"Angels can fly because they take themselves lightly." – G. K. Chesterton

Posts tagged ‘game theory’

I can explain the Republicans

The current political situation has grown so absurd that it’s hard to know what to say about it.  I like neither party but, like most folks, I can at least understand the Democrats.  Until recently I was completely bamboozled by the Republicans.  I understand why someone might be opposed to tax hikes.  What we’re seeing now, however, is Republicans who are unwilling to consider the possibility of even a tiny tax hike on very wealthy people.  In previous iterations of the budget debate, the Republicans opposed tax hikes but understood the stance as one thing in a large negotiation.  They would be willing to trade their support for the smallest tax hike they could get in exchange for concessions on other topics.  This was basic common sense.  It was how politics worked.  Now they’re just not willing to do it.

Needless to say, that’s not the only instance in which the Republicans are being inexplicable.  Their behavior with regards to spending is equally strange.  In 1995 the Pubs caused a government shutdown during budget negotiations with Bill Clinton.  The public blamed the Republicans and they lost big in the next election.  For years after that, they never considered shutting down the government again.  When it was time to negotiate a budget, they simply negotiated like reasonable people.  Then, in spring of this year, they went right back to threatening a shutdown, as if they had forgotten the lesson of 1995.  In that case they folded at the last minute, but the episode was still bizarre.

There was also Paul Ryan’s budget, which effectively gutted Medicare as a safety net for the elderly and replaced it with a privatized system.  Anyone with clear thinking ability and knowledge of the American electorate should be able to see that this is political suicide.  The Republicans have already lost one House seat because of this and they’re likely to lose many more.  They know it perfectly well.  After all, it was only five years ago that George W. Bush’s plan to privatize Social Security not only failed, but also caused the entire Republican agenda to fail and lead to a plunge in Bush’s approval ratings, eventually costing the GOP the House, the Senate, and the Presidency.  The Republican leadership surely hasn’t forgotten this.  Why on earth would they want to repeat the same thing with Medicare?  I don’t like using the word “insane” because it’s one of the most overused words in the English language at this moment.  Most people simply call anyone who they disagree with insane.  But in a situation like this, an intelligent and honest person could legitimately wonder whether Republican leaders have lost their marbles.

I was thinking along those lines until a couple days ago, when I remembered this:

The point of this amusing little episode is that there are some circumstances where it’s to your advantage to make people believe that you’re genuinely nuts even when you aren’t.  The reason lies in the obscure branch of mathematics known as “game theory”.  In game theory you have two or more ‘players’ who each make a decision.  Based on the decisions of the players, each one gets a payout.  We assume that the players are seeking to maximize their payout.  The most famous scenario in game theory is the ‘Prisoner’s Dilemma’, in which both players, by trying to get the best for themselves, earn a worse payout (longer prison terms) than if they had cooperated at personal expense.  A payoff matrix shows how this works.

There are many other scenarios in game theory, including the ‘battle of the sexes’ game.  In this one we have a man and a woman both choosing where to spending the evening.  The man would prefer a baseball game while the woman would prefer a ballet.  However, they want to spend the evening together, and the payoff matrix reflects this fact.

In this case, each side “wins” if they hold to their position while the other side caves.  However, if both of them hold strong then, in effect, they both lose.  What’s notable about this game is that it’s advantageous to be seen as hard-nosed and obstinate.  If the woman believes that the man is totally set on baseball and will never change his mind, it’s in her interest to choose baseball.  On the other hand, if she believes there’s a good chance he’ll change his mind, then she has reason to fight hard for the ballet.

Now you may be wondering what this has to do with the Republicans.  The answer is that we can view the current budget debate as a ‘game’.  The players are the Democrats and the Republicans.  Strategies are to hold strong or to cave.  If both sides hold strong, then the United States will default on its debts, a financial disaster unmatched in American history.  Both sides would prefer to hold strong while seeing the other side cave.  Needless to say, neither side benefits from caving.  So the payoff matrix would look something like this.

(I created this image myself and I apologize for the fact that it’s not as spiffy as the other two, which I downloaded.)

So we see that it fits the same general pattern as the ‘battle of the sexes’.  In other words, each side benefits if it can convince the other that it will hold strong no matter what happens.  However, in this case the consequences if both sides hold strong are so awful that no sane person would seriously consider them.  A debt default is, from a financial perspective, the end of the world–just ask citizens of countries who have done it, such as Russia or Argentina.  So if you’re going to go the strategic route of convincing the other side that you’re going to hold strong and not negotiate under any circumstances, you need to convince the other side that you actually are crazy enough to do it.  Hence the Republicans, just like Cleavon Little in the Blazing Saddles clip, are putting on a show to convince the Democrats (and the rest of us) that they’re crazy enough and they just might do it.

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