Stardate 20020220.2001

(On Screen): Since this seems to be Game Theory week here on the starship, I thought I'd talk about another aspect of it. As Samwise points out in my forum, the Prisoner's Dilemma gets more interesting when you start talking about multi-player games. In this case, what you have is more or less that every person who is honest increases the total size of the pot, but every person who cheats contributes less but takes a bigger share of it than he should. This is a sufficiently interesting case in Game Theory that it's been given its own name: the tragedy of the commons or spoiling the commons.

The classic example of this (and source of its name) is common grazing land. Everyone has some livestock and there's a common field where they all graze. If it's too heavily grazed, the grass can't recover and the total amount of fodder it produces will decline. There's an optimum number of animals it can support, and any attempt to graze more than that will work for a while but in the long run force a decline.

So all the farmers divvy that amount up evenly among them. But one guy cheats and brings one too many animals. This isn't an exact science, and one extra animal probably doesn't make any difference. But he's getting away with something and so he wins more than everyone else does.

If only one guy does that, no-one is harmed. But a large percentage of the farmers do it, then you truly have overloaded the grazing and the land will decline, and soon everyone will have to substantially cut their herds.

We've actually seen this happen, many times. Sometimes it truly is grazing. It's happened many times to fisheries, where individual fishermen will take more fish than they should and the whole fishery will decline as a result. In fact many of the great historical fisheries of the world have been destroyed this way.

But that's not the only way in which the tragedy of the commons can manifest. It shows up all over. And because of that, it represents something of a mathematical proof to suggest that pure laissez faire capitalism, completely unregulated by government, is in the long run unsustainable and runs at considerably less than the efficiency that it should. Like all manifestations of the Prisoner's Dilemma, what happens is that the efforts of individuals to optimize their own situation results in a less-than-optimal overall system. For a successful capitalist economy to run at optimum efficiency, it's not a question of whether there needs to be government control and oversight, but how much and of what kind.

Because that's the solution to the Prisoner's Dilemma. In my previous article about it, I mentioned that most scenarios are presented as crimes, because it means that the participants can't rely on protection by an outside authority. In actuality, in the legal commerce world the force of law is necessary because of the Prisoner's dilemma. If I'm not buying drugs, but rather am buying concrete or carrots or cooking sherry, then if I bring a gun and steal from my supplier, or if he provides me with something other than what I want to buy, then one or the other of us will end up in court. I will get arrested for assault; or I might sue him for breach of contract, or he might be prosecuted for fraud. The government enforces good behavior on both of us, and therefore the gains from cheating are far outweighed by the penalty that the court system will impose for having done so.

By the same token, the tragedy of the commons can be prevented by government imposition of quotas with criminal penalties for violation. If you graze too many animals, you pay a fine set to be sufficiently high to more than nullify the gains you would get for having done so. It doesn't always work, but it can if it is done correctly. (Like all human institutions, governments are imperfect and sometimes fail to perform their functions.)

A different example of the Tragedy of the Commons is industrial pollution. It costs a lot for a factory to clean up its wastes and remove and properly dispose of anything horrible which might be in it. Suppose that every factory in the country actually does so; we'll define that as the "cooperate" state.

One guy builds a factory and doesn't install pollution controls in it; he's cheating. The total pollution he causes is not great; the overall system is not severely impacted. His factory costs less to run and it permits him to build the same product as his competitors for less expense, but he can sell them at the same price, so he makes more profit.

The whole system is degraded slightly by the pollution he releases and so everyone suffers a little because of his cheating. He makes a significant gain through lower cost of manufacturing.

Depending on what it is, he may not even suffer at all. Suppose that what we're talking about is some sort of noxious effluent released into a river. The river carries it away from him; he never sees it again. It's everyone downstream from him that has to deal with it.

Pretty soon one of his competitors, getting tired of being beaten in the market, also dismantles his pollution controls, and then another and another and suddenly a lot of pollution is being released, and it starts to add up. Everyone begins to suffer substantially because of it.

In the actual event, starting in about the 1830's