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Guest Post by Karim Secker.

Guest Post by Karim Secker.

A new project by the Equality Trust aims to ask some important questions of the game-theory model of economics. The project, called Economicon, is part of an ESRC initiative to develop educational tools focusing on inequality for 16-19 year olds.

There is no shortage of games that model themselves on complex real-life problems like economics, or politics, or warfare. From some of the oldest known games like chess and morabara (an elegant and complex African boardgame about herding cows efficiently dating from around 800AD), through modern boardgame classics like Risk, Monopoly and Settlers of Catan, right the way up to some of the more epic contributions of the computer game era like the Civilisation series (which let you nurture an entire civilization all the way from inventing sharpened sticks up to space travel), games about the fundamental rules of human society appear across cultures and throughout history.

Whether they use pebbles or pixels and are passed on through word-of-mouth or fibre-optics, what these games all have in common is that they try to capture the strategy and conflict of real-world, large-scale problems in all their staggering complexity using nothing but a set of abstract rules.

 Believe it or not, game theory and the minimax mathematical equation on which it is based are this year celebrating their 300th anniversary. And that may be a problem. Three centuries on, it is still the basis of most modern economic thinking. 

Games are so deeply ingrained in how we think and learn about complex human interactions it is perhaps not surprising that economists trying to devise a science of financial decision-making decided to name it ‘game theory’. Believe it or not, game theory and the minimax mathematical equation on which it is based are this year celebrating their 300th anniversary.

And that may be a problem. Three centuries on, it is still the basis of most modern economic thinking. And it is, at best, a paradox. Game theory’s most famous example, the prisoner’s dilemma, describes two captured bank robbers faced with a choice between ratting the other out for a better chance at their own freedom, or staying silent and trusting their partner. And unfortunately for theoretical criminals everywhere, the logical thing for both bank robbers to do is to rat out the other. Which of course will land both of them in prison, eyeing each other over soggy porridge for the next ten to fifteen.

Being logical, according to game theory, makes you lose.

Of course, this changes if you play the same person more than once, meaning you need them to trust you next time. But is this good enough? In our own society, we often have to trust people we may never see again, or that we never see at all. Where do morals fit in? Reputations? Social responsibility? Community?

There is something missing from the game theory model of society, and not just at an emotional or ideological level. In a real world prisoner’s dilemma, even if you win and walk free, your incarcerated ex-partner in crime may well have friends and family who will have something to say about it. They may well know where you live.

Game theory is based on the assumption that each interaction happens in a vacuum, and that once it is finished, there are no other consequences to deal with. Perhaps this is why economists are so bad at predicting and planning for the future, such as insisting on austerity policies that irrevocably damage the health and education levels of the coming generation, or arguing that promoting economic growth is more important than dealing with climate change when even a small environmental crisis will bring with it the mother of all recessions. What the game-theory model of society misses out is, well, the society.

What the game-theory model of society misses out is, well, the society.

A new project by the Equality Trust aims to ask some important questions of the game-theory model of economics. The project, called Economicon, is part of an ESRC initiative to develop educational tools focusing on inequality for 16-19 year olds.

Economicon is a computer game that lets small groups of players model real economies. It lets you play with society-wide factors like inequality, tax and anonymity and then see how these shape the decisions of the individuals within those societies. It offers players similar choices to the prisoner’s dilemma, but crucially, it is for more than two players, allowing students and researchers to better understand how societies work and how co-operation happens, or why it fails to.

Modern economics has been accused, with some justification, of being an ideology masquerading as a science, as putting mathematics before real people, and treating us all as nothing more than logical, gain-maximising automatons. Well it may just turn out that not just the attitude but also the mathematics of modern economics are due an upgrade.

Maybe we need a mathematical model that can account for the effects of an interested third party, or a fourth, or a seven point something billionth, and maybe, just maybe this will start to look a little more like the way actual humans do things.

So, is it time we expanded our economic model to allow for the effects of society? Or rather; what type of game do we want to be playing?

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