Friday, 7 November 2008


What is common between prisoner's dilemma, global financial markets, and law? All of them give good results if (and only if) everyone believes and complies with the rules of the system.

If I forsake other prisoner's trust, I gain in a single game. But in repeated games, my best strategy is to comply voluntarily and punish immediately (more specifically, copy other player's previous move, at times with small probability of forgiving defection). With a rational opponent, the sum of individual benefits in non-compliance is less than that in compliance strategy. A beautiful illustration of this can be found at S Anand's four philosophies arising out of pure mathematical logic. Communication, or any method of co-operation between prisoners helps.

In an investment bank I can earn fat bonuses for a few years using complex financial wizardry. But when it comes in an opaque and unaccountable manner (and same is done by other bankers as well), everyone loses trust in me, my company and overall market. The sum of individual paychecks and bonuses is less than overall loss faced by the market. In the long run, I would earn more if I (and others) believed in not cheating the system by not being transparent and circumventing the laws. Government's measures of restoring co-operation and faith help.

If I believe in god (of any kind), I am less likely to resort to atrocities, having faith in my own future. If I start creating a destructive distrust between different religious beliefs, I create a fundamentalist in someone's mind. Respecting the religious systems - mine and others' helps in cooperation and peace.

I have come to believe that the hope essentially stems from the faith in the system. I am inclined towards being agnostic when it comes to religion. But given the above analogies, I think it is better for me that I believe in a system. If more people believe in a system (not specifically religious system), mutual cooperation can produce more benefit for the society on the whole. I am more or less willing to believe in god, if it helps coperation in the system, and I think it does as shown by researchers. This article in The Economist shows through economic games that belief in group/system helps. (Read the last para for humour.)

One may compare the belief in a system to an economic cartel of producers, in both the systems there is a short-term incentive to defect from given association, but not in long term. However, there is one important difference. In a cartel, the extra value created for producer is coming at the cost of customer, making it a zero sum game effectively. In a game of prisoner's dilemma cooperation creates value but not at someone else's cost.

Few days back one of my friends was trying to proxy in class. If I don't believe in the system of x% compulsory attendance in a class, I am likely to give/arrange for proxies. I hope the above argument is convincing enough for him not to proxy in class :-)

PS: Yesterday we had a fantastic talk by Shaheen Mistry from Teach For India. I am inclined towards volunteering, but not yet sure of it. Let's see.


@pro said...

well written, thought-provoking ... keep it going!

yo DT :)

Kartik said...

@apro - thanks, yo DT! :)