Is zero-sum the default economic position?

[bobman0330]

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Say the other player on the game show was a stranger to you until you met and shook hands before the game started. Would you dick him out of a million dollars just to have an extra chance (not even a certainty) of winning a hundred dollars? This is a case where an extra hundred is relatively meaningless in comparison to the goal of winning the million. If two friends can silently choose the copperative and highly profitable strategy for both of them, so can two strangers who think it through.

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This is mostly a payoff question. For me, getting $1 million and my friend or even a stranger getting $1 million is better for me than getting $1,000,100. So that might not even be a PD situation.

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I still think there must be something fundamentally flawed in the so-called expert strategy if it returns a far lower EV that would the strategy employed by two morons playing randomly. It does return a MUCH lower overall EV so how do you resolve this paradox? Game theory against ANY opponent is supposed to protect your EV not destroy it. Yet in this case it fails miserably against an equal game theorist.

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Well, this is why the PD is considered to be so important, and why a lot of the insights of game theory take people by surprise. The natural assumption is that behaving rationally should result in an optimal outcome. But sometimes, rationality can work against you.

But there's not a paradox. The expert strategy increases your EV by $100. Playing against an expert reduces your EV by $1 million. If you can "trade" your option of increasing your EV by defecting in exchange for your opponent's option, then it's a bargain. Signing an enforceable contract would do this. But if you can't, you're in trouble. Unless your opponent is altruistic and doesn't want to screw you over, he will if he's smart. Because his choice will not affect what you do.

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But thinking that way screws you also, and for enormous money, whenever you are against anyone thinking similarly. Game theory is supposed to protect your EV no matter who you are up against and regardless of the strategy they employ. I still don't see how two morons could (and would) outperform two game theory experts if the expert strategy is sound in this example, which leads me to think that the expert strategy is not considering everything it ought to be considering. An expert strategy employed by both players should not be dominated EV-wise by moronic or random strategy employed by both players, but it is. Furthermore why should a purely altruistic strategy outperform all other strategies when both parties employ it? I believe there is more than meets the eye to this example.

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But if you are up against a sample of 50% experts and 50% idiots, you are going to be getting 1 million half the time and 0 half the time. I'm going to be getting 1.0001 half the time and zero the other half. Why isn't my strategy better?

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I've only read segments of this conversation, but it's recognized that the expert strategy is to not defect, right? Given that, in your scenario against 50% experts and 50% idiots you will make $1 mil 75% of the time, not 50%. 50% from the experts and 25% more from the randomly choosing idiots. On the other hand, if all the "experts" are choosing to take your option and defect, you only make $1 mil 25% of the time vs. half the idiots. Given these two options for the results of the expert strategy, it should be pretty apparant which is the expert strategy.

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The one that produces a strictly better payoff every single time? You do not control your opponent's choice. Your opponent's choice is beyond you. You do not affect your opponent's choice in any way. Your opponent's choice is independent of your decision. The outcome of the game does not have to be symmetrical. The fact that a dummy does better playing against a dummy than an expert does against an expert says more about who you'd rather play against than how you should play. Etc., etc., etc.

One more explanation:
Imagine the game was turned into a sequential one, where the opponent wrote down his answer, showed it to you, then you wrote down yours. What would you do? If you're playing to maximize your payoff, you would always defect. Because you'll always make more by defecting, whatever you write. Now, if it was sequential, how does your decision change?

[John Kilduff]

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Say the other player on the game show was a stranger to you until you met and shook hands before the game started. Would you dick him out of a million dollars just to have an extra chance (not even a certainty) of winning a hundred dollars? This is a case where an extra hundred is relatively meaningless in comparison to the goal of winning the million. If two friends can silently choose the copperative and highly profitable strategy for both of them, so can two strangers who think it through.

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This is mostly a payoff question. For me, getting $1 million and my friend or even a stranger getting $1 million is better for me than getting $1,000,100. So that might not even be a PD situation.

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I still think there must be something fundamentally flawed in the so-called expert strategy if it returns a far lower EV that would the strategy employed by two morons playing randomly. It does return a MUCH lower overall EV so how do you resolve this paradox? Game theory against ANY opponent is supposed to protect your EV not destroy it. Yet in this case it fails miserably against an equal game theorist.

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Well, this is why the PD is considered to be so important, and why a lot of the insights of game theory take people by surprise. The natural assumption is that behaving rationally should result in an optimal outcome. But sometimes, rationality can work against you.

But there's not a paradox. The expert strategy increases your EV by $100. Playing against an expert reduces your EV by $1 million. If you can "trade" your option of increasing your EV by defecting in exchange for your opponent's option, then it's a bargain. Signing an enforceable contract would do this. But if you can't, you're in trouble. Unless your opponent is altruistic and doesn't want to screw you over, he will if he's smart. Because his choice will not affect what you do.

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But thinking that way screws you also, and for enormous money, whenever you are against anyone thinking similarly. Game theory is supposed to protect your EV no matter who you are up against and regardless of the strategy they employ. I still don't see how two morons could (and would) outperform two game theory experts if the expert strategy is sound in this example, which leads me to think that the expert strategy is not considering everything it ought to be considering. An expert strategy employed by both players should not be dominated EV-wise by moronic or random strategy employed by both players, but it is. Furthermore why should a purely altruistic strategy outperform all other strategies when both parties employ it? I believe there is more than meets the eye to this example.

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But if you are up against a sample of 50% experts and 50% idiots, you are going to be getting 1 million half the time and 0 half the time. I'm going to be getting 1.0001 half the time and zero the other half. Why isn't my strategy better?

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I've only read segments of this conversation, but it's recognized that the expert strategy is to not defect, right? Given that, in your scenario against 50% experts and 50% idiots you will make $1 mil 75% of the time, not 50%. 50% from the experts and 25% more from the randomly choosing idiots. On the other hand, if all the "experts" are choosing to take your option and defect, you only make $1 mil 25% of the time vs. half the idiots. Given these two options for the results of the expert strategy, it should be pretty apparant which is the expert strategy.

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The one that produces a strictly better payoff every single time? You do not control your opponent's choice. Your opponent's choice is beyond you. You do not affect your opponent's choice in any way. Your opponent's choice is independent of your decision. The outcome of the game does not have to be symmetrical. The fact that a dummy does better playing against a dummy than an expert does against an expert says more about who you'd rather play against than how you should play. Etc., etc., etc.

One more explanation:
Imagine the game was turned into a sequential one, where the opponent wrote down his answer, showed it to you, then you wrote down yours. What would you do? If you're playing to maximize your payoff, you would always defect. Because you'll always make more by defecting, whatever you write. Now, if it was sequential, how does your decision change?

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What you're saying is true, but I think there is more to it than that.

Imagine a room full of idiots, and another room full of experts. The rooms play separately and all pairings take place within the same room. The participants in Room 1 are told that they are all morons, then they are paired and they proceed to play one game. The participants in Room 2 are told that they are all game theory experts, then they are paired and proceed to play one game. Now what should the game theory experts do after they are given that knowledge? Stubbornly adhere to their "expert strategy" whereby they will each earn $100, or implicitly collude so that everyone in the room can earn a million dollars instead of a hundred dollars?

[bobman0330]

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Imagine a room full of idiots, and another room full of experts. The rooms play separately and all pairings take place within the same room. The participants in Room 1 are told that they are all morons, then they are paired and they proceed to play one game. The participants in Room 2 are told that they are all game theory experts, then they are paired and proceed to play one game. Now what should the game theory experts do after they are given that knowledge? Stubbornly adhere to their "expert strategy" whereby they will each earn $100, or implicitly collude so that everyone in the room can earn a million dollars instead of a hundred dollars?


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Well, the game theory experts probably get together and say, "Let's beat the crap out of anyone who defects after this game show is over." If that's not feasible, then yes, they go ahead and defect. Why wouldn't they? Of course they'll stand up and harangue the others about how important it is to cooperate, but when it comes down to it, the profit-maximizing decision is to defect.

The intuition that the most rational decision is the one that leads to the best results when applied to a group is totally wrong.

[John Kilduff]

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Imagine a room full of idiots, and another room full of experts. The rooms play separately and all pairings take place within the same room. The participants in Room 1 are told that they are all morons, then they are paired and they proceed to play one game. The participants in Room 2 are told that they are all game theory experts, then they are paired and proceed to play one game. Now what should the game theory experts do after they are given that knowledge? Stubbornly adhere to their "expert strategy" whereby they will each earn $100, or implicitly collude so that everyone in the room can earn a million dollars instead of a hundred dollars?


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Well, the game theory experts probably get together and say, "Let's beat the crap out of anyone who defects after this game show is over." If that's not feasible, then yes, they go ahead and defect. Why wouldn't they? Of course they'll stand up and harangue the others about how important it is to cooperate, but when it comes down to it, the profit-maximizing decision is to defect.

The intuition that the most rational decision is the one that leads to the best results when applied to a group is totally wrong.

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Well I guess we're not going to agree on this. If the experts defected in that situation and everyone made $100 instead of $1 million, I would consider them all to be idiots. It's not all that much different than if you and your best friend are the two participants; you implicitly collude or cooperate so that you both do very, very well. If either of you try to screw the other over hugely you only stand to benefit slightly, and the other participant has the same power to do that to you. So for you guys to both make the big $ you both have to be willing to forgoe a tiny bit of potential extra. It's a bit of a leap of faith but you are risking a negligible amount by making it. If you and the other participant are both game theory experts and you both know this, how could you both be so foolish as to walk away with only $100 apiece? Wouldn't the fact that you both understand this mean that you should both grab the $1 million since it is so easy for you both to do so? The $1 million is there for the taking; it's so simple for you both to walk away $ 1 million richer.

I still don't understand how what you are recommending can truly be expert strategy if it so horribly underperforms every other strategy when a strategy faces itself in the other participant. Literally any other strategy, played against itself, would produce far higher returns for both participants. This leads me to suspect that there must be something wrong with the recommended expert strategy (when used in situations where payoffs are so disparate, and the primary opponent is not the other participant).

[bobman0330]

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I still don't understand how what you are recommending can truly be expert strategy if it so horribly underperforms every other strategy when a strategy faces itself in the other participant. Literally any other strategy, played against itself, would produce far higher returns for both participants. This leads me to suspect that there must be something wrong with the recommended expert strategy (when used in situations where payoffs are so disparate, and the primary opponent is not the other participant).


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Well, I'm not advocating defection as the best strategy that everyone should use. Whole branches of applied economics are devoted to identifying PD and similar situations in real life and exploring ways that the resulting inefficiencies can be avoided. The recognition that rational, self-interested people will often defect is just the first step towards finding ways to make sure they don't defect in the real-life situations they encounter.

In any case, I am absolutely confident when I tell you that in a situation like your game show example, a person interested in maximizing their own payoff should always defect. That doesn't mean you're incorrect to say there's "something wrong" with that strategy. It's insanely inefficient. The results for both participants are ghastly. But it is rational.

[vhawk01]

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Say the other player on the game show was a stranger to you until you met and shook hands before the game started. Would you dick him out of a million dollars just to have an extra chance (not even a certainty) of winning a hundred dollars? This is a case where an extra hundred is relatively meaningless in comparison to the goal of winning the million. If two friends can silently choose the copperative and highly profitable strategy for both of them, so can two strangers who think it through.

[/ QUOTE ]

This is mostly a payoff question. For me, getting $1 million and my friend or even a stranger getting $1 million is better for me than getting $1,000,100. So that might not even be a PD situation.

[ QUOTE ]
I still think there must be something fundamentally flawed in the so-called expert strategy if it returns a far lower EV that would the strategy employed by two morons playing randomly. It does return a MUCH lower overall EV so how do you resolve this paradox? Game theory against ANY opponent is supposed to protect your EV not destroy it. Yet in this case it fails miserably against an equal game theorist.

[/ QUOTE ]

Well, this is why the PD is considered to be so important, and why a lot of the insights of game theory take people by surprise. The natural assumption is that behaving rationally should result in an optimal outcome. But sometimes, rationality can work against you.

But there's not a paradox. The expert strategy increases your EV by $100. Playing against an expert reduces your EV by $1 million. If you can "trade" your option of increasing your EV by defecting in exchange for your opponent's option, then it's a bargain. Signing an enforceable contract would do this. But if you can't, you're in trouble. Unless your opponent is altruistic and doesn't want to screw you over, he will if he's smart. Because his choice will not affect what you do.

[/ QUOTE ]

But thinking that way screws you also, and for enormous money, whenever you are against anyone thinking similarly. Game theory is supposed to protect your EV no matter who you are up against and regardless of the strategy they employ. I still don't see how two morons could (and would) outperform two game theory experts if the expert strategy is sound in this example, which leads me to think that the expert strategy is not considering everything it ought to be considering. An expert strategy employed by both players should not be dominated EV-wise by moronic or random strategy employed by both players, but it is. Furthermore why should a purely altruistic strategy outperform all other strategies when both parties employ it? I believe there is more than meets the eye to this example.

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But if you are up against a sample of 50% experts and 50% idiots, you are going to be getting 1 million half the time and 0 half the time. I'm going to be getting 1.0001 half the time and zero the other half. Why isn't my strategy better?

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I've only read segments of this conversation, but it's recognized that the expert strategy is to not defect, right? Given that, in your scenario against 50% experts and 50% idiots you will make $1 mil 75% of the time, not 50%. 50% from the experts and 25% more from the randomly choosing idiots. On the other hand, if all the "experts" are choosing to take your option and defect, you only make $1 mil 25% of the time vs. half the idiots. Given these two options for the results of the expert strategy, it should be pretty apparant which is the expert strategy.

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The normal person doesn't pick randomly, they never defect.

[John Kilduff]

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I still don't understand how what you are recommending can truly be expert strategy if it so horribly underperforms every other strategy when a strategy faces itself in the other participant. Literally any other strategy, played against itself, would produce far higher returns for both participants. This leads me to suspect that there must be something wrong with the recommended expert strategy (when used in situations where payoffs are so disparate, and the primary opponent is not the other participant).


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Well, I'm not advocating defection as the best strategy that everyone should use. Whole branches of applied economics are devoted to identifying PD and similar situations in real life and exploring ways that the resulting inefficiencies can be avoided. The recognition that rational, self-interested people will often defect is just the first step towards finding ways to make sure they don't defect in the real-life situations they encounter.

In any case, I am absolutely confident when I tell you that in a situation like your game show example, a person interested in maximizing their own payoff should always defect. That doesn't mean you're incorrect to say there's "something wrong" with that strategy. It's insanely inefficient. The results for both participants are ghastly. But it is rational.

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I follow you on that, but the fact that it is so ghastly in terms of efficiency and overall EV, whereas colluding is so extremely profitable, leads me to think that two experts, knowing they are against an expert, should be able to "make a leap" of sorts in their thinking and recognize how great it is for them to each grab the $1 million through cooperation. If they both follow their prior expert strategy they are both screwed so they both must realize that strategy is a failure in this situation. So why should it be so hard to just jump to not defecting in this case?

[vhawk01]

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I still don't understand how what you are recommending can truly be expert strategy if it so horribly underperforms every other strategy when a strategy faces itself in the other participant. Literally any other strategy, played against itself, would produce far higher returns for both participants. This leads me to suspect that there must be something wrong with the recommended expert strategy (when used in situations where payoffs are so disparate, and the primary opponent is not the other participant).


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Well, I'm not advocating defection as the best strategy that everyone should use. Whole branches of applied economics are devoted to identifying PD and similar situations in real life and exploring ways that the resulting inefficiencies can be avoided. The recognition that rational, self-interested people will often defect is just the first step towards finding ways to make sure they don't defect in the real-life situations they encounter.

In any case, I am absolutely confident when I tell you that in a situation like your game show example, a person interested in maximizing their own payoff should always defect. That doesn't mean you're incorrect to say there's "something wrong" with that strategy. It's insanely inefficient. The results for both participants are ghastly. But it is rational.

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I follow you on that, but the fact that it is so ghastly in terms of efficiency and overall EV, whereas colluding is so extremely profitable, leads me to think that two experts, knowing they are against an expert, should be able to "make a leap" of sorts in their thinking and recognize how great it is for them to each grab the $1 million through cooperation. If they both follow their prior expert strategy they are both screwed so they both must realize that strategy is a failure in this situation. So why should it be so hard to just jump to not defecting in this case?

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Great first step. Now make the second one. Knowing what we now know, the expert will make the further deduction that, now that his opponent is not going to defect, it becomes +EV to defect.

[John Kilduff]

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I still don't understand how what you are recommending can truly be expert strategy if it so horribly underperforms every other strategy when a strategy faces itself in the other participant. Literally any other strategy, played against itself, would produce far higher returns for both participants. This leads me to suspect that there must be something wrong with the recommended expert strategy (when used in situations where payoffs are so disparate, and the primary opponent is not the other participant).


[/ QUOTE ]

Well, I'm not advocating defection as the best strategy that everyone should use. Whole branches of applied economics are devoted to identifying PD and similar situations in real life and exploring ways that the resulting inefficiencies can be avoided. The recognition that rational, self-interested people will often defect is just the first step towards finding ways to make sure they don't defect in the real-life situations they encounter.

In any case, I am absolutely confident when I tell you that in a situation like your game show example, a person interested in maximizing their own payoff should always defect. That doesn't mean you're incorrect to say there's "something wrong" with that strategy. It's insanely inefficient. The results for both participants are ghastly. But it is rational.

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I follow you on that, but the fact that it is so ghastly in terms of efficiency and overall EV, whereas colluding is so extremely profitable, leads me to think that two experts, knowing they are against an expert, should be able to "make a leap" of sorts in their thinking and recognize how great it is for them to each grab the $1 million through cooperation. If they both follow their prior expert strategy they are both screwed so they both must realize that strategy is a failure in this situation. So why should it be so hard to just jump to not defecting in this case?

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Great first step. Now make the second one. Knowing what we now know, the expert will make the further deduction that, now that his opponent is not going to defect, it becomes +EV to defect.

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You can take it to as many levels as you want and it flips each time. At the next level, it reverts to what I said. Assume both experts are capable of thinking to the same levels. $1 million is a helluva lot more than $100 and they would be foolish to not prioritize it accordingly.

[Butso]

economy is positive sum righty?

you seem billionaire friendly. the majority of the gains from their investments go to ibanks and themselves because most of the time they are transferrig ownership of existing shares with some other rich git and not actually generating increased investment in the company.