The Liberal Paradox

[Borodog]

By the way, my derisive tone is meant for the people who propound things like the "paradox of liberalism", not you or your OP asking about it.

Just wanted to clarify.

[sj2010]

no its cool, i wasn't getting that vibe from your posts. I just didn't want people underestimating my intelligence, haha...

[AlexM]

[ QUOTE ]
> Combining these gives

* Joint preference: neither to go > Alice to go > both to go > Bob to go

[/ QUOTE ]

I'm confused by this whole scenario, but this in particular. The combined preference is obviously: both go > neither go = Alice goes > Bob goes.

The "libertarian" solution, if you can call it that, would be for the two people to talk about what they want and make a decision based on that. This would obviously result in them both going. But then, I have no idea what you're talking about.

[wtfsvi]

The Alice and Bob movie situation is just an example to prove a point. Sure they could just tell each other about their preferences and everything would work itself out, but that's not a likely outcome in most situations where two (or whatever number) individuals' actions affect each other.

I think the paradox does an ok job of showing that liberty will not always lead to an optimal solution. It didn't show me how violence will do better, though.

edit: Also, if I was Bob, "neither go" would skyrocket past "both go" in my set of preferences as soon as someone tried to force me to go. But that's a little beside the point.

[Felz]

[ QUOTE ]
The "libertarian" solution, if you can call it that, would be for the two people to talk about what they want and make a decision based on that. This would obviously result in them both going.

[/ QUOTE ]

How does this "obviously" result in them both going?

[wtfsvi]

[ QUOTE ]
[ QUOTE ]
The "libertarian" solution, if you can call it that, would be for the two people to talk about what they want and make a decision based on that. This would obviously result in them both going.

[/ QUOTE ]
How does this "obviously" result in them both going?

[/ QUOTE ]Because they both think both go > neither go, and neither of them will go alone?

[Felz]

[ QUOTE ]
A pareto superior action requires at least one party be made better off and none be made worse off. The second condition is impossible to meet under coercive action/exchange. It is only voluntary actions/exchanges that can possibly be "Pareto optimal".

[/ QUOTE ]

This is of course incorrect, see prisoners dilemma. Individualk rationality does not necessarily lead to collective rationality. This is one of the big contributions of game theory to economics and one of teh reasons why its becoming more and more important in economics.

[Felz]

[ QUOTE ]
Because they both think both go > neither go, and neither of them will go alone?

[/ QUOTE ]

This is true only under the assumption that they both create a binding contract (sanctions) which is not part of the scenario. As both go is not a nash eqilibrium this isn't a simple coordination game. bob would simply deviate and stay at home. Obviously the scenario of Bob and Alice is a mere placeholder and allows for Bob to deviate without Alice knowing before arrival at the movies.

Edit for clarification:
Alice then would anticipate that Bob would deviate and also stay at home given her preferences. So neither would go resulting in a non optimal solution. This is the liberal paradox.

It's simply a "prisoner's dilemma" scenario.

[wtfsvi]

Why would Bob deviate after they've told each other about their preferences? Are you saying "but Bob might act irrationally!"? Well, sure..

I agree with you that this scenario is just a placeholder, and the "they would just talk about it" will not always happen for the scenario this story is meant to represent.

[Felz]

[ QUOTE ]
Why would Bob deviate after they've told each other about their preferences? Are you saying "but Bob might act irrationally!"? Well, sure..

[/ QUOTE ]

Because he prefers to stay with her going? Gooing instead of staying would be "irrational."
What you're assuming is that it's suddenly in bob's interest to reach a pareto optimal solution after they've both talked about it, but that would be irrational within the centext of a one shot game as it's being described.
Bob does already know about Alice's preferences even without them interacting. This is the so called common knowledge assumption.
The dilemma is that they both still end up with neither going even though would be better off with them both going, this is the prisoners dilemma. Individual rationality prevents them from reaching a pareto efficient solution.