Game Theory Annotations and Thoughts

YouTube Game Theory Videos

Ellickson, Robert. Order Without Law. Chapter 9.

Intro to Game Theory 2009 (Econ 223 Lecture 1). John Fountain, University of Canterbury.

Game theory was developed to mathematically analyze the potential moves of poker players, based upon their beliefs about what OTHER players will do. The theory is aimed at the Nash Equilibrium, in which a compromise is reached that pleases all parties. The thinking and choice-making that occurs in the process of games is informative beyond that simple goal. Game Theory describes the behavior required for equilibrium to occur, and the choices that may result in payoffs other than that which is welfare-maximizing.

It is assumed that human players act selfishly and rationally, leading to an order based on "unleashed" self-interest. During the Cold War, this assumed rationality was a way to approach the U.S.’ moves, which involved "incorporating [the] enemy into your own thinking." In Prof. Fountain’s lecture, he uses game theory to describe the “game” played between professors teaching a class and students attempting to pass.

*Does this leads to the assumption that if everyone is thinking rationally, they will all be playing the same "game," and considering the same "moves?" If so, then that adds another layer of rationalizing, in which you must consider the factor of likelihood that others will make a choice based on the moves and consequences, and your own potential moves. Oy!

In the cold war example, the U.S. military used game theory to convince the Russians that if they were to attack, the U.S. was capable of great destruction in return. This resulted in what the video calls a "delicate balance" called the "equilibrium of terror." It is interesting to think about this equilibrium in the context of the Nash Equilibrium, the simplified version of which results in each party getting what it desires. What was the desired "move" in the Cold War, on the part of either side? Neither wanted the world blown to oblivion, but to make matters more complex, neither wanted to be the first NOR the second to act! Game theory dilemma!

John Nash: "Stability through suspicion and self-interest"
-tried to apply game theory to all human interaction and behavior
-showed that this kind of system did not have to result in chaos, if the equilibrium could be reached
-"separate optimization"
-idea that each player is separate and alone
-but all of the actions work together in a common--not cooperative space--to create equilibrium
-prisoner's dilemma to show how selfishness would always lead to the best outcome
--rational choice always to betray--at worst, got diamond, at best got diamond AND money. if you trusted, you could lose everything. the "sucker payoff"
-but what if both parties do this?

Political implications of game theory: a society based upon self-interest that would not result in chaos may instead lead to suspicion and distrust. This is a manner of social order—perhaps in this case, the social ideology of game theory is a form of social control. Even when Nash was institutionalized for paranoid schizophrenia, his model of choice-making continued to be influential on cold-war era social control and methods of order.

For example, game theory was applied by R.D. Laing to family dynamics, aiming at the underlying suspicious between family members. British and American economists also used Game Theory to generate a “fundamental truth” about human behavior and intentions as strategic and self-interested. This had a detrimental effect public faith in the benevolence of government acting in a public interest. Game Theory has been further extended to encourage a kind of empiricism that greatly essentializes the rationality of humans.