In the Harvard Business Review blog, Justin Fox follows the lead others have taken and explores how game theory helps us make sense of the current Washington standoff:
Threatening to cause something really bad to happen in order to get your way is a negotiation tactic known as brinkmanship. Here’s a description from game theorist Thomas Schelling, in his 1960 classic The Strategy of Conflict:
If I say “Row, or I’ll tip the boat over and drown us both,” you’ll say you don’t believe me. But if I rock the boat so that it may tip over, you’ll be more impressed.
Not all brinkmanship is seen as acceptable. If a member of Congress showed up in the Capitol with a bomb and threatened to blow the place up unless his colleagues agreed to name a post office after him, he’d surely end up dead or in jail. The debt limit, originally written into law during World War I and raised many, many times since, has often played a role in budget negotiations, and been the subject of much political posturing through the years. But no majority party in the House or Senate appears to have seriously threatened not to increase the ceiling when needed before 2011. That year, a new GOP majority in the House used the threat of a debt ceiling breach to force a number of concessions on government spending, and since then debt-limit brinkmanship has been a recurring feature of the Washington scene.
Is there room to negotiate? (Hint: we need more schmoozing and face-to-face discussions, according to game theory best practices.)
But looking at the short-term interests of the different players, as opposed to their stated goals, does open up opportunities for negotiation and cooperation. When you focus on others’ interests, rather than their passions, you’re far likelier to be able to predict their behavior and to come to some sort of accommodation with them. I got that idea from the 17th and 18th century thinkers quoted in Albert O. Hirschman’s The Passions and the Interests, but I think it’s a major theme of the negotiation bible Getting to Yes as well. I definitely know that, as somebody who has on occasion been driven to indignation by the statements of the Tea Partiers, the simple act of writing the last few paragraphs has significantly lowered my outrage level and increased my empathy with them (if not necessarily sympathy for them).
Determining just what the opportunities for negotiation and cooperation might be isn’t so easy, of course. The most obvious commonalities of interest involve President Obama and the Tea Party — the Tea Party owes its very existence to Obama’s presidency, while he owes the current unity of the Democratic Party and possibly his 2012 reelection to the Tea Party. But it’s hard to see how to translate this into deals. Would fire-breathing Georgia Republican Paul Broun trade a vote to raise the debt limit for an Obama promise to come to his district and loudly condemn him on the day before the next Republican primary? Probably not.
The prospects for success don’t seem to be great–although many question whether the Republicans will allow the US to default on its debt. In a post from last January’s gridlock negotiations, Mohamed A. el-Erian writes:
As much as the fiscal debate seems to be always forced into extreme-corner solutions — revenue increases versus spending cuts — the underlying issue is much more consequential. It relates to fundamentally different (and, in part, quite dogmatic) views about the role, scale and scope of government — especially under present circumstances, where growth is sluggish, unemployment is high, safety nets are overly stretched, and income distribution has seriously deteriorated.
So every time the two parties come to the bargaining table, outcomes lack both content and momentum. Indeed, each round renders the next one even more difficult and contentious.
via theAtlantic.com – How Game Theory Explains Washington’s Horrible Gridlock
Can’t get enough of game theory meets current events? Consider this lengthy TED post, which covers some new terrain, including this fascinating book on how marriage and game theory merge, as well as this:
In their book, It’s Not You, It’s the Dishes, journalists Paula Szuchman and Jenny Anderson wonder if the daily negotiations of marriage are more like playing a game of poker than most people realize. In the article “Marriage and the Art of Game Theory,” which ran on the Daily Beast in July of 2012, Szuchman writes, “Game theory is the study of how we make decisions in strategic situations. Classic examples: the Cuban missile crisis, soccer penalty kicks, and the first scene of The Dark Knight. When you find yourself debating whether to wait for the bus another minute or give up and walk, you’re facing a game-theory dilemma … To cooperate or not to cooperate? To budge or stand your ground? To say ‘OK, fine’ or ‘not a chance’? These are questions married people find themselves asking with surprising frequency.”
This analysis of The Dark Knight gives us an explication of the opening scene:
The first spoken words concern the topic of strategy. These lines introduce the Joker’s character and they foreshadow the punch and counterpunch of the entire movie. The robbers in the car explain the job and how the loot will be divided. It’s apparent they are not happy with the plan:
Driver: Three of a kind. Let’s do this.
Passenger side: That’s it–three guys?
Driver: Two guys on the roof. Every guy gets a share. Five shares is plenty.
Passenger side: Six shares. Don’t forget the guy who planned the job.
Driver: He thinks he can sit it out and still take a slice. I know why they call him the Joker.
The robbers don’t like that the Joker gets an equal share for doing unequal work. Their complaint raises the issue of fair division, which is central to game theory. In fact, fair division is the first problem that game theory addressed historically. The problem appears in the Babylonian Talmud about how creditors should divide an estate. The text offers a mysterious solution that had baffled scholars for over 2,000 years. It was only very recently that a Nobel Laureate economist deciphered the answer using the tools of coalitional game theory. Let me tell you, the answer is fascinating.