The Choice Dilemma

Since I just mentioned it in a comment for my entry two days ago, I will mention the book No One Makes You Shop at Wal-Mart: The Surprising Deceptions of Individual Choice, by Tom Slee. It’s an interesting book that applies game theory to simplified versions of real world problems. Although this is working at a very high level of abstraction compared to real life, the writing is lively enough, and the ideas are certainly interesting.

Game theory is usually discussed in terms of nuclear showdowns, the prisoner’s dilemma, and Axelrod’s theories of cooperation. Supposedly the U.S. nuclear strategists during the Cold War really did use game theory to plan what to do, inspired by studies at the Rand Institute. This was more or less comprehensible since there presumably could be only one nuclear war between the U.S. and the U.S.S.R., which simplified a number of issues of diplomacy. This topic is well covered in The Prisoners of Insecurity by Bruce Russett.

But today I want to write about Slee. Slee shows how using different payoffs will cause individuals making their own personal best choice to systematically lead to outcomes that nobody prefers. The Walmart example in the title suggests that people in a small town prefer to have a vibrant downtown, and they also prefer to pay less for goods. When one person shops at Walmart, which is cheaper, it has no effect on the downtown. However, when everybody in the town makes the same decision, the downtown stores have no customers, and close. Clearly nobody made people shop at Walmart. However, their individual choices led them to a situation they did not want.

Naturally this is vastly simplified, as indeed are all the examples in the book. I still found it interesting, as it shows in a very straightforward way that arguments like “it is always better to have more choice” really aren’t true. It is often better to have more choice, but it is not always better. And that is so even without getting into psychological considerations like choice paralysis.

There are several types of situations where it is actually better on average for people to surrender their freedom of choice. This is so even though for each individual it would be better to have choice. his is like the prisoner’s dilemma: you get a better overall result by choosing the worse individual result. Some people find this to be counterintuitive. It is, for example, the basic argument for a closed shop union. Since the game theory arguments are difficult to explain, and are overly abstract in any case, most people resort to arguments based on solidarity and designated enemies (i.e., sticking it to the boss).

I’m not sure whether game theory is all that useful. It helps clarifies issues, but it may often simply abstract too much. Still, I think everybody needs to have a good understanding of game theory, notably the prisoner’s dilemma and Axelrod’s studies on cooperation. And of course just one step up is Maynard Smith’s evolutionary stable strategy, which is akin to a Nash equilibrium. And also Hofstadter’s idea of superrationality, which unfortunately is probably too much rationality for human beings to actually have. So there are a lot of important ideas in this area, and I think we all need to understand them in order to see how to avoid conceptual traps. Perhaps it should be taught in high school math class. In fact, for all I know, it already is.