While trying to teach my students about the (non-repeated) "Prisoner's
Dilemma" (PD) game, I had the following thoughts. I hope some of them
are vaguely original or at least interesting.
The usual view of this "game" is that it turns Adam Smith's "Invisible
Hand" (IH) on its head (or on its heel). In the Greatest Economics
Story Ever Told, the IH says that in exchange individual greed leads
to the production of mutually-beneficial gains for all (or almost all)
people, especially when organized by a competitive market. On the
other hand, in the PD story, individual greed (possessive
individualism) leads to mutual destruction of the prisoners. This
occurs even though there exists a mutually-advantageous solution for
them (collusion, cooperation, conspiracy, other "c" words).
There's another way of looking at the PD. The problem is that the
police have set up a special social structure that pushes the
prisoners to hurt each other. They aren't allowed to talk to each
other. They have to make their decisions (rat[*] on each other or
keep quiet) simultaneously (in effect). The cops create incentives
that push each prisoner to rat. Thus, the prisoners both "defect" and
suffer. (For simplicity, I'm ignoring degrees between "ratting" and
"staying mum." I'm also ignoring the honor among thieves, which
can encourage tacit collusion, so that both refuse to "rat" on the other.)
This might be thought of in terms of "transactions costs" which make
it extremely expensive for the prisoners to get together and strike a
deal. But that would be misleading. The problem is that exchange can
also be like a PD game. Orthodox economists don't tell you that in the
act of exchange, the two "players" are colluding to not rob each
other. If we drop this usually-covert assumption, we see four possible
choices. (Again, the choice is binary, ignoring intermediate choices
between the extremes. Again, the two "traders" are assumed to embrace
possessive individualism.)
1. Cain and Abel swap their goods with each other, with
mutually-beneficial effects (collusion, IH result).
2. Cain slays Abel, stealing his goods. Cain gains in a big way
(getting both sets of goods) while Abel obviously suffers.
3. Abel slays Cain, reversing the roles.
4. Both fire their weapons at each other, so both die (both defect,
the usual PD result).
As in a PD game, the incentive is there for Cain to kill Abel.
Naturally, Abel will fear this event and find that he has an incentive
to preempt Cain's dirty deed (done dirt cheap). So Cain may react by
shooting first... Mutual destruction ensues...
What's the solution to this mess? Orthodox economics (Orthonomics?)
simply assume it away. More seriously, the political philosopher
Thomas Hobbes advocated bringing a very Visible Hand, the Leviathan,
the unified state which monopolizes the means of violence. This
prevents mutual destruction. It sets up incentives for the two traders
to cooperate.
Another political philosopher, John Locke, naturally enough didn't
trust the state. Thus, he advocated merging the propertied class (what
we would call the capitalists) with the state. The former should
dominate the latter, to the maximal possible extent, natch. In this
scenario, Cain and Abel _are_ the state, colluding to prevent the
odious option #4.
There still is an incentive problem, though. Suppose that we see
trading between the two brothers. Cain could easily see the benefits
of having both of the guys' goods rather than simply getting Abel's
goods in exchange for his own. He might then cheat or rob or kill
Abel. This unhinges the collusion. So Locke proposed that people
accept each others' property rights as "natural." If they accept this
fiat, then trading can occur and both can benefit. It's as if he were
proposing that the "honor among thieves" that allows real-world
prisoners to collude in real-world dilemmas should allow all property
owners to see themselves as a community, with common interests.
Though Hobbes and Locke were a little silly (seeing imaginary "social
contracts" as providing insight into what's happening in the real
world), they captured the two main elements of what allows the IH to
work, at least some of the time. These are the coercion of the state
and the generally-accepted legitimacy of property rights.
The latter element, I believe, needs some shoring up. After all, if
profits are to be made, why accept the ideology of "natural" property
rights? But there are two reinforcing elements that Karl Marx might
suggest. The property owners cling to the ideology of natural property
rights because it defends them against those who lack significant
property rights (capital). The ideology helps maintain ruling-class
solidarity. Second, if the capitalists believe it, or at least
generally act as if they did, then it's easier to teach to the
underclasses.
This analysis says that the mutually-beneficial exchange of the IH
story is just as artificial as is the mutual destruction of the PD
case. Both are based in human-made institutions. For one, the
structure is created allowing collusion, while for the other, it's set
up to encourage defection.
Those in power decide which activities fit in which box. For example,
for you hemp-heads out there, the capitalist state in the US has
decided that pot sellers belong in the PD box, while alcohol purveyors
belong in the IH box. To choose a less intoxicating example, the
social structure puts purely private goods in the IH box, while purely
public goods are in the PD box. (The "public goods problem" is a
version of the PD game, with a large number of participants. The
"rats" are called free-riders.) Of course, in the real world, almost
no products are purely public or purely private.
BTW, if this story is revealing, that indicates (once again) that game
theory can say something about the world, as long as we don't obsess
with equilibrium situations (Nash or otherwise).
[*] This is unfair to rats. Recent research indicates that those cute
and furry creatures are more cooperatively-minded than the
stereotypes say.
--
Jim Devine / "The radios blare muzak and newzak, diseases are cured
every day / the worst disease is to be unwanted, to be used up, and
cast away." -- Peter Case ("Poor Old Tom").
