The ability for economics to eloquently and succinctly describe complex social interaction continues to amaze me. The Nash theorem describes a situation whereby the greatest economic benefit for society comes when all participates are aware of each other strategy and act accordingly and consistently. The minute individuals start acting in their own best interests, the greatest overall economic benefit is diminished.
In this post, which describes individuals acting in their own self interest in a driving context, illustrates this beautifully. The “A-ha” for me is how we, as a society, need to look edgewise at social problems. We are inundated with “free market” messages as a society, none more strong than our relationship with our automobiles. “Drive when you want, how you want, wherever you want” is the message which is reinforced by a deluge of advertisements by auto manufactures. To counter the free market message and in order to create greater economic benefit in the transportation system in the United States, perhaps it’s time to look at an alternate model.
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This would seem to contradict the foundation of capitalism, which I interpret to be that a collective good is achieved through pursuit of individual greed?
And please don’t ever make me register just to comment on your articles, man!
Ryan, good observation. In general a free-market economy works on the basis of each individual pursuing their own self interests. Cynics would say “greed”
The Nash equilibrium doesn’t counter this universally, just in some circumstances. A Gridlock is a perfect example. If every individual takes the route that is optimal to them, then everybody’s individual interest will not be maximized and the full economic value will not be realized. If however certain people choose to take a longer, but less congested route, the overall economic benefit is greater because the average commute time is less. A paradox when we think of a traditional free-market economy. Oh, and I took the restrictions off commenting.
But if everybody is taking the same route to the point that the route is now congested then it’s no longer in each individuals’ best interest, ay? It would seem that each individual should still be pursuing what’s to their best interest _within the context of the overall group dynamic_?
Probably splitting hairs here. It’s an interesting concept.