Thursday, July 14, 2011

Debt Negotiations as Game Theory

A lot of people have figured out that the debt negotiations going on in Washington is just a high stakes game of chicken.
Chicken: Game Theory
Game Theory is what happens when mathematicians try to make themselves useful, they complicate a simple game like chicken. There are only four outcomes - I win if you surrender, the converse, if we both surrender we both lose, if neither surrender we both really lose.
When everybody plays to win.
When rational people are involved the result is that both sides surrender (compromise), everybody loses a little face but everybody survives. When chicken becomes interesting, and fuckin' scary, is when crazy people are involved.

Winning at chicken requires being so insane that everybody knows you'd rather end up a dismembered corpse than let the other side win. This is how Tea Party Republicans play. They would rather see the entire national economy implode than "help Obama."

President Obama hasn't helped himself get a lose-lose compromise by spending his past two years building a reputation as a unilateral surrenderer. (If you never play hardball people start believing you don't know how.)

The best result we can hope for is that both sides realize what stupidity they are about to accomplish, they swerve at the last moment and we only get some minor crack-ups in the ditch. But, I'm afraid the testosterone levels have gotten too high. Everybody is intent on winning at any cost, or, more accurately, determined to prevent the other side from winning. Those of us watching from the sidelines may witness a spectacular crash after which we can sop up what's left of the economy with a sponge.

Personal Note
I once played chicken. I had flipped off someone who had been tailgating me as he sped past. The guy thought about it for a couple of seconds, did a U-turn, and crossed three lanes of traffic to drive straight at me. I pulled over and let him win. But, did he win? He had been in a hurry and now he was speeding off in the wrong direction.

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