5 ms·

When I learned of Nash Equilibriums, it changed the way I saw a variety of fields - government, business, advertising, and so on. http://en.wikipedia.org/wiki/

When I learned of Nash Equilibriums, it changed the way I saw a variety of fields - government, business, advertising, and so on. http://en.wikipedia.org/wiki/Nash_equilibrium http://en.wikipedia.org/wiki/Nash_equilibrium > In game theory, Nash equilibrium (named after John Forbes Nash, who proposed it) is a solution concept of a game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his or her own strategy unilaterally. It's fascinating stuff. Nash equilibriums are regarded as "stable" - no one will change what they do. Things tend to trend towards Nash Equilibriums and settle there until there's new technology. Government legislation, including higher taxes, frequently breaks equilibrium. The new best solution for large players might be to divert earnings or leave the area they were doing business. Frequently, this results in the legislators getting angry and legislating more solutions. One that immediately springs to mind is North Carolina and Amazon. North Carolina legislators were annoyed that Amazon customers in NC didn't pay sales tax because Amazon didn't have a presence there. They passed a law that made it so Amazon having affiliates there would count as them having a business presence, so Amazon would have to start charging their NC customers sales tax and remitting it to the NC government. Amazon responded by canceling NC affiliates. This was the start of that email: > We regret to inform you that the North Carolina state legislature (the General Assembly) appears ready to enact an unconstitutional tax collection scheme that would leave Amazon.com little choice but to end its relationships with North Carolina-based Associates. You are receiving this e-mail because our records indicate that you are an Amazon Associate and resident of North Carolina. Now, that obviously wasn't an NC legislator's intention. But it turned out to be the new stable best solution for Amazon. They must've done some math and decided that not charging sales tax in NC is important than letting affiliates with a NC address continue to participate in earning referral fees. Too often legislators think people will accept their legislation and things will go according to their planned scenario. They don't stop and think, "How does this change people's incentives? What nasty secondary effects could come from this?" When the nasty secondary effects come, they either try to shame the organization in line (which doesn't usually work), or they pass even harsher legislation. You can see where this leads - it's not pleasant. Disrupt Nash equilibriums if you must, but do it with your eyes open that there could be some really nasty secondary effects to the process.

halo 17y ago
Surely that works both ways? If the government isn't aware that companies are using a loophole to avoid tax or more companies start using loopholes to avoid tax then it isn't a Nash equilibrium either and the government will be pressured to react by introducing new legislation to remove that loophole. I think by ignoring this and focusing solely on the legislators, you are exposing your biases.
- lionhearted 17y ago
  > ...government will be pressured to react by introducing new legislation to remove that loophole. That's the point right there - doing that would create more secondary effects. Let's say England says that if you have employees there, and make large profits, you have to pay high taxes. The reason I focus on legislators is because they tend to be ignorant of secondary effects. Let's say they want Google to pay more taxes and want "close the loophole" as you say - how do they do that? There's law, they can't just write a letter to Google demanding taxes. So what will the law read? "The Fair Tax Burden in Cyberspace Act of 2010" - how would that theoretically read? Well, maybe the first draft says that if you have staff in England over a certain amount, you have to claim corporate taxes there. Well, maybe Google does the math, and decides it's not worth - and and lays off or transfers its English staff. So a legislator gets furious, and writes the, "Anti-Cyber Laundering Protection Act of 2011", which mandates that if a website collects revenue from a country, it has to pay taxes, or the website is banned. Do you see how this goes downhill really fast? Legislators don't consider that the actions they take won't always produce the results they want, and almost always have secondary consequences. Maybe this is much ado about nothing, but we could get another one of those scenarios here. I will admit a bias though - I think Google does a better job providing for humanity and the people of England than the English government. And I say that despite the fact that I think the English government is one of the more sane and better run governments in the world - Google just does an absolutely incredibly job, they've produced far more amazing stuff in a shorter period of time than just about any government organization. So yes, I have a bit of a bias in favor of great companies keeping their revenues instead of giving them over to bureaucracies, but that's not even the crux of this here. The crux is that by legislating, you create secondary effects, many of which are not positive, and the world would be better if legislators paid attention to that and thought things through more clearly.

halo 17y ago

Surely that works both ways? If the government isn't aware that companies are using a loophole to avoid tax or more companies start using loopholes to avoid tax then it isn't a Nash equilibrium either and the government will be pressured to react by introducing new legislation to remove that loophole. I think by ignoring this and focusing solely on the legislators, you are exposing your biases.

lionhearted 17y ago
> ...government will be pressured to react by introducing new legislation to remove that loophole. That's the point right there - doing that would create more secondary effects. Let's say England says that if you have employees there, and make large profits, you have to pay high taxes. The reason I focus on legislators is because they tend to be ignorant of secondary effects. Let's say they want Google to pay more taxes and want "close the loophole" as you say - how do they do that? There's law, they can't just write a letter to Google demanding taxes. So what will the law read? "The Fair Tax Burden in Cyberspace Act of 2010" - how would that theoretically read? Well, maybe the first draft says that if you have staff in England over a certain amount, you have to claim corporate taxes there. Well, maybe Google does the math, and decides it's not worth - and and lays off or transfers its English staff. So a legislator gets furious, and writes the, "Anti-Cyber Laundering Protection Act of 2011", which mandates that if a website collects revenue from a country, it has to pay taxes, or the website is banned. Do you see how this goes downhill really fast? Legislators don't consider that the actions they take won't always produce the results they want, and almost always have secondary consequences. Maybe this is much ado about nothing, but we could get another one of those scenarios here. I will admit a bias though - I think Google does a better job providing for humanity and the people of England than the English government. And I say that despite the fact that I think the English government is one of the more sane and better run governments in the world - Google just does an absolutely incredibly job, they've produced far more amazing stuff in a shorter period of time than just about any government organization. So yes, I have a bit of a bias in favor of great companies keeping their revenues instead of giving them over to bureaucracies, but that's not even the crux of this here. The crux is that by legislating, you create secondary effects, many of which are not positive, and the world would be better if legislators paid attention to that and thought things through more clearly.