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It's unfortunate that the article uses the Prisoner's Dilemma as its example, because the Prisoner's Dilemma is actually not the best game model to set up as th

It's unfortunate that the article uses the Prisoner's Dilemma as its example, because the Prisoner's Dilemma is actually not the best game model to set up as the opposite of the Invisible Hand. A more appropriate model would be the Tragedy of the Commons, which was proposed by a fellow named Garrett Hardin in an article in a 1968 edition of Science magazine. If you are interested in formal modeling of coordination problems, an interesting overview can be found in Elinor Ostrom's book Governing the Commons. In chapter one she gives an overview of the Prisoner's Dilemma, the Tragedy of the Commons, and the Logic of Collective Action (Mancur Olson's theory). After reviewing these abstract formal models, she looks at other possible institutional solutions for coordination problems. Here are some links: http://en.wikipedia.org/wiki/Prisoners_dilemma http://en.wikipedia.org/wiki/Prisoners_dilemma http://en.wikipedia.org/wiki/Tragedy_of_the_Commons http://en.wikipedia.org/wiki/Tragedy_of_the_Commons http://en.wikipedia.org/wiki/Logic_of_Collective_Action http://en.wikipedia.org/wiki/Logic_of_Collective_Action http://en.wikipedia.org/wiki/Coordination_game http://en.wikipedia.org/wiki/Coordination_game http://en.wikipedia.org/wiki/List_of_games_in_game_theory http://en.wikipedia.org/wiki/List_of_games_in_game_theory

DanielBMarkham 17y ago
Any quick one-liners or easy-to-understand wisdom that you've gained from the material? The entire subject area looks immensely fascinating, yet very dense at times.
- Perceval 17y ago
  Yes, game theory can get inscrutably complex, even through the initial models are pretty simply to set up and understand. The basic components of any coordination/cooperation problem are the same: you have actors with preferences, you have a situation with rules that they can't change, and you have outcomes with payoffs/penalties depending on whether the actors choose to cooperate or not. Most of the problems revolve around how to get people to cooperate, when defection is attractive for some reason. Most of the solutions involve making sure situations are not one-off interactions, that all actors have information about what each other is doing, and that in the case of multiple actors using common resources, you need to have some form of monitoring and enforcement. If actions are one-off, the temptation to act selfishly is higher than if actors know they are in a long-term situation in which they must choose to cooperate or defect time and time again. In this way information such as reputation can then function as a signaling device to other actors. Games such as the Prisoner's Dilemma work only when presented as a one-off situation in which both actors have no information about what they other is going to do. So the solution is 1) make sure you're not setting up one-off interactions, and 2) make such actors are in an information rich environment wherein they can make appropriate signals about their intentions and past behavior. Most of the other games, such as Tragedy of the Commons or Battle of the Sexes, have stable solutions if you repeat them and increase the information available to the actors. The equilibrium solutions are called Nash Equilibriums, after John Nash, the paranoid schizophrenic mathematician featured in the movie A Beautiful Mind. http://en.wikipedia.org/wiki/John_Forbes_Nash,_Jr http://en.wikipedia.org/wiki/John_Forbes_Nash,_Jr. A bit more than a one-liner, but hopefully this helps a bit.
  - alecco 17y ago
    Beware of simplistic conclusions of very basic game theory, especially if it's coming from RAND. http://en.wikipedia.org/wiki/Tragedy_of_the_anticommons http://en.wikipedia.org/wiki/Tragedy_of_the_anticommons This documentary enlightens a bit on the subject and is quite accessible. http://en.wikipedia.org/wiki/The_Trap_%28television_documentary_series%29#1._.22Fuck_You_Buddy.22_.2811_March_2007.29 http://en.wikipedia.org/wiki/The_Trap_%28television_document... http://video.google.com/videoplay?docid=404227395387111085# http://video.google.com/videoplay?docid=404227395387111085# (AFAIK not released outside of Britain due to footage rights issues, a real shame.)
- GavinB 17y ago
  The tragedy of the commons works like this: If everyone follows their self interest and goes fishing in the lake, pretty soon all of the fish will be gone and it will take decades for them to repopulate. If you somehow (how to do it is a coordination problem) arrange for only a small number of people to fish, they can bring in reasonable number of fish every day for many years. The upshot: In some markets, like consumer electronics, supply and demand regulates things very efficiently. In others, unconstrained individual interest can ruin everything. In the financial markets, individuals acting rationally for themselves can cause damage to the overall economy: crashes, bubbles, bank runs, etc.
  - jamesbritt 17y ago
    " If everyone follows their self interest and goes fishing in the lake, pretty soon all of the fish will be gone and it will take decades for them to repopulate. " Or, everyone follows their self interest and realizes that they will need to work out some agreements to moderate fishing or there will be no fish.
    - jibiki 17y ago
      > Or, everyone follows their self interest and realizes that they will need to work out some agreements to moderate fishing or there will be no fish. This can have downsides, namely the sort of "credentialism" that's often derided on this site (licensing for interior decorators, etc.) All the players in some industry decide that it's in their best interest to appeal for regulation which will prevent others from entering this industry.
      - jamesbritt 17y ago
        Oh, absolutely. I just don't buy the idea that the default expected behavior from people is to shot themselves in the foot so blindly (e.g., a race to see who can empty the lake first). That people may slowly stab themselves in the foot repeatedly is more likely.
    - GavinB 17y ago
      There are many different ways to deal with coordination problems, both public regulation and private arrangements. The overfishing problem isn't a hypothetical example, it's a real problem that has caused problems all over the world. http://en.wikipedia.org/wiki/Overfishing#Instances_of_overfishing http://en.wikipedia.org/wiki/Overfishing#Instances_of_overfi... The problem is that even if 90% of the fishers in an area are responsible, the remaining 10% can ruin it for everyone. And no one has any incentive, other than their conscience, to cooperate. And that's why it's a tricky problem.
jamesbritt 17y ago
Interesting view on the Tragedy of the Commons and whether it is an accurate assumption: http://www.britac.ac.uk/pubs/src/keynes95/06sec5.cfm http://www.britac.ac.uk/pubs/src/keynes95/06sec5.cfm

DanielBMarkham 17y ago

Any quick one-liners or easy-to-understand wisdom that you've gained from the material? The entire subject area looks immensely fascinating, yet very dense at times.

Perceval 17y ago
Yes, game theory can get inscrutably complex, even through the initial models are pretty simply to set up and understand. The basic components of any coordination/cooperation problem are the same: you have actors with preferences, you have a situation with rules that they can't change, and you have outcomes with payoffs/penalties depending on whether the actors choose to cooperate or not. Most of the problems revolve around how to get people to cooperate, when defection is attractive for some reason. Most of the solutions involve making sure situations are not one-off interactions, that all actors have information about what each other is doing, and that in the case of multiple actors using common resources, you need to have some form of monitoring and enforcement. If actions are one-off, the temptation to act selfishly is higher than if actors know they are in a long-term situation in which they must choose to cooperate or defect time and time again. In this way information such as reputation can then function as a signaling device to other actors. Games such as the Prisoner's Dilemma work only when presented as a one-off situation in which both actors have no information about what they other is going to do. So the solution is 1) make sure you're not setting up one-off interactions, and 2) make such actors are in an information rich environment wherein they can make appropriate signals about their intentions and past behavior. Most of the other games, such as Tragedy of the Commons or Battle of the Sexes, have stable solutions if you repeat them and increase the information available to the actors. The equilibrium solutions are called Nash Equilibriums, after John Nash, the paranoid schizophrenic mathematician featured in the movie A Beautiful Mind. http://en.wikipedia.org/wiki/John_Forbes_Nash,_Jr http://en.wikipedia.org/wiki/John_Forbes_Nash,_Jr. A bit more than a one-liner, but hopefully this helps a bit.
- alecco 17y ago
  Beware of simplistic conclusions of very basic game theory, especially if it's coming from RAND. http://en.wikipedia.org/wiki/Tragedy_of_the_anticommons http://en.wikipedia.org/wiki/Tragedy_of_the_anticommons This documentary enlightens a bit on the subject and is quite accessible. http://en.wikipedia.org/wiki/The_Trap_%28television_documentary_series%29#1._.22Fuck_You_Buddy.22_.2811_March_2007.29 http://en.wikipedia.org/wiki/The_Trap_%28television_document... http://video.google.com/videoplay?docid=404227395387111085# http://video.google.com/videoplay?docid=404227395387111085# (AFAIK not released outside of Britain due to footage rights issues, a real shame.)
GavinB 17y ago
The tragedy of the commons works like this: If everyone follows their self interest and goes fishing in the lake, pretty soon all of the fish will be gone and it will take decades for them to repopulate. If you somehow (how to do it is a coordination problem) arrange for only a small number of people to fish, they can bring in reasonable number of fish every day for many years. The upshot: In some markets, like consumer electronics, supply and demand regulates things very efficiently. In others, unconstrained individual interest can ruin everything. In the financial markets, individuals acting rationally for themselves can cause damage to the overall economy: crashes, bubbles, bank runs, etc.
- jamesbritt 17y ago
  " If everyone follows their self interest and goes fishing in the lake, pretty soon all of the fish will be gone and it will take decades for them to repopulate. " Or, everyone follows their self interest and realizes that they will need to work out some agreements to moderate fishing or there will be no fish.
  - jibiki 17y ago
    > Or, everyone follows their self interest and realizes that they will need to work out some agreements to moderate fishing or there will be no fish. This can have downsides, namely the sort of "credentialism" that's often derided on this site (licensing for interior decorators, etc.) All the players in some industry decide that it's in their best interest to appeal for regulation which will prevent others from entering this industry.
    - jamesbritt 17y ago
      Oh, absolutely. I just don't buy the idea that the default expected behavior from people is to shot themselves in the foot so blindly (e.g., a race to see who can empty the lake first). That people may slowly stab themselves in the foot repeatedly is more likely.
  - GavinB 17y ago
    There are many different ways to deal with coordination problems, both public regulation and private arrangements. The overfishing problem isn't a hypothetical example, it's a real problem that has caused problems all over the world. http://en.wikipedia.org/wiki/Overfishing#Instances_of_overfishing http://en.wikipedia.org/wiki/Overfishing#Instances_of_overfi... The problem is that even if 90% of the fishers in an area are responsible, the remaining 10% can ruin it for everyone. And no one has any incentive, other than their conscience, to cooperate. And that's why it's a tricky problem.

jamesbritt 17y ago

Interesting view on the Tragedy of the Commons and whether it is an accurate assumption: http://www.britac.ac.uk/pubs/src/keynes95/06sec5.cfm http://www.britac.ac.uk/pubs/src/keynes95/06sec5.cfm