A STUDY OF POWERS

MAREK CHLEBUS

 

 

 

GLOBAL AND LOCAL GAMES

AN INQUIRY INTO THE NATURE AND CAUSES OF THE POVERTY OF NATIONS

 

 

Introduction

Ideology happens to be a confusingly easy alternative to knowledge. Some people are so engrossed in ideological controversies that they have no time for learning, which in many cases is simpler than polemics. Obviously, there are, and most likely always will be, unrecognised or even unrecognisable dilemmas: life on the planets of other stars, the liars’ paradox, or reincarnation. In these areas a literary salon has exactly as much to say as a research laboratory, and confidence in judgement has to be replaced by self-confidence. However, in some areas ideology becomes redundant [1], and disputes seem to result from a paradoxical laziness [2]. This refers in part to a two-hundred-year dispute between the liberals and the socialists.

For over half a century there has been a mathematical science on conflict and co-operation, called Game Theory. The most frequently quoted general phrasing dates back to 1944; John von Neumann and Oskar Morgenstern are its authors. This theory was soon implemented in, amongst other things, economies, political science, philosophy, anthropology, biology, military science, and statistics. Many scientists divide social sciences into descriptive and speculative ones – either before Game Theory or the modern ones, which already apply a new paradigm. Game Theory arranges and sometimes lightens some political controversies, and particularly the historical argument in which the liberals highlight an optimum market efficiency, and the socialists emphasise market injustices.

One of the prophets of liberalism, Adam Smith, in his fundamental work “An Inquiry into the Nature and Causes of the Wealth of Nations”, proved that neither a referee nor a guard, nor somebody’s good will, are needed in the market game as the egoistic intentions of the participants in trade activity are converted by the market itself into an optimal general result.

The spirit of this game is that its “invisible hand” turns the participants’ greed into a good thing. Under the influence of this argument, competition and economic egoism were regarded as a valuable basis which had protection from the authorities, and some co-operative or altruistic grounds became reprehensible and were punished as a conspiracy threatening competition, or as mismanagement. According to the logic of Smith’s value system, personal greed and mutual mistrust better serve a general prosperity than co-operation and solidarity.

Smith’s thesis has rarely been questioned. Even the socialists did not turn down Smith’s belief in competition, but rather supplemented it with a moral aspect and tried to verify the most drastic consequences of the market; as a matter of fact, one of the prophets of socialism, Karl Marx, regarded himself as carrying on Smiths’s ideas.

Contemporary economists treat the market in a slightly different way and interpret Smith differently, but the political and intellectual elites still have an ideological approach to the “invisible hand”. It enjoys an excessive trust from ones and the others erroneously suspect it different iniquities [3]. Political disputes concerning the market and regulations are, if not the same, then in any case very similar to those from Smith’s era. At the same time, these are more and more often anachronistic, which partly results from insufficient popularization of some sciences.

Game Theory

A game is what, broadly speaking, we colloquially mean by this name. Not only bridge or poker but also trade, war, gen sowing, the elimination of viruses by the immune system, or trees growing in a forest, are games. The theory distinguishes two types of games: the competitive ones in which participants’ profits and losses achieve equilibrium: if someone wins, somebody else has to lose in his favour, and non-competitive games in which victories and defeats do not have to balance [4].

Competitive games are called – confusingly to some extent – zero-sum games, although the amount paid may not be zero. In these games, an increase in the benefits of one player requires decreased profits from the remaining ones. Such games may always be led to an equivalent strategic form in which the paid amounts balance to zero.

Non-competitive games, called non-zero games, are more complex, and such games appear amongst those in which the optimal strategy of all or some players is also competitive, and there may also be such games in which co-operation is required to win.

Roulette, when a model includes a casino, is a competitive game as it does not generate or destroy money, but only transfers it between wallets. However, an ordinary player at a table plays in a non-competitive way in relation to similar players (their payments are independent), and the sum of a game is negative for him, as the game rules grant privileges to the casino, and from the statistical point of view, a player has to lose to finance the casino [5]. As we will see, the type of game is a derivative of the applied model and its range.

In a sports race, when prizes come from external donors and create a positive game sum, the optimal strategy is competitive: the one who wins takes a prize. However, if a race was collective and the team which, as an entire group, finished the race first, would have won, the optimal strategy would have remained competitive solely outside one’s own team; inside the team co-operation would have been required.

Even the best racer would not get a prize if he only cared about his own result and neglected the result of the weakest member of his team. A strategy for an ordinary relay race, in which the points of particular members of the team are added, would be more complex.. For instance, leaving aside the weakest who have no chance to get points, exposing the best ones who fight for their own result and bring many points, and limiting co-operation only to an average group that has a chance to supplement the achievements of the best ones, or even sacrificing the average group which would work for the results of the best (“a game for a leader”), would be optimal.

There is no one universal strategy. Recognition of the range and type of game allows searching for an optimal strategy. For example, it appears that conclusions attributed to Adam Smith remain entirely valid for the situations that model competitive games, called zero-sum games, and partly to others in which competition remains a good strategy. However, in some games, Smiths’s recipes become destructive. These are the games which require co-operation.

In some situations the competition has an optimising effect, whilst in some it does not. Game Theory allows us to distinguish these situations, but with certain assumptions and with some limitations. Rationality of each player is the key assumption, but, as we know from experience, people happen to be irrational [6]. The fact that there is no general recipe for the best strategy is the basic limitation. It does not appear from the fact that the market is not optimal in some areas that a central planner would be better [7]. Optimizing meta-strategies may be formulated for particular games, but these are not always entirely explicit and often are too complicated and unrealistic [8] to be used for political purposes. The fact that some prizes are not measurable or comparable creates additional problems in an individual analysis. Nevertheless, these problems, at least for frequently repeated games, are eliminated by the statistics.

I shall present below a few examples of non-competitive games. These are specifically-selected examples in which competition appears to be disastrous for both the whole, and for each particular player. These indicate areas in which suspicion concerning egoistic attitudes is justified [9].

Three Traps

Dollar Auction

Two players compete for a dollar lying on a table. The competition is in the form of an auction with a bid of $0.25. After the auction is completed, both players pay their final bids, and the winner takes the dollar. The first participant bids 25 cents, expecting to win 100 cents; as he has spent 25 cents, his profit will be 75 cents. Now, the other bidder has a choice either not to lose anything and not to win, if he gives up, or to bid 50 cents in order to get 100 - 50 = 50 cents. Then, the first one either loses the bidden 25 cents, if he passes, or he bids 75 cents and gains 100 - 75 = 25 cents. Now, the other player either gives up and loses his recently bidden 50 cents, or bids 100 having nothing to win (100 - 100 = 0) but also avoiding a loss. Then the first bidder has to decide whether to lose 75 cents, or only 25 if he bids 125. Obviously, he prefers to minimize the loss and bids $1.25. He overpays, acting in a well-conceived own interest. A further move from the other player is also paradoxical, as he either passes and loses one dollar that he has bidden, or loses only $0.50 if he raises his bid to $2.50; then he will pay 150 cents but will get back 100 cents, so his loss will decrease.

This is an endless game. When the first player bids $1,000,000, it is always profitable for the other one to outbid. In real experiments, players usually bid to 3-4 dollars. They all lose, despite the fact that the sum of the game is positive and they could all share in this.

The auction for one dollar may be regarded as a model of commercial tender for a contract worth one dollar, or as a model of the arms race in which two competing countries arm themselves in order to grab a contested territory worth one dollar. Acting in a rational way at each stage, they increase expenses ad infinitum.

Prisoner's Dilemma

An investigator captures two burglars, about whom he knows that they have robbed a bank, but he cannot find sufficient evidence for conviction. If one of the suspects does not enter into co-operation, the investigator will have to release them despite his belief in their guilt. Thus, he puts them in separate cells and investigates them separately, offering each of them the same deal:

YN      if you plead guilty and accuse your friend, then as a crown witness you will go free, and I’ll request a 10-year sentence for him;

YY      if you plead guilty and so does your friend then I do not need a crown witness, but given your co-operation I’ll ask for only a five-year sentence for both of you;

NY      if you do not confess and your friend blames you, he will be released and you will get a 10-year sentence;

NN      if you both do not plead guilty, perhaps I will not be able to prove anything, but I’ll keep you in custody for a year.

Clearly, it is in the interest of both of them not to confess (the NN variant), but in the interest of each of them separately is not to be punished at all, which may be achieved solely by accusing the other one. Therefore, the first one will choose YN, accusing his friend, and the other one – NY – charging the first one.

However, both these variants make up the YY variant in which they are both accused, and thus they are threatened with 5-year sentences. The loyal variant (NN), although optimal, is at the same time the most dangerous one, as it may result in a 10-year sentence when the accomplice betrays his colleague.

Each prisoner has to decide whether he should refuse to co-operate with the investigator, which implies a 1-year or a 10-year sentence, or to collaborate and reduce the risk to 0 or 5 years. From a rational point of view, if he has any doubts as to the accomplice’s attitude, he will choose the second solution and will confess.

If the prisoners were allowed to communicate, they would enter into co-operation in order to achieve the game optimum, i.e. two years of prison in total. If they do not co-operate the game result will be 10 years for each of them.

The Prisoner’s Dilemma is a very important example of a non-competitive non-zero sum game. A huge number of significant models come down, one way or another, just to this game situation.

Enthusiasts for the Prisoner’s Dilemma organize tournaments of computer programmes, playing this game many times. By now, a simple programme driven by the following philosophy, has prevailed:

§                  in the first game co-operate, do not betray, and then

§                  do what he has done: if he has betrayed you – betray, if he has collaborated with you – co-operate.

Some people regard this as a moral message: be friendly, co-operative, punish traitors, but if the latter are becoming better, do not be unforgiving.

Tragedy of Commons

An example of a disappearing common pasture is the equivalent of a multi-person Prisoner’s Dilemma. Let us imagine a village consisting of 10 homesteads having a common pasture that cannot be divided. There is water in one section, shadow in another one, and grass, clover, and various things good for a cow somewhere else. Let us assume that it is not possible to separate completely valuable sections from this pasture. The pasture can feed 10 cows and each of these brings an annual profit of $1,000. A higher number of cows decreases profits because cows are malnourished, and when there are 11 cows, each brings a profit of $900, 12 cows: $800 each, ad so on, up to 19 when each generates a profit of $100. When there are 20 cows there is no profit at all.

Let us recapitulate on the ecology and economy of the common pasture:

 

Number of cows

Profit from one cow

Total profit

N<10

1,000

N·1,000

10

1,000

10,000

11

900

9,900

12

800

9,600

13

700

9,100

14

600

8,400

15

500

7,500

16

400

6,400

17

300

5,100

18

200

3,600

19

100

1,900

20

0

0

 

At the beginning, a few farmers graze one cow each on the pasture. Each farmer achieves an annual profit of $1,000. The overall profit of the village from this pasture is: $1,000 times the number of cows. Introducing additional cows increases both the investor’s and the whole village’s profit, as long as the saturation limit (10 cows) is not exceeded. Just to simplify the proposition, let us make a further assumption, which does not influence the general nature of the conclusion; that these 10 cows come from 10 homesteads: each farmer grazes one cow. Each farmer earns $1,000, so the village earns $10,000.

What would happen if one farmer, having in mind his own profit, put an extra cow out to pasture. Then, each cow would generate a $900 profit, the village’s profit would decline to $9,900, but the egoist’s profit would increase to $1,800. If the same or another egoist considered a further animal it would also be profitable for him, as each of the 12 cows would bring $800 each, the whole village would earn $9,600, but the same egoist would have $2,400 instead of $1,800, or another egoist would have $1,600 instead of the current $900. Let us note here a certain added value: everybody loses less than the egoist gains. In the case of the eleventh cow, the egoist earns $800, the community loses $100, and when the twelfth cow is introduced the community loses a further $300, but the egoist gains as much as $600 or $700.

A single egoist should stop at the fifth cow: then there are 14 cows, each one generating a $600 profit, thus his cows bring him $3,000. If he burdened the pasture with another cow, he would not gain anything as he would have 6 x 500, i.e. the same. If he wanted to go further and had 7 cows out of 16, he would have only $400 per cow, i.e. $2,800 altogether, and thus less by $200 than in the case of 5 or 6 cows.

However, if there are more egoists than just one we may note a “rat race”. The first egoist, having 5 cows, prefers to have 6 or 7, if he was afraid that someone else might introduce an extra cow, as then he would lose $100 per each cow. Therefore, he prefers to further charge the pasture, defending himself against a possible loss.

A decision-taking process is always the same: breaking out of the coalition and charging extra pasture is a good individual strategy. When there are as many cows as 18, each one brings a $200 profit, and the village earns altogether $3,600. A farmer introducing a nineteenth cow, if he had one bringing a $200 profit before, will now have two cows generating $100 each, so he does not get anything, apart from a sense of security, as if somebody else introduced another cow he would lose $100. The game stops at 19 cows and a total profit of $1,900 instead of the original $10,000.

A disappearing pasture is regarded as a competition and co-operation model in an area of indivisible good, such as environment, security, culture, etc.

Games in practice

The dollar auction between the USA and the Soviet Union, the arms race, ended with the desertion of the latter who did not dare bluff further and left America with the problems of the whole world in exchange for a partial exemption from payment. The dollar auction happens in politics and in the economy when the decision-maker cannot rise above the local and temporary context and see the whole problem. Acting professionally, they make decisions which are short-term and “by the book”, but generally disastrous even to those who make them. A quite entertaining, but not “pure”, example is raising the ante on the opponent’s promises during a political campaign. It may lead to obligations which freely surpass the capacity of the government.

An often-seen and commonly-understood example of escalation shaped by the dollar auction is a trivial argument about a trifle. The parties to this argument bid up, surpassing all logic according to the strategy:

§                     I have greatly insulted the other party and – regardless of the outcome of this quarrel – the cost is going to be significant,

§                     but by increasing the insult or blackmail by just a bit, I do not raise the cost by much and I could win in the end.

The only solution that can guarantee profit from the dollar auction is conspiracy: the bidders agree that one will bid low and the other one will not outbid them. Later they share the profit. This strategy is in danger of a third party, outside the conspiracy, joining the game. Numerous examples of preventing this from happening can be seen in larger public tenders which have elaborate methods of limiting access to the bidding.

The Prisoner’s Dilemma in practice very often leads to a choice which is not beneficial for the prisoner. Political campaigns often follow the scenario of this dilemma: regardless of the difficulties in presenting evidence, the right wing accuses the left of theft (YN) and gains on it, but only until the left wing starts trumpeting the theft of the right (NY). Public opinion, by synthesizing the messages, remembers that all politicians are thieves (YY) – relying not on evidence, which it does not usually have, but on the declarations of politicians themselves. In mature and stable political systems, a certain secrecy is created to cover the customs and finances of politicians, as in this way it prevents the loss of a good name. This corresponds to the solidarity of inmates (NN).

In Europe, in the Middle Ages common pastures were a norm for centuries. Their historical failure looked different from what Games Theory foresees because some abandoned the rules of the game and eliminated their competition. The stronger started fencing pastures and forbidding the community access to them. District pastures were taken over by individuals who, quite naturally, began to optimise their profit according to the general interest of the users, in this case their own. This solution would be an optimal one within the broader scope of the game, a game accepting eliminating players.

The pasture issue provides an example of a common, indivisible good. Natural environment, health (at least in the context of epidemic diseases), security, moral order, culture, knowledge, and many more areas are among such goods. The example of pastures allows for an exact analysis of the effects of competition and co-operation in a situation in which it is prohibited to physically eliminate some of the players.

In the case of ecology, a certain attempt at softening the conflict between the interest of the individual (to pollute) and of the whole (clean environment) is the recently-introduced emission charge: those who pollute the environment should compensate the others for it. As I mentioned earlier, in the model example of pastures, the profit of the egotist is initially higher then the losses of the community. That is why such charges will not stop the egotist's harmful actions, but might limit them. Upon using these charges, the burdening of the pastures would stop at the moment when the profit of the egotist becomes equal with the loss of the community, at 14-15 cows. Of course, it is a better solution than failure, but not a more profitable one than the initial solidarity. An effective solution would be to deprive the egotist of all profits, but this would require a more or less refined confiscation of profits, a 100% tax.

An interesting and salutary experiment is the American pollution emission market, on which a regulating body sets emission limits in particular areas and sells them to companies (primary market) with the right to re-sell them further (secondary market). Reportedly, the authors of this solution themselves were surprised at how positive the ecological and economical results were. A game defined by such rules is sensitive to the initial prices on the primary market, which have to be carefully selected on the basis of some arbitrary calculation of ecological values into economic ones.

Another example of common good is the qualifications of staff in a company which are in danger of falling into a trap of negative selection. An incompetent superior searches for a feeling of security and employs even more incompetent subordinates because they, and only they, pose no threat to the superior. With every single HR decision, the organisation loses because of incompetence which reaches one more position. The superior does not win security because there still is no competition for him. If he did allow a competent person in, the company would not profit greatly, but the superior would lose a lot: he would be in danger from then on.

After passing a certain “critical mass” of incompetence, the organisation falls into a permanent trap which systematically makes the company weaker. The corruption of human resources in an economic organisation eliminates the market after some time; however, the corruption taking over a country may be permanent because international competition exerts lower selective pressure. That is when the political elites, to protect their own interest, block out access to politics to those who endanger their status quo: too independent, talented, intelligent, educated, competent, or honest. The defence of status quo is the optimal strategy for maintaining power by the degenerating elites. Escaping this trap becomes possible only when this power loses its appeal: in a state of financial collapse, the fall of the government, anarchy, revolution, disaster, or a lost war. The long-lasting periods of peace strengthen incompetence in an obvious way.

Corrupt bureaucratic and political groups fall into a similar trap since they have to use negative moral selection eliminating individuals who are not corrupt or not weakened in any other way (conventionally, financially, criminally) from the milieu because they cannot be certain of such individuals. No mechanism can stop the moral degrading of groups falling into this trap except for competition between them, but this competition is susceptible to the Prisoner’s Dilemma.

This corruption can put whole societies in danger, as they lose common goods also known as social resources such as morality, kindness, righteousness, co-operativeness, resourcefulness etc.

The limits of market

The classical market [10] – the one which was so convincingly defended by Smith – is a competitive zero sum game [11]. What the seller gains, the buyer loses and conversely, the buyer’s profit consists of a limitation of the seller's profits. In this way a negative feedback between the players’ interests is activated: everybody controls each other, protecting their own interests. The feedback leads to a state of equilibrium in which the profits are divided between everyone, of course not equally, but rationally, because in the state of equilibrium, accessibility to all goods within the market is maximised.

In such a game, every one should safeguard his own interest, and only his own. Any top-down regulation of production, of prices, or control of trade is harmful, because it can only lead the market away from optimal balance. In extraordinary situations, disasters, panic, or economy fluctuations, the market regulates itself and restores equilibrium. Both the restoration of the balance and the balance itself may be brutal to some players. However, those who cannot find their place on the market are taken care of by social care, which is supposed to deal with extraordinary and marginal situations [12].

Today's state, more or less efficient, democratic or rich, as a rule feels responsible for the social order, education, health, and well-being of its society. This responsibility is, after all, declared in most constitutions. With corporations it is totally different. They are subordinate to trade law, they have to be egoistic, and cannot feel the same responsibility as the country. The law determines profit or other benefits [13] as the aim of companies, and actions creating a loss for the companies (contrary to this aim) are punished with prison sentences.

The co-operation of companies is limited by various anti-monopolistic laws, which protect any competition. Also, communication between companies is limited by numerous limitations (trade secrets, antitrust laws). A company, a corporation, is defined as an egotistic entity in the market and social game, having limited possibilities of co-operating with similar players in the game. A player with such an attitude would fall into every above-mentioned trap. In the language of the Prisoner's Dilemma, the corporate strategy can be expressed in a single directive, “compete, do not co-operate”. Let me remind you that in the Prisoner’s Dilemma, the best strategy is “first co-operate, then reciprocate”. In the Dollar Auction, only unconditional co-operation, a conspiracy, can secure victory.

The corporation is a free-market creation and is still optimal in the conditions of competition. Production, trade, and entertainment provide many examples of the effectiveness of corporations and the efficiency of the free market. There is no better idea for a game with a zero sum. One has to keep in mind, though, that not all games are like this. Can a company be a good player in a game for common goods? Of course. Only a change in its strategy would be needed. Such a change would in turn require changes in the law. But we have to remember that a redefined corporation might lose its effectiveness on current markets.

“Global area” does not only consist of country territories, and the relations between countries. The atmosphere, oceans, security, and health are integral wholes, indivisible between countries, and global. These problems as a whole are not covered by governments, diplomacies, or the ineffective UN. International relations are rather an area of country rivalries than of care for global order. Global space is filled by competition, and this is exactly the area where it is so easy to trace games with a non-zero sum, and where egotism can be disastrous. Liberalisation, commercialisation, deregulation, and privatisation, which are used on a wider and wider scale in foreign relations, gradually decrease the responsibility of countries for various areas, also those where the market is not optimal and its “invisible hand” turns out to be destructive.

The free market may be harmful in some areas, and the world, becoming a whole, covers these areas more and more, not only not having the right institutions, laws, or experiences, but not even having a consciousness devoid of the wrong stereotypes.

Global security

The last terrorist attacks in the USA are a good counterexample of the divisibility of security. On the international scale, this situation is similar to the internal situation of some South American countries in which the poor live on the streets, the rich in their castles, and all in all nobody is either free, or safe.

The game against terrorism is similar to the historical situation of controlling sea piracy. It required hundreds of years of international co-operation to limit piracy to a scale which did not endanger trade and sea transport. Piracy, just as terrorism today, was a war of the poor. Many countries, in times of their military and economic weakness, licensed pirates, thus raising them to the status of privateers. Privateering became a form of self-defence and business. Even royals sometimes took part in privateering escapades.

The model of guerilla warfare taken from Games Theory fits the situation of fighting terrorism. In this model t partisans attack one of the N points protected by p policemen. In this game, there is only one right solution for the policemen, when their number allows the manning of each post with a force stronger than the combined guerilla forces (p>N·t).

An effective game against terrorism, defined so that the world policeman has to protect N points against a terrorist attack, requires a ratio of forces 1/N. If one treats N as a number of larger factories, events, institutions, and public buildings, then it would be in millions. Therefore, eliminating the terrorism problem would require less than one person out of a million to have a feeling of mission, injury, or helplessness which would push them to an act of terrorism. A population of several billions could allow itself to have a mere couple of thousand of poor wretches, psychopaths, and desperadoes put together. That is the number of people who can be found in any larger hospital or prison.

Conclusions

The world is becoming a whole, as Marshall McLuhan used to say – a global village. Not only chemical and biological dangers spread easily between continents; also demoralisation, incompetence, stupidity, and aggression spread from country to country and from culture to culture. Basically, all inhabitants of developed countries eat, drink, and smoke the same products, drive the same cars to the same homes, and when there, turn on the same TV channels.

Despite these similarities, internal and international differences and disproportions become deeper. A Microsoft employee copies a CD-ROM with MS Windows in a couple of seconds, with a market value comparable to that of a couple of tons of coal mined by a miner. It is also worth mentioning that Windows can be copied legally only in the USA, and coal comes mainly form China, Russia, and South Africa. Already Adam Smith wondered how paradoxical can the market be when it values objectively worthless goods highly, such as diamonds, and completely depreciates such life-giving goods as water. However, the market is not there to be clever but to work.

Organisational and legal solutions usually stem from ideas. Every law is subordinate to some vision of order and justice. Contemporary international law and supranational institutions stem from some vision of the world. Such a vision is rooted in the 18th, or at its best in the 19th century, and does not fully correspond to modern reality. There is less and less free space, no-man’s lands, and wild nature. The pioneer period of taking control of the Earth is approaching its end. Our political consciousness comes from times when in our common pasture, our biosphere, there were just a couple of cows grazing. Back then, competition was the best idea for life. Since not so long ago, the Earthly “pasture” feeds more than 10 cows. We are passing the point of inflexion on the logistic curve of growth. The progress of burdening the biosphere will become a serious threat on the other side of the logistic formula. Growth will lose its absolutely positive value [14].

The global world needs new institutions and new laws. In the area of common goods, faith in the charity of “the invisible hand” of the market is a superstition. These goods cannot be ruled just by commerce and competition. Co-operation is a better solution, but is hard to put into an institutional framework [15]. Countries, usually in order to force or substitute co-operation, introduce different types of regulations, which do not have to be better than commerce. Perversions of some administrations can be even worse than the ruthless market. Concessions, licenses, permits – necessary tools of regulation – serve not only management but also corrupt extortions [16]. Nobody likes bureaucracy, especially in the times of its professional and moral degeneration, only that, except all the drawbacks, bureaucracies can basically realise non-commercial aims, and a commercial entity cannot. That is what both Games Theory and history claim: examples of corporate management of colonies by some companies were scandalous.

In some areas, where the classical market is not optimal, corrupt and degraded bureaucracy can be even worse. It is most clearly visible where an open market is not permitted by a doctrine. An underground market, or corruption, can raise prices in such a situation, and limit access to goods much more than a free market would [17]. Of course, commerce does not have to be the worst solution for the common-goods issue but it is not the universally best one.

The new situation in the world requires a new philosophy of managing common goods, a somehow cleverly-modified market, with some elements of regulation.

Summary

In the 18th century, Smith convinced the elites of some countries that the state could cease to regulate in some areas in which self-regulation was cheaper and better. Those countries quickly noted great economic growth. However, as it turned out, in the areas of environment, education, social and health care, “the invisible hand” did not work, or worked in a way we would not have wanted it to. For example: self-regulation can heal a society eliminating and not curing, the ill. Such a solution would not be in accordance with the fundaments of our culture.

In the 20th century, when it became clear that “the invisible hand” could shake up the economy, states started smoothing-out the economic cycles, of course implementing non-market interventionism. After the great crisis, great wars, and the arms race, the state puffed up to an extent unseen before, and in many areas progress has gone backwards. Deregulation, liberalisation, and commercialisation became obvious necessities. But, upon entering some areas of common goods, they became a threat. It might be time for us to count the cows on the common pasture [19].

The discussion about the world as a whole and humanity as a community, deepened by recognition of the effects of globalisation and by global terrorism, provides a valuable intellectual potential which can and should be used to remodel some stereotypes. It would be much better if while doing this, everywhere where it is possible, knowledge replaced ideology.

2001/2002

 

 

 

[1] For example: ideological discussions about the order of the planets in the Solar System, which absorbed and divided people so much, have seized. It is science and not ideology that penetrates the Solar System nowadays. Quarrels are solved with the help of experiments rather than polemics or opinion polls.

[2] This resembles somewhat a situation of a woodcutter who is trying to cut down a tree with a blunt saw to no avail and is so busy doing so, that he does not have the time to sharpen the tool.

[3] On the one hand, the politics of developed countries is dominated by liberal ideas, which can be seen in the tirelessly repeated incantations such as: privatisation, deregulation, liberalisation, or merchandising, on the other hand, states reserve themselves monopoles in many areas by limiting market mechanisms, and intervene on most markets with the help of different concessions, norms, taxes, customs.

[4] Precise definitions speak of strictly competitive games (with a fixed sum, colloquially: zero sum) and partially competitive games (with a variable sum, colloquially: non-zero sum).

[5] Even though the rules of the game favour the casino, there are strategies which guarantee wins for the “smaller players” – the ones at the table. One of these strategies is consistently doubling the stakes while betting on a colour: the player bets one dollar on, say, red and the player wins, he receives a new dollar, if he loses, he doubles the stakes betting on the same colour. Let us assume that the player has lost N times losing 1 + 2 + 4 + ... + M dollars, where M equals 2N-1. The sum of this progression is 2*M – 1. This is the total loss. In the next move, the player doubles the stakes again and bets 2*M. Let us assume that he wins in this move, since in an honest game his colour has to come, statistically even every second time. The player has won 2*M, and earlier he lost 2*M - 1, so a dollar less. Using this strategy patiently, the player wins a dollar. The problem behind this strategy in practice is that to win one dollar, one has to have many more, the longer the initial series of losses, the more dollars the player has to have. In order not to be affected by N losses, one has to have 2N dollars.

[6] An important phenomenon distorting consumer rationality, and in consequence the market, is advertising, which does not refer to the strong sides of the product but to the weaknesses of the buyers, usually to their desires.

[7] The civilisation and economic rivalry of the Soviet block and the capitalistic world provided enlightening examples: planned economy appeared quite effective upon initial development stimulation of underdeveloped countries, which were relatively easy to control, but as system complications grew in numbers, the market gained advantage.

[8] With the strategy of doubling the stakes in roulette, in order to be indifferent to losing 20 times in a row, one has to have over a million dollars. But which millionaire would play for a dollar?

[9] My description of the three traps was based mainly on the 1979 sketch by the Hungarian sociologist Elemér Hankiss “Social Traps” (Budapest: Magveto, 1979) and partially on the 1993 handbook by an American mathematician Philip D. Straffin “Game Theory and Strategy” (Washington, DC: Math. Assoc. Amer., 1993).

[10] Contemporary economists usually consider the market as a game with a plus sum. However, some segments of the market remain games with a zero sum, for example the competition of suppliers for satisfying a given demand.

[11] Sub-markets sometimes are different games. The game of the wholesaler and the retailer can be won by the both of them, for example at the cost of the manufacturer or the consumer. However, the division of the set amount of goods is a strictly competitive game.

[12] The stratification of some societies, described as the 20-80 formula, seems to provide an example of stretching the margin to 80%. In such a situation, the market, not losing its optimal strength, would become a game for the elites, an exquisite casino.

[13] An important exception is joint-stock companies with a non-economic aim, accepted by some commercial codes, including that in Polish.

[14] In sociobiology, this would correspond to the change of strategy from r to K (taking control of the environment requires a pioneer strategy, called r, and maintaining a stable population in a filled environment requires a balance strategy, called K). Sociobiology was created some thirty years ago and is a science which claims that individual, environmental, and species strategies derive from genetic egoism. For a sociobiologist, a chicken serves the egg to the purpose of creating new eggs. Despite or sometimes because of the egoism of the egg, it is sometimes occasionally profitable for the chicken to co-operate or even be altruistic.

[15] An interesting political experiment of the turn of the 19th and 20th century was a cooperative which functions satisfactorily today in managing real estate and in a couple other areas. The cooperative is a form of a compromise between competition and co-operation which is worthy of an analysis. Other organisations which are not subdued to competition are associations and religious groups.

[16] The corrupt co-operation of the bureaucrats is an example showing that co-operation can also be destructive. It would be better for the society if the officials competed against each other.

[17] An example of that may be public health care, by intention commonly accessible and free, which may be more expensive and less accessible than the private one.

[18] I do not know undisputedly good examples of bureaucratic management of common goods. There are, however, some promising precedents of legislative wit, for example the order to put sewage discharges above water intakes. It is easier to execute and limits pollution of rivers in a more effective way than regular bans and penalties.

[19] Charles Van Doren attempted to do that in the book “A History of Knowledge” (New York, Birch Lane Pr, 1991). According to him, the whole fauna weighs about 2 billion tons and is divided equally between see and land fauna. People are supposed to weigh 250 million tons, cattle 520 million, sheep, goats, pigs, poultry – 185 million, dogs, cats, and other pets – 5 million, wild animals – only 40 million. Mankind and its hosts constitute 96% of land fauna in weight, and over 50% of all fauna all together (because of fishing, a large amount of fish and crustacean have to be considered as our dietary base). Independent of how complete and accurate these calculations are, they seem to present a full hominisation of the biosphere.