The advantage of looking at various real life transactions from the perspective of the Prisoner’s Dilemma is that it lets you see how participants acted with rational common sense—or what seemed so at the time.
Standing in a basic, unstructured line is a condition where a person expects and ordinarily gets mutual cooperation: You trust that when other people come up they will stand in line behind you. Nevertheless, you watch, just to be sure they do. And the longer the line, the more important the goal, the greater the chance that some at the back of the line will be totally deprived of getting tickets (or whatever the goal is), the more you worry.
If someone does cut the line, they may be engaging in defector behavior—but not necessarily. If you see that they are rejoining their spouse or parent, or a bigger group that got in line before you did, or they are getting a ticket for a soon-leaving train, and you accept such behavior, that does not count as defection. The cutter is in fact cooperating and you stop worrying about them.
But if you can see no good reason, you decide the cutter is a defector and either you (and perhaps others) yell at them, “Go to the back,” or you fume quietly and wait for someone else to correct the situation. The line cutter has betrayed you and the rest of society, and you either want appropriate revenge, or you and the others standing in line are strongly temped to switch to mob anarchy instead of line-standing.
If at a particular location line cutting regularly makes patrons unhappy, management will often put up poles and ropes to make the line more structured, and perhaps deploy bouncers. As usual, precautions against defection add expense and reduce flexibility, but if they increase patrons’ net satisfaction on average, they’re worth it.
A simple as line-standing is, it can pick up a lot of emotion. An example that made TV news in 2011 was an attempted defection among spectators waiting to get into a riveting murder trial. The retaliation to the betrayal resulted in a fist fight. At least one TV report showed that this happened in spite of the line being protected with ropes and security personnel. As a result, a more complicated system was established.
Suppose that a growing company has an office copier. When the company is small, everyone fits on the first floor of one building and nothing much is thought about sharing a single copier.
When the company grows, rents the second floor of its building, and sends the salespeople up to the nice new space up there, some of them may grumble a bit about having to hoof down and up stairs to use the copier, but things are basically fine.
Then a consultant tells the boss, “We need more accountability.” Accounting declares the copier to be part of the Admin cost center and puts a clipboard next to the copier; everyone is supposed to log how many pages they copy when, and which department they belong to. There is significant grumbling.
When those who fill out the log notice that other people aren’t logging their use, the grumbling grows louder, until an Admin clerk picks up the duty of monitoring the copier to make sure everyone is logging properly. When, inevitably, that clerk alternately neglects the monitoring and their other duties, Accounting and Admin clash, stiff all-staff memos are sent out, and grumbling grows into an uproar.
Peace is restored when the Sales and Admin departments agree to share the cost of another copier and Accounting agrees to drop the log system. The company now has two copiers, each by itself capable of handling the entire staff’s needs. This proves convenient whenever one of the machines breaks down, but otherwise makes no economic sense. The company has wasted money.
Utilizing the Prisoner’s Dilemma perspective, what happened in this story?
In the beginning we had an environment that expected and got mutual cooperation: Everyone used the copier and fulfilled their minimal responsibilities—occasionally filling the paper tray, notifying Roger in Maintenance when the toner cartridge needed replacement (which was trickier), etc.
Accounting’s decision to require “accountability” created an environment that expected significant defection and guarded against it. The arrangement was better than the previous situation for catching abuse, such as someone using the copier for big personal projects, but greatly more uncomfortable and costly in time and annoyance for the staff—the log-fillers, the log-scoffers, and the harried Admin clerk.
That finally led to an unacceptable though intangible overhead expense being removed—protected mutual cooperation—and a full Double-Cooperator environment being restored, at the cost of an uneconomic tangible one-time expense (getting an extra copier).
In retrospect, the question for the boss was: Which kind of environment did he want for the company at that point in its development? Was it small and familiar enough that mutual cooperation would still work? Or was it getting big and diverse enough that defection (such as doing personal project copies) would become both a big expense and demoralizing? If the latter, then the controls would make economic sense, but those controls would also signal a significant change in company atmosphere: The company would be transitioning to protected Double-Cooperator.
And in a similar vein, was the extra capital investment in three copiers and the change to department-level accountability worth the improvement to employee morale, by restoring a Double-Cooperator feeling and increasing the convenience of the Sales and Marketing staff? In this case, even without seeing the (imaginary) balance sheets, we can assume that answer is yes.
Finally, it is important to be aware that advancing technology can change the playing field. In this case the copier salesperson can come in and say, “You’re having a problem with accountability? Let me show you a slick new solution!” And they will present the concept of copier key-cards.
By viewing the Copier Episode through the prism of the Prisoner’s Dilemma, we can predict the social ramifications of all these accountability questions more clearly.
In everyday life, falling in love and getting married is a good example of transitioning from the Double-Defector precautions of strangers to the Double-Cooperator relationship of husband and wife. In divorce, the situation reverses.
When divorce is simply a matter of splitting up property, it can go smoothly. But often there is powerful emotion involved, and often that emotion is feeling betrayed.
The Prisoner’s Dilemma perspective notes that this is a game-ending situation, which means it is strongly tempting to take cheap shots (see below) against the other party. If the other party perceives that as happening, then the divorce process rapidly slips into a mutual defection relation—a mutual revenge relation, actually. A lot of protections have to be put in place just to finish the process, which becomes ugly and messy and insanely uneconomic for everyone but the lawyers.
The way to avoid this is to be extra, extra careful not to engage in cheap shots signaling betrayal as the process is being worked through.
All the definitions of “cheap shot” on the Net stress that the victim of a cheap shot is defenseless. As you’ll see, that’s not required in my usage.
What I do mean by a cheap shot is not just that one person defects against another or others, but that s/he expects little or no bad consequences from doing so. If it’s cleverly done, the cheap-shotter can game the system so that the other person takes even more damage and feels a lot more disenfranchisement when s/he discovers what is happening.
I believe the term comes originally from boxing; a boxer taking a swing after the bell rang ending the round or hitting below the belt had taken a cheap shot at his opponent.
Here are typical examples:
There are more examples later in this book.
To be a little clearer on what is and isn’t a cheap shot, here is an example of something that at first glance looks like the cheap shot examples above, but isn’t the same.
Billy Bully injures Johnny Starr, the other team’s star player, with a flagrant foul, putting Johnny out of commission for the rest of the season. Publicly Billy stoically takes his own expected suspension; privately he also takes a big bag of money from his team coach for a job well done.
This scenario is not a cheap shot but gangsterism. The team-spirit attitude isn’t thinking about the sport as a whole, it’s tribal Us-vs-Them thinking, not Prisoner’s Dilemma thinking, that controls the situation. Billy and his team ignore deep damage to their team and the larger sport caused by loss of popularity with and (more important) respect from their fans.
Looking at value differences between Eastern and Western cultures through the prism of the Prisoner’s Dilemma, we find that the East tries to make Double-Cooperator transactions more secure while the West tries to make Double-Defector transactions more rewarding.
The basic premise in Confucian philosophy is that social relations are hierarchical and all should be modeled after good family relations: The emperor is father to his ministers, the minister is father to his people, the headman is father to the village—and of course men are fathers to their families. The community is well structured, people know their relations to each other well, and therefore can trust each other. Thus, most transactions are Double-Cooperator, expected to involve mutual cooperation and actually doing so. So it makes sense to research and practice ways to improve and preserve that situation.
This is also true of various semi-closed communities outside East Asia. An internationally famous example is the diamond-trading community in Amsterdam.
Locally famous are the Mormons of Utah. If two strangers meet in Utah, one of the early small talk questions Mormons ask is, “Are you a Mormon?” To a non-Mormon the question gets mildly annoying, especially when the non-Mormon notices that the answer makes a difference in how the Mormon acts. The Mormon is implicitly asking, “Can I start a Double-Cooperator relationship with you based on your being part of the Mormon religion and community?”
Many believe this is why Utah has become known as the affinity fraud capital of the country. Unlike being a third-generation Amsterdam diamond trader, it’s all too easy to seem to subscribe to Mormon values without actually doing so.
The challenge for Eastern thinking is dealing with defection, broadly defined as behaving in unexpected ways.
Some kinds of defection are beneficial to the community, for instance, developing a new art form or a new way to apply technology. But how do you weed out bad defection, such as crime, and keep good defection, such as beneficial innovation? Totalitarian systems choose a highly inefficient answer to the challenge: All defection is assumed bad until proven good to the satisfaction of the authorities.
Traditional Eastern systems have a different answer. They place a high value on a person “saving face” when things go wrong—well known in the West precisely because it’s not something Westerners give a high priority to worrying about. In Prisoner’s Dilemma terms, to save face is to avoid looking like a defector from the community’s value system. This is essential because a reputed defector cannot participate as an equal in a Double-Cooperator system.
“If men were angels, no government would be necessary,” said James Madison.
Modern Western thinking makes the opposite assumption: That man is base, steeped in sin (as Protestant preachers of Madison’s time would have told you), and so can’t be trusted. The default transaction in the West is Double-Defector.
Westerners regularly work on making such transactions more efficient.
The famous underpinning of modern Western success as a civilization is the Rule of Law, including the concept that everyone is equal under the eyes of the law. That facilitates Double-Defector transactions—there are no favorites, and everyone is protected.
The famous checks and balances of the US Constitution are also based on Double-Defector thinking, in that they try to keep a defector in government from becoming a tyrant and abusing power. (By slowing down and distributing important parts of decision making, the same checks and balances also help avoid Blunders caused by Panic thinking.)
The Bush Administration’s determination after the World Trade Center/9-11 event that the standard American legal system was not strong enough to handle terrorists was a big setback to Rule of Law. It was the poorest of the Bush/Cheney choices springing from the 9-11 crisis, even poorer than starting the Iraq War. Keeping terrorists outside of conventional courts continues to poison America’s legal efficiency at home and around the world.
I go into this in greater length below, but here’s a quick preview of how the American “Yes, I support Rule of Law, but…” cancer spreads damage:
When a crime is committed in either Eastern or Western culture, it does a lot of damage. As a rule of thumb, a crime costs the victim about a hundred times what the criminal gets away with in value to the criminal.
I know this from personal experience. I was visiting Istanbul, Turkey, in 2004 when I got attacked by pickpockets. It was a team effort, and as one person distracted me, another fished around in my left pants pocket and got my passport and my glasses. Fortunately my wallet was in a different pocket. The passport and glasses were valueless to them, but the cost to me of replacing them was about $400 and three days of phone calls and running around. So by standard math, the damage-to-victim/reward-to-thief ratio was infinite. No wonder people get so angry when they’re robbed!
In Western culture, where Double-Defector relations are the norm, people routinely do a lot to protect themselves from crime. We buy various forms of insurance as well as taking personal precautions. (The reason my wallet was not in my pants pocket was that I knew there was a chance it would be picked.) In Eastern cultures where Double-Cooperator relations are the norm there is less protection in place, so damage done by crime is greater and recovery is slower.
Let’s start with a riddle in two parts:
Part One …
Q: What do rent-controlled apartments, plywood after a hurricane hits, and elective surgery in the UK all have in common?
A: First, they are in limited supply. Second, the people of the community who want these things have decided they would rather wait a longer time to get them and not pay higher prices to get them sooner.
Part Two …
Q: What do tickets sold by scalpers, gasoline in the US, and supermarket foods have in common?
A: First, they are in limited and/or variable supply. Second, the people of the community who want these things have decided they would rather have shorter lines and “pay the going rate” for them.
Higher prices vs. longer lines is an economic tradeoff that all of us face every day, but many people don’t recognize that they—or others on their behalf—are making such a choice.
When a high price is offered that we haven’t agreed to trade for a shorter line, we give it the ugly name of price gouging.
One of the curious fallouts after America’s Gulf States were hit with spectacular hurricanes in the 2000s was the passage in some of them of anti-price-gouging laws.
After the disasters, some enterprising people had brought in construction supplies and offered them for sale at higher-than-normal prices. Rather than wait, some people bought the supplies. Others got very upset at the prices, so upset that they convinced their governments that doing something like that should be illegal.
I find this reaction to be odd … very odd. These laws took away a freedom, the freedom to have a shorter line. But the people who would exercise that freedom—those who had bought at higher prices and might expect to do so in the future—didn’t protest vigorously. They didn’t even whimper a little.
Let us explore that mystery.
Economics 101 teaches that when a particular good gets scarcer and demand doesn’t change, then the price for that good will rise. In the real world, that’s a half truth. The price of the good may not rise because a law prohibits sellers from charging more for it. But then something else happens: A line forms and purchasers have to wait a longer time to buy the good.
This is Economics 102—the “spend time or spend money” rule that is well recognized in business circles and is the root of the proverb, “Time is Money.”
Yet, there are many, many people who don’t recognize this relation. They see waiting in line as a “free” activity, rather than as preventing them from engaging in a more pleasurable and/or economically rewarding activity. And because they don’t see it as a tradeoff against spending more money, some of these people get upset when a seller offers goods at higher prices. The willing waiters feel that this is unfair to them because if someone buys the good, they have nothing left to wait for.
Oddly, those who buy at a higher price rarely seem to have the balancing emotional reaction of “I have a right as a consumer to buy a shorter wait!”
In particular, seats for entertainment events can be either dross or diamonds. For example, in 2007 Kevin Federline rap concert tickets became famous because they couldn’t be given away, while tickets to see teen-rocker Miley “Hanna Montana” Cyrus became famous because there were never enough.
As a result of such demand uncertainty, ticket reselling for entertainment events has long been a thriving business. Some people don’t like it, and in US English it has picked up the ugly nickname of “scalping”. Yet it thrives, because primary ticket sellers pick a price to offer the tickets for and stick to it, even though demand fluctuates widely from one event to the next, and over time for a given event. They think it would be bad for their reputations to auction tickets.
So if scalpers add value to the community by running the auctions required to match ticket prices against demand, why do so many people have a deep emotional dislike for scalpers, seeing them as parasites?
Because the person who is willing to pay more is seen as having cut to the front of the line, betraying (defecting against) community standards.
If it feels the same way to the person who pays more, that would explain why they don’t vigorously support their own action and allow anti-price-gouging laws to get passed. Or those anti-scalping laws that apply only within a certain distance from the ticket sales line at the event.
I suspect this difference in emotion about time and about money is the result of deeply different thinking patterns in humans being successful in different situations.
For a Neolithic Age hunter, particularly an ambush hunter, patience was a virtue. Doing nothing but being still while waiting for prey to come within range wasn’t merely free, it was an economically gainful activity.
But for a Neolithic gatherer, time busily foraging wasn’t semi-abstract money, it was literal food.
Both Neolithic gatherers and Neolithic ambush hunters did well, and humans evolved brains that think both ways. We can see standing in line as the fair way to treat a scarce resource, and/or as a waste of time when money can avoid it.
The fable of the grasshopper and the ant can’t be proved to have been told around the fires in Stone Age caves, but it can be seen as reflecting the difference from the gatherers’ point of view. The grasshopper, a gatherer who doesn’t bother to store any of his gatherings against the coming winter, could symbolize the hunter who cannot store his harvest of game—at least until jerky is invented. When game becomes scarce, he must depend upon the cooperation of the antlike gatherer.
For Agricultural Man and Industrial Man, the scale tipped decisively in favor of “time is money”. But even the first of these environments dates back only about ten thousand years, and 500 generations of humans isn’t long on the evolutionary scale.
This evolution of two successful but contradictory ways of thinking is why in the Information Age we now have issues when dealing with situations that trade time for money. The argument that time is money may win hands down on the logical level, but some people can still feel time is free in some circumstances, and when they do they call waiting “being fair”.
Capitalists tend to be time-is-money-ists. They like quick, efficient resolution of problems, and auctions can efficiently find a good’s right price … for most economically relevant values of “right”.
Socialists may agree. But for them, equal access to the productivity of the community—“to each according to his need”—is more important than efficiency, and willingness to wait in line is probably a good measure of perceived need. They are philosophically uncomfortable with allowing an uncertain but probably higher price, perhaps beyond the means of the proletariat.
And socialists certainly will not grieve if the opportunity cost per minute is greater for higher-paid line-standers.