Prisoner's Dilemma Thought Experiment
What in the Game Theory is Going on?
The world is full of confident (or faux-bravado) people speaking authoritatively on topics.
I joke in real life that being an adult is when you finally see through that charade and realize most people don’t know what is going on. You see, as a kid, most of us had some baseline thought that age brought wisdom, experience, and knowledge (and to some extent that is true). There is some belief in people in positions of power (teachers, police, doctors, etc) should be listened to.
[I still remember coming home from school and repeating something my 5th grade teacher said about money to Papa F’er. He told me why that was inaccurate. “But she is a teacher and knows this stuff” I replied, only to have him drop the truth bomb of “if she knew anything worth knowing, she wouldn’t be at [name of local bar Papa F’er worked at] turning tricks with [name of town mechanic] to try to get her clunker fixed at 50 years old”. ]
But as you get older, you have one or all of these types of events happen and it really shakes you out of the view that ‘older person speaking with authority = actually knows something’. Either you:
Start seeing how so many people in their 30s and beyond are just making seemingly obvious mistakes in their personal lives over and over and not learning a thing
Have kids and interact with other parents or teachers and see how much of a mess their lives are and all the mistakes they make in conversations, but 100% conflate their job/degree with having infinite general knowledge about everything
Think a PhD in nutrition talking about…I don’t the economic impact of policy decisions
See people you grow up with who were complete morons go on to be doctors, police, teachers, people on TV etc. and realize the bars to professions isn’t high
Start seeing younger people defer to you on questions when you know absolutely nothing about them
I know nothing about cars. Literally don’t care, it is of no interest to me what happens that makes it go and stop. But as a 40-year old blue collar looking male, people will insist I tell them what I think might be wrong with their car.
Now, there are plenty of ‘people past the age of childhood’ who still aren’t adults sadly. They operate on the childhood-like belief that particular people with some degree or job or age must know the answer to everything they are asked.
This all came to mind as I have been bombarded with everyone’s take on what the implications of tariffs mean in the world. A lot of people with varying amounts of success (or lack of), across many fields of jobs and expertise (or lack of), all seemingly know exactly what this all means.
And my answer to all of them has been - “there are 200 something countries and 7 billion people in the world. I have no idea what happens with a wide-sweeping change in policy since it depends on how each country reacts, then how we react to that reaction, then how other countries react to our reaction to that initial reaction, and how that dominoes forward. Then based on all of that, it depends on the net change in 7 billion people’s decisions on what to buy, from where, and probably millions of businesses decisions on where or if to move and what to change.”
And that remains my answer here.
“But the markets are down, muh 401k!!!”
Well yea, markets don’t like uncertainty and the old system made certain people a lot of money who owned a lot of shares. It isn’t a shock the markets reacted poorly to the rules suddenly seeming like they changed.
In short, I honestly believe no one actually has any idea how this all shakes out in the end. Some theories sound better than others, but there is a lot of dominoes to still fall. Anyone saying otherwise is lying and taking you for a naive child. They can have opinions, but there is still so much unknowns to see how this plays out.
(For example there is both a non-zero (though probably not much above 0) chance that both 1) All countries with tariffs on US goods (there are many) drop them and US doesn’t implement any tariffs and global free trade results where prices of goods fall for everyone, and 2) All major countries get into a trade war that results in country boycotts and a freezing of the entire import/export market.
Again, neither scenario is likely (although I have heard both proposed to me) but it just shows how disparate this can play out.]
But, one thing all this tariff discourse has brought back to the front & center is game theory - particularly prisoner’s dilemma-esque games of cooperation vs confrontation.
Game theory is a good lens to view all this through and once you understand it a bit, it can help you greatly in how you approach situations in life.
And it can also help explain how 2 people can look at the same tariff situation and come to 2 radically different takes on it (assuming they are bright, thinking people and not just repeating CNN/Fox talking points they heard last night).