The cascading consequences of co-operation’s collapse

What happens when co-operation collapses? Where might this lead? Bill Ferguson’s recent efforts to interpret political settlements analysis through the  analytical lens of collective action and game theory offers useful insights. Drawing on Bill’s work, what follows summarizes three simple ‘games’ which illustrate how a collapse of co-operation  can lead to disaster. (This piece is not wholly self-standing; its aim is to provide some game-theoretic details referenced in the principal/companion piece, “Co-operation collapses, institutions implode, consequences cascade”.

    GROUP B  
    Co-operate Defect
GROUP A Co-operate 2,2 -1,3
  Defect 3,-1 0,0

Game #1 – how an abandonment of co-operation can lead to the collapse of rule-bound governance.  As Nobel-prize-winning economic Douglass North taught us, institutions – “humanly devised constraints which govern human interactions” – comprise a system of rules. But having agreed on a set of rules, will the participants abide by them? In classic free-rider fashion, each participant could get higher benefits by defecting from the co-operative agreement; but the incentive structure induces both to defect, leaving both worse-off compared to the co-operative equilibrium.  Benefits matrix #1 above illustrates. (This is, of course, the classic ‘prisoners dilemma’ game.)   Formal check and balance institutions (including the rule of law)  comprise the classic mechanism for guarding against opportunism, including vis-à-vis  market transactions.  However, when political leaders with  control over the levers of governmental authority defect from the co-operative agreement, then  guardrails of restraint can all-too-readily give way.    

Game #2: how a collapse of co-operation can result in a failure to provide  to provide the myriad public goods which are integral to a thriving society. Public provision requires multiple stakeholders  to agree both as to which public goods to provide, and how to provide them. Views may vary; political institutions provide the decision-making mechanisms to enable stakeholders to  reach sufficient agreement to move forward.  Consider what can happen, though, if participants adopt ‘my-way-or-the-highway approaches to collective discourse.  Benefits matrix #2 illustrates with an example where both participants are supportive of provision, but differ as to their preferred modality of provision. If neither is willing to compromise the result will be non-provision, leaving both worse off. (This is an illustration of game theory’s classic ‘battle’ game.)

    GROUP B  
    Option A Option B
GROUP A Option A 2,1 0,0
  Option B 0,0 1,2

Game #3 – how a collapse of co-operation can produce catastrophe, including state collapse and a descent into violence. In this game, as  benefits matrix #3 illustrates, the insistence of protagonists goes beyond an willingness to compromise to achieve joint gains (in which at least one party achieves less than their potential maximum benefit. In this game (the game of ‘chicken’) each protagonist embraces an unbounded, unconstrained willingness to  do what it takes, to threaten and intimidate – including the threat of inflicting massive, mutual destruction – to force acquiescence by others to some preferred outcome. As benefits matrix #3 illustrates, if one player backs off, then bullying behavior is rewarded. However, if neither player is willing to acquiesce to the other, indeed if each is willing to go to any length, including violence, in pursuit of his preferred outcome, the result for everybody involved could be disastrous.

    GROUP B  
    Co-operate Fight
GROUP A Co-operate 2,2    0, 4
  Fight 4,0 -4, -4

2 responses

  1. Pingback: An immigrant’s plea – make America great again! « WORKING WITH THE GRAIN: Integrating governance and growth

  2. Pingback: Co-operation collapses, institutions implode, consequences cascade « WORKING WITH THE GRAIN: Integrating governance and growth

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