the differential-game approach to analyze the conditions that tip off an abstract two-agent (e.g. a rich and a poor country, a husband and a wife, capitalists and workers, etc.) economy [from cooperation to distributional conflict].
In this simple economy, the agents can be initially endowed with different amounts of wealth. Then they decide at each instant whether to use the wealth for current consumption (which yields immediate gratification) or fund current appropriation actions (e.g. lobbying to change tax policy, buying safe boxes, or forcefully expropriating the other guy), or to produce for the next instant in time and have more wealth for future consumption. They are trying to individually maximize the total sum of their gratification over continuous time for the life of the game.
I pinned down a closed-form Markovian Nash equilibrium ... and analyzed its most obvious or salient features. Because of the concavity of the appropriation function, only extreme conditions of inequality ... can induce the players to break an (implicit, non-binding, not agreed upon) commitment to "cooperate."<
It's extremely interesting that a model of self-seeking individuals would produce cooperation in most situations. I don't know much about game theory, but similar Prisoners' Dilemma games imply conflict, not cooperation. The fact that Julio's model produced non-intuitive results is a major blow against Ted's critique, which is totally on the methodological & philosophical level as far as I can tell. Methodology and philosophy can guide us in our thinking, but if simple social science produces unexpected results, it's a step forward. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
