…and Governing Dynamics for All
About 60 years passed since the John Nash built the foundations of modern game theory and he famously described his new concept as “governing dynamics”. However, considering the tremendous amount of interest we show to Nash equilibrium and modern game theory Nash built, its only odd that as economists, we do not give the importance it deserves to the concept of “Governing Dynamics”. Indeed, Nash never truly attempted to exemplify this concept through an article or a treatise, and probably this is the reason why we do not simply care to ponder upon that. That being said, as far as Nash described back in the day, governing dynamics concept was the root of his ideas on modern game theory.
One does not simply has to stick to what Nash said about governing dynamics in order to ponder upon the concept. Think about the gist of Nash equilibrium and the core best response mechanism behind it — governing dynamics concept provides the actual basis for that. This mechanism indicates, in a nutshell, that every player has a best response set to any action she encounters. So far, so simple, nearly textbook explanation. What should differ when we think about governing dynamics is taking this best response mechanism to macro-level response mechanisms for every set of individuals, which influence each other beyond the past responses they observed. These sets of individuals continuously affect each other’s best response mechanisms, and there might be an order among the sets’ magnitudes of influence. Positively, there is a dynamic process of altering other groups’ best response mechanisms, even though some groups get affected less than others. This picture might provide a primer to think more elaborately on governing dynamics concept, since this constant change and reciprocal effects create the mode of governing dynamics in an economic system.
Taking Nash’s best response mechanism concept to macro-level may not be nothing new in terms of creating social preference vectors, bargaining models, etc. However, these models and vectors are mostly static, in other words they are fairly good at providing explanation for very specific cases (in fact, that is what they aim to achieve). But they do not offer a true “dynamic” environment. What these works mostly lack is a behavioral aspect. Behavioral economics tools can turn these ideas into notable pieces in terms of describing the governing dynamics in a specific society, industry, region — basically anything we aim to examine.
Going out of the box when creating any type of game in order to examine response mechanisms, going deeper and pondering more upon governing dynamics might provide different perspectives and results for whom are really trying to find another vantage point.