Capitalism, Compassion, and The Prisoner’s Dilemma

The other day in class we talked about the prisoner’s dilemma, which, in brief, goes like this:

Two suspects are arrested by the police. The police have insufficient evidence for a conviction, and, having separated both prisoners, visit each of them to offer the same deal. If one testifies (defects from the other) for the prosecution against the other and the other remains silent (cooperates with the other), the betrayer goes free and the silent accomplice receives the full 10-year sentence. If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge. If each betrays the other, each receives a five-year sentence. Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act? (from Wikipedia)

From a strictly rational, individualistic perspective, the choice is clear. One should defect. This choice results in a 50/50 chance between a 5 year sentence and complete freedom, depending on the choice of the other prisoner, while cooperation would result in, at best, a six month sentence, and a 10 year sentence at worst. No matter what the other player does, one player will always gain by defecting. Therefore, all things being equal, all rational players should choose defect.

Now, I’m no expert on game theory, but what struck me in class when we were going over this was the fact that, although the clear rational choice for each individual player is to defect, a situation in which both players make this choice is clearly not the optimal outcome if we look at the game as a whole. Being a non-zero-sum game, the sum of both players’ gains, less their losses, need not return to zero, nor be equal in every possible outcome. Any instance in which one player chooses defect will result in a total of ten years of prison time, split either five-five or ten-zero. If both players cooperate, however, a total of only one year, six months for each player, must be served.

According to traditional game theory, cooperation is only a viable choice if the game is repeated an infinite or random number of times, as only then will the possible threat of punishment outweigh the potential for success with defection. If, however, rather than considering only one’s own well-being, we look at that of both prisoners, taking into account the total effect of one’s choice, cooperation would be the only acceptable option for the compassionate player.

If we draw a parallel to economics here, perhaps the difference between between defecting and cooperating can be seen as analogous to the difference between capitalist and socialist economic philosophies. In a strict capitalist economy, with everyone looking out for their own interests, one (person/corporation/etc.) has little choice but to “defect” – to attempt to profit at the expense of others. With no reason to expect cooperation from competitors, this is simply the only way to move forward. If everyone makes this choice, however, eventually nobody “wins” at all. In my opinion, this is something like what we are seeing happen on a global scale with the current economic crisis. Competition in the free markets of the world has produced massive growth and industrialization in the developed world, but there has always been someone getting the short end of the stick, whether it was third world countries, displaced native populations, or the first-world poor. Now, globalization and the emergence of new world powers like China and India have saturated our “game” with plays of “defect,”and we are rapidly nearing the point of equilibrium, beyond which we would all be better off cooperating.

In the past it was possible, as the United States and much of the West did, to profit hugely by exploiting an apparently unlimited supply of natural resources. Now, however, with developing countries all expecting to enjoy the same success that the U.S. has, the resources are turning out to be not so limitless after all.  (Here, my analogy perhaps does not hold up well, as the resources of the world certainly do constitute a zero-sum, though the use we can get of them, maybe does not?) In any case, if we all continue competing for the rights to an unsustainable lifestyle, the outcome will not be pretty. I believe that through cooperation and compassionate sharing of resources, we can achieve an outcome that, while it won’t be the downright steal that the U.S. has gotten away with over the last century, will be greatly preferable to the alternative for everyone involved.

If I’ve gotten anything completely wrong here, please let me know. As I say, I’m no economist and no game theorist. I do plan on doing some courses in these areas if I can squeze them into my schedule though.


One response

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    April 10, 2009 at 6:05 pm

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