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Dennis Jones is a Jamaican-born international economist, who has lived most of the time in the UK and USA, and latterly in Guinea, west Africa. He moved back to the Caribbean in 2007. This blog contains his observations on life on this small eastern Caribbean island, as well as views on life and issues on a broader landscape, especially the Caribbean and Africa.

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Sunday, August 23, 2009

Economics 101: The Prisoner's Dilemma

Economics is about choice. Choice is a natural part of life. Humans respond in many ways when faced with choice. One of the factors that drive human behaviour is self-preservation.

One of the most interesting exercises in economics is to try to see what happens if one plays the prisoner's dilemma. Borrowing from the Stanford Dictionary of Philosophy, Its essence is what happens if you have two confined people and give each the choice of freedom with an offer like:

“You may choose to confess or remain silent. If you confess and your accomplice remains silent I will drop all charges against you and use your testimony to ensure that your accomplice does serious time. Likewise, if your accomplice confesses while you remain silent, they will go free while you do the time. If you both confess I get two convictions, but I'll see to it that you both get early parole. If you both remain silent, I'll have to settle for token sentences on firearms possession charges. If you wish to confess, you must leave a note with the jailer before my return tomorrow morning.”

The “dilemma” faced by the prisoners here is that, whatever the other does, each is better off confessing than remaining silent. But the outcome obtained when both confess is worse for each than the outcome they would have obtained had both remained silent. A common view is that the puzzle illustrates a conflict between individual and group rationality. A group whose members pursue rational self-interest may all end up worse off than a group whose members act contrary to rational self-interest.

I am going to try to look at this and other aspects of standard economics and how they help understand human behaviour. People have scoffed when I say that collaboration is (+/+) and confontation is (-/+). So, choose collaboration. For that reason, I do not threaten, and especially not my child. We try to apply reason and reasonableness. The outcomes are always better.

I have been interested in the idea that if a people do not have the capacity for self-sacrifice then they will inevitably take a path that puts individual interests over the interests of the whole. I have been looking around the region for signs of that or its absence. Each country may shown signs of both, or only one.

2 comments:

MaxTheITpro said...

Nice blog post!!
But why does the hypothetical economic scenario have to deal with prisoners? I think they're ample examples right now where the theory of "economics" is never actually applied in reality. Case in point...Pure/Fair Competition, Open Markets.

Just look around you! No one's playing "fair" when it comes to BUSINESS. In democracies, big business buys favours by contributing to political campaigns. On the other end of the scale, big business keeps the "dick"tator happy via massive bribes along with knowing that they're NOT operating "at home" with all of those checks & balances that might throw their executives in jail.

So, why, for example, can't farmers in the Caribbean or Africa export their produce to the West without jumping through hoops?

On one side, we have cheap labour and output. But then this thing called TRADE gets in the way because it seems like the farmers and/or the distributors in the West can't handle the competition -- for obvious reasons (higher costs).

So why the "protection" when these same business "elites" with their Western MBAs always demand "open markets" & a "level playing field?"
To conclude, I have no faith in "economics." The models need to be overhauled COMPLETELY.

My 2 cents!

See my blog post "Dependency & Rising Prices" to understanding where I'm coming from!
http://maxtheitpro.com/dependency-and-rising-prices

- Max "The IT pro"

Dennis Jones said...

The prisoners' dilemma is just a classic problem about choices under certain conditions.

You need to look carefully at trade, and realise that even in the Caribbean it is hard for Caricom countries to trade with each other as each puts up restrictions to protect its own products and markets.

The 'west' has a particular set of restrictions that are not impossible to overcome. But take a look at the matter of say exporting Jamaican patties to other Caricom nations. Even so-called free movement of labour in the Caricom region is limited.