Blog: Game Theory

It is traditional to describe politics as a "spectrum," from extremists on the left to extremists on the right, with the population spread out in between and politicians located at various points based on their policy positions. Using this model, game theory would recommend politicians running in national elections try to position themselves close to the center.

This is just like a classic game theory example (PDF, scroll to bottom of page 58): two vendors are selling ice cream on a long beach, and can choose where to place their carts. Everyone will go to the closest vendor, so the two vendors have an incentive to move closer and closer to each other (to capture more of the beachgoers in between) until they end up right next to each other in the center of the beach - giving each half the beach, but forcing customers to walk much farther than if they simply located themselves farther apart.

Game theory leads to some poor outcomes for beach vendors, but even worse for politicians, because the whole metaphor of a political spectrum is a false one, as George Lakoff argues in a recent article. Instead, he describes two "systems of values and modes of thought," the progressive and conservative worldviews. Many people mix and match viewpoints between the two, but that doesn't mean they are in the "center" - a person who is liberal on social issues and conservative on trade would be just as far away from a social authoritarian and economic populist as a pure progressive is from a pure conservative. And the universe of positions isn't limited to just two issues.

Lakoff describes the people who split their positions as "biconceptuals," and the way for a Democrat to appeal to a biconceptual isn't to "move right" or adopt conservative values, but rather to speak about the class of issues where the biconceptual is in agreement with the progressive viewpoint, which most voters hold on the majority of issues. The DLC, which has made a habit of attacking other Democrats as extremist and sparked a lively debate recently through an op-ed which generated rebuttal op-eds, eloquent responses online, and a debate on Meet the Press, recommends precisely the wrong approach, accepting more conservative policies on more issues, mostly issues where the American people in fact largely agree with the progressive viewpoints. When viewed through the lens of biconceptuals, this strategy makes no sense. It only seems logical in the false metaphor of a single political spectrum.

Getting deeper into The Wisdom of Crowds... Surowiecki discusses the "Ultimatum Game" where two people are placed in a room and one, randomly assigned to be player A, is given ten $1 bills and must split them in some proportion (equal, unequal, whatever) with player B. Player B then gets to choose to accept the deal, in which case each of them keep their amount of money, or reject the deal, in which case neither gets any money.

The economic game theory ideal, the perfectly rational actor, would as player A choose to give $1 to B and keep $9. B would then have to choose between keeping $1 and getting nothing, and therefore take the deal. (There's a classic game theory problem often assigned in economics classes involving five pirates).

In real life, most player B's will reject offers of $1 or $3 even though it is not in their rational best interest to do so, because they perceive it as unfair. And most player A's, even without knowing the player B, will offer a fifty-fifty split.

I already knew that stuff. What I didn't know, and is fascinating, is that this only holds when the roles of A and B are randomly selected. If the players are told that A performed better on a test, then the player A's offer less money and the B's overwhelmingly accept their offers. If people have any reason, even an irrelevant one, to believe that one person is "better" than the other, their insistence on fairness goes out the window.