Game Theory

The success or failure of game theory is — to put it bluntly — the competence or incompetence of participants

Game theory is one of those human endeavors that attempts to rationalize the process of making choices/decisions, including choosing reactions when others are making choices/decisions. Although the basic description is simple, game theory itself is not. It is applied in a variety of ways, with game theorists specializing in the complexities of specific applications. But the general principle of game theory is the same: the study of decision systems by extrapolating decisions, strategies and relative balance through available options, constraints and results.

What is fundamental to game theory is rationality. Given that game theory is strategic interaction between two or more individuals, the process depends on how rational or irrational each of the parties is. The key objective in every game — i.e., political campaign, driving in traffic, negotiating a contract or legislation — is to determine an optimal strategy taking into account your preferences and how other players might act. Strategies include: what will you do if you know what I am going to do, what will I do if I know that you know what I am going to do, what will you do if you know that I know that you know what I am going to do and so on.

One of the primary tenets of game theory is the Nash equilibrium. The assumption is two or more players in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his or her own strategy. If each player has chosen a strategy, and no player can benefit by changing strategies while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding result constitute a Nash equilibrium.

The value of game theory is to enhance the ability to reach agreement, create value for all stakeholders, share goals and solve problems. Ideological intransigence, arbitrary belief or hidden motivation are antithetical to rational, pragmatic participation. That said, the reality is that some types of personalities are antithetical to game theory. Predictability and attention to detail are replaced with chaos and disruption. Facts and data are replaced by arbitrary opinion and demands. Strategy comes down to whatever is on one’s mind at the moment.

In other words, the success or failure of game theory is — to put it bluntly — the competence or incompetence of participants. Are they truly interested in the results or are they there to inflate their own ego, with little interest in the details that are inherent in negotiation and strategy. Game theory isn’t just about “winning” but how it is done and the actual results. Making deals that are self-serving while disregarding the consequences for others might seem like winning, but it essentially undermines the greater good.

I note this because the political and social turmoil resulting from dubious leadership and questionable motives dominates the daily news. The presidents of numerous countries, including this one, are failures when it comes to game theory. Intellectual dishonesty, abuse of power, conflict of interest and self absorption are all characteristics common to those who view strategy not as a process toward greater good but as a mechanism for self-advantage. Accountability is the only meaningful consequence for people like this, particularly given the common egocentric presumption among them that they are above the law.

Pragmatists are aware that not adhering to the rule of law, obstructing justice and lying are considered “strategy” for some…even at the highest levels. We aren’t surprised some choose to ignore facts and even make up their own alternative ones. It’s obvious that others might overlook what we consider egregious behavior. What matters is recognizing that most people, most of the time, consider these wrong and unacceptable. The rationale for checks and balances in government, like audits for companies and institutions, is to create a system of accountability and consequence.

What is often not understood is that while punishment of some sort is typically viewed as being for previous transgressions, it often is more valuable for preventing these behaviors in the future. Those who distort game theory by undermining process and principle will continue to do so unless they are prevented from doing so. For example, the object of impeachment is not to exact vengeance but to protect the public against future acts of recklessness or abuse. The past is what it is, but the future holds the promise of being better if we pay attention here and now.