Game Theory Take On - Washington’s Rogue Elephants | Hacker News Reader

Game Theory Take On - Washington’s Rogue Elephants

nytimes.com

60 pointsasnyder57 comments

The article's pretty short on analyzing what game best models the current debates. My vote would be for the ultimatum game, but that ignores the element of time in their decisions. Time is a huge factor in this game, so it probably isn't even that great of a model.

Wikipedia has a pretty comprehensive list here: http://en.wikipedia.org/wiki/List_of_games_in_game_theory

The author makes several comparisons with the game of chicken

http://en.wikipedia.org/wiki/Game_of_chicken

Giving oponents a reasonable percentage of irrational behaviour is actually a normal thing in game theory. Game theory doesn't stop to apply because someone on this planet acts irrational to gain an advantage. I like to think more in terms of finding the rationale behind the "irrational behaviour". That the truthfully out of mind elephant acts this way because the cost of a failure really doesn't matter to him at that moment. If u don't care about the losses, maximising the win percantage actually is quite rational. And in a game of chicken the best chances of winning are of course if you really don't stop, ever. The only reason why most people stop before the crash, is that they worry about the cost of a failure might be bigger to them then the possible win of a success.

That's, by definition, not irrational behavior.

It would be better called "nothing to loose behavior", but of course in the real world that's pretty rare, and certainly does not apply to the politicians in the current situation.

Agreed, if they threaten something like a nuclear bombing. Let's think about another situation: At a family party there is one piece of cake left and 2 people want to eat it. Both people recognise the interest of the other one and try to offer it to the other one, but both now don't try to take it in fear of losing face. In some way you can also apply a chicken game situation here. Or another example: 2 gay men sit in a bar, see each other and consider the other one attractive. They look at each other and smile at each other. But who should make the first step? (Had to take 2 equal partners, with woman and man it is too likely that culture expects the man to act) In both situation neither the price nor the cost is that high, that relatively(!), extrem actions (like being actively impolite, or just sit there and wait in the bar until the other one makes the move) can and should be expected. I'm not into politics that much, that I could give meaningful examples there, but I think according to the situation and threats each party makes, it happens more often then you might think with just these high stakes situations in mind.

I thought this was an interesting article as it's more analysis than it is political commentary, something the hacker news community could enjoy from an analytical perspective.

This article is a pseduo-analytical wrapper around an extremely partisian stance: My political opponents are irrational idiots (literally mad elephants), having purposely made themselves incapable of rational cooperation. Therefore, I will take the high road as the morally upright and rational person I am.

The key thing about the game of chicken is that it is symmetric. And, in fact, the current budget debate is more-or-less so: both the president and the house republicans must agree; it either rejects the deal, there is a terrible consequence for everyone. (It's possible, of course, to argue that one side will come out worse, to break the symmetry, but the article makes no attempt to justify such a claim.) Declaring one side crazy and the other side righteous is hardly analysis.

Tea Party-leaning legislators have constituents who actually want them to shut down the Federal Government, so they have less to lose than those legislators beholden to sane voters.

The problem is, once your opponent in this game of chicken has visibly guzzled a fifth of bourbon and torn off his steering wheel, it's too late for you to do the same.

You are falling into the same trap. You see them wanting to shut down the goverment and decided they are insane.

They have perfectly sane reasons for wanting that - you just don't agree. And if you are unable to see that, then the fault lies with you, not with them.

Whether they're sane by some objective standard is irrelevant to this understanding of the underlying game theory. If someone handcuffs himself to you on the edge of a cliff and starts dancing a jig, he has the upper hand in negotiations, for pretty much anything he wants to negotiate.

You are still stuck.

You think they are doing things just to annoy you, or for no reason at all.

They are choosing things because they think it's the best thing to do.

But you seem incapable of realizing that someone may actually have a different opinion about something. You seem to think that if they have a different opinion it must mean that they are not rational.

They have perfectly sane reasons for wanting that

Name one.

To force the country to prioritize its spending and stop creating higher taxes on future generations. Deficit spending is taxation without representation, and should be eliminated.

Both parties are guilty of deficit spending (republicans more so) and new representatives were elected in 2010 to reduce spending.

Why are you asking me? Go ask them.

And whatever answer they give you, if you think that it's not a sane reason then the problem lies with you, not with them.

It's hard, but eventually you will learn to accept that other people have different opinions about things - even things that seem totally obvious to you.

I am asking you because you made the assertion.

Now you're asking me to go prove your assertions for you. I wasn't the one who made the claim.

It's hard, but eventually you will learn to accept that other people have different opinions about things - even things that seem totally obvious to you.

This is unnecessary. I do accept that other people have different opinions. What I don't accept is that they are inherently sane, which is the assertion you made. I simply asked you to support the claim that there are sane reasons with an example of such a reason.

> I do accept that other people have different opinions.

You say that and yet you can't think of even a single sane reason to want to shut down the government?

The situation isn't symmetric - the President will just invoke the 14th Amendment and bump up the debt ceiling next week if needs be. It's just that the Democrats seem to have decided to use this issue to demonstrate to the voting public just how unreasonable the Republicans have become in negotiations, by trying to negotiate when they don't even need to. Looking at recent polling results, the strategy seems to be working.

There's one big flaw in any plan to unilaterally increase the debt ceiling: it's not really clear whether that would be legal. You could make a reasonable argument on either side, and the final arbiter would be the Supreme Court, which is not particularly liberal these days. Nobody who wants a safe investment would buy the new treasury debt issued under those conditions without a significant risk premium above what they are paying now; I certainly wouldn't touch it with a 10 foot pole without a couple of hundred basis points of spread over the current yield. Not something the government would want to lock itself into for 2 years to avoid skipping some Social Security payments.

It's true that it isn't cut and dried whether or not the 14th can be invoked, which means that any attempt to use the 14th would likely end up in the Supreme Court. It is also true that the Supreme Court is not terribly liberal at the moment. But, fortunately enough for the US and the world, raising the debt ceiling is not a 'liberal' cause - it's something that G.W. Bush, G. Bush, R. Reagan and others from the conservative side of politics have seen fit to do. It is not likely (in my opinion) that the Supreme Court would follow Tea Party rhetoric against the advice of every economics advisor out there. In other words, I think that ending up in the Supreme Court is pretty much a win for anyone that thinks the debt ceiling needs to be raised...

To me, it's not even clear that it would end up with a decision in the Supreme Court given the political questions doctrine and the fact that's hard to imagine who would have standing. I think that the worst that would happen is long impeachment proceedings.

Issuing SS payments does not affect the federal debt subject to the debt ceiling. This means that SS is not in any danger from the debt ceiling.

http://online.wsj.com/article/SB1000142405311190355490457645...

Can you explain how Obama could invoke the 14th? After reading it, it doesn't seem to mention any executive powers (IANAL, I am curious though).

not legal.. it specifically refers to rebellion and insurrection and costs associated with putting down a rebellion or insurrection which by no stretch can apply to the war on terror..hence Obama rejecting its use.

IANAL, but the language does not limit the guarantee of the public debt only to putting down rebellion or insurrection - those are specific cases that are included, and I would hazard to guess that the language was put in the clause to contrast with the next part which explicitly voids any debt the US has towards anyone in rebellion/insurrection against the US.

EDIT: Here's the text of section 4 of the amendment in it's entirety - "Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void."

"Literally" mad elephants? ;) http://xkcd.com/725/

"Literally" referred to the fact that the OP literally called them mad elephants, not that they literally are .

I was just reminded of that xkcd comic and thought I would share. I wasn't actually trying to start an argument about the usage of the term "literally" (which is why I'm not continuing it!). In any case, I would have thought the comic portrays the person doing the correcting in a crazy enough light to show disdain for the practice...

This is an interesting article, but the game isn't chicken, what is happening in Washington is a dance of distraction. Most of the damage to the economy is already done, the public is just waiting for the "leadership" to finally drive the rotting ship into the iceberg. No matter how much the rational and historically educated among us yell "The emperor has no clothes", we are powerless against the interests that have dominated over the last thirty years.

You've written this in such a way that any reader will either think he or she is familiar with the your ideas or have no clue what your ideas are. Could you elaborate?

Good article - up until the point where he claims the Republicans are the "rogue elephants". To the other side the Democrats are the "rogue elephants", and it's interesting that the author appears incapable of seeing that.

A truly irrational person is a rare thing. If you are unable to explain the actions of your opponent in any other way then the fault lies within you, not them.

Have you paid attention to what's going on at all? Republicans are rejecting a plan that's significantly to the right of their initial demands. And they're currently pushing for a bill that reduces the deficit less than the democrats' plan, with the twist that the limit has to be reauthorized multiple times before the next election. Just to insure that congress doesn't accomplish anything and the markets are uncertain going into election 2012.

Splitting the difference is a major problem here. The Republicans are incentivized to be as crazy as possible because attitudes like yours, and most editorial boards will just split the difference assuming 2 valid points of view. So the crazier you are, the further the split will be in your direction.

For those interested, summaries and comparisons of the plans currently in the House and Senate, the positions of Obama and Boehner when negotiations broke down on the 22nd, two bipartisan senate plans, and the earlier House Republican plan are all viewable at http://www.nytimes.com/interactive/2011/07/22/us/politics/20...

I think he is calling Republicans "rogue elephants" because they have split into dysfunctional elements is reasonable. When significant portions of their party are not willing to make any deal they lose their majority standing in the house and are forced to act as a minority party in both the house and senate.

PS: A basic functional strategy would be to block any Democratic bill in the senate and then pass a poison pill in the house which they can then present as the "only option to avoid default". Instead their only option is compromising in the Senate so they can get enough Dem support in the House to pass something. However, they are still acting like they can pass something in the House and blocking legislation in the Senate.

They did pass a bill, the debt ceiling is tied to a balanced budget amendment.

Which is frankly ridiculous grandstanding. If nothing else, a quick look at exactly how the deficit developed will reveal the hollowness of current pleas from some wings of the Republican party for a balanced budget amendment:

http://www.nytimes.com/2011/07/24/opinion/sunday/24sun4.html

caps on future spending and a balanced budget amendment is ridiculous grandstanding?

keep in mind the group that passed this bill were not in the congress 2 years ago, let alone 10. Also keep in mind the republican leadership that was in office the last 10 years did not endorse or get behind the cut, cap, balance bill either. T

Yes, it is.

* Boehner has been in the House since 1991 and has been in a senior position for most of the time since 1995, so he has his part in the history.

* If a balanced budget amendment was such a major priority, there was plenty of time to pass it when President Bush was in office and raising the debt limit. This isn't about the principle but the opponent, amply illustrated by the reams of incoherent, provably incorrect slurs against President Obama from Tea Party activists.

* The proposals currently being insisted upon produce less savings than Democratic proposals but with the means to re-ignite this debate during next year's election campaign; their motive isn't a fiscally responsible solution but an attempt to inflict political damage.

* While it's true that Tea Party supporters weren't in congress 2 years ago, they're not there now in substantial numbers either. To argue that a small group of inexperienced politicians backing an incredibly economically naive platform should be allowed to have the final say is absurd; they are being used as cover by the Republican leadership.

* If the priority was truly balancing the finances then the targets would be different. Bush's top-end tax cuts were a huge contributor to the deficit yet are being treated as sacrosanct. US military spending is 5 times the nearest rival (China) and approximately equal to the next 20 biggest spenders; this is ego and corporate welfare, and a far better source of savings than the soft targets proposed. Equally if the healthcare bill combined with Medicare and Medicaid was too expensive in its current form (somewhat surprising given the CBO forecast savings rather than increased costs from its introduction) then the correct answer is not repeal but extension - single payer, whenever examined, has been cheaper. http://www.pnhp.org/facts/single_payer_system_cost.php?page=...

So, I repeat myself. What the Republican leadership is proposing, including a balanced budget amendment, is not fiscally responsible measures to try to regain control of American government finances. It is ridiculous grandstanding to try and inflict political damage on their opponent by deliberate misrepresentation of the both the history and the facts.

Rand Paul's balanced budget in 5 years proposal: http://blogs.abcnews.com/thenote/2011/03/sen-paul-unveils-5-...

Your assessment of the republican leadership is correct, your assessment of the tea party caucus is off. It will probably play out the same as the 94 republican revolution, where the leadership takes over the movement and resumes deficit spending.

The goal is not spending or balanced budget per se, the goal is to maximize freedom and minimize the impact of the federal government on the individual citizen. So single payer health care is not optimal if you value freedom of choice. If your only criteria is cost, then we should just make all doctors and nurses slaves, because that is cheap.

(Why the new account to reply to me?)

'Freedom' is one of those 'motherhood and apple pie' terms that gets thrown about, but with very little rigour behind its use. Freedom to what, exactly? The alleged virtuous benefits for freedom of the current healthcare situation (as you brought up that one in particular) are somewhat illusory to my mind when the current limited offering is costing the taxpayer more - financial freedom would be enhanced, not diminished, by a more comprehensive offering, while providing improved service. There's no realistic proposal to limit one's choice to pay for alternative treatment if one prefers, but the current system is, frankly, provably a waste of money.

Yeah, it's ridiculous grandstanding because they don't have any plan or budget that actually gets there.

Chanting "cut cap and balance" repeatedly without any substance behind it is the definition of grandstanding.

I think his point is not that Republican policies are irrational, but that Obama is assuming the Republicans are ultimately willing to compromise to avoid default, and actually they're not.

I assume the author is making reference to the fact that the elephant is the Republican mascot: http://media.nowpublic.net/images/3d/5/3d5c7422c1c56dc249ed9...

Of course, it doesn't justify the claim, but it might trick people into believing it if they aren't paying attention.

To the other side the South Koreans/Kulaks/Jews/Blacks are the "evil" ones, and it's interesting that no one is as wise as I, the keeper of the Great Scales of Balance, who knows the truth: if there are two sides, they are equally good and bad.

The regime in East Germany was truly worse than in West Germany. And they knew that, even though official propaganda said something different.

(The contrast between South Korea and North Korea is, of course, even more striking. But I did not grow up in Korea.)

So how could he stop playing the game? Simply give up on raising the debt ceiling?

That doesn't seem like it would give a good outcome.

Unfortunately for the president, he is the one who has the final move if the debt ceiling isn't raised: he will either have to shut down non-essential government services and skip making some entitlement payments, or he will have to skip an interest/principal payment on the sovereign debt. This puts him in a weakened position relative to the Republicans (many of whom would probably consider skipped entitlement payments as more of a feature than a bug), which probably explains why they are pushing it down to the wire. In addition, the Democrats clearly wish to avoid having another debt ceiling showdown next year during the presidential election, which further weakens their position. It appears that the Republicans are angling for a short-term benefit of spending cuts with a minimal amount of revenue increases in addition to a medium-term benefit of getting to play this game again next year when they have an even larger advantage, so they are presenting this unpalatable option along with the even more unpleasant option of major spending cuts with no revenue increases over a longer period. Attempting to view this from the position of a neutral observer, it actually appears very well played on their part.

Congress already passed a bill instructing the Treasury to pay interest on debt, social security, wages of troops in that order. If the President does not follow that law, it's probably an impeachable offense.

The result won't be a default or social security checks not getting sent out, but a normal 1994-style government shutdown.

I know that such a bill was proposed, but was it ever passed? I agree that a shutdown similar to the one that happened in '95-'96 (http://en.wikipedia.org/wiki/United_States_federal_governmen...) will definitely occur if the ceiling is not raised immediately, but Republicans could conceivably double down their bets and refuse to raise the ceiling until entitlements are affected, which would certainly happen before the president made a decision to curtail current military activities. Does anybody have a reference to the rate at which outflows currently exceed tax revenues to give us an idea of when that point might be reached?

It would be terrible in the short run, but it would be vastly better in the long run. Presently, the US is on the unsustainable trajectory of acquiring debt until it defaults. Not raising the debt ceiling would immediately end this problem. Is it better to have a smaller catastrophe now, or a bigger catastrophe later?

Eh, the thought is that revenues vary wildly with the state of the economy. If increased spending and/or tax cuts now can stimulate the economy, we'll have lots more money to pay down the debt next year, or so the theory goes.

Personally, I think it's pretty irritating that governments seems to think that the current revenue levels will continue forward no matter where we are in the business cycle. In the past, this has been most noticeable in state governments. Every time there is a boom, California goes and spends all the increased tax revenue and commits to spending it in the future. Of course, this is a problem when the economic boom ends.

I'm just suggesting that we tackle the debt problem when the economy is good. Doing so while unemployment is still 10+% is, I think, risking another downturn, which is going to make paying off the debt even harder.

> It would be terrible in the short run, but it would be vastly better in the long run. Presently, the US is on the unsustainable trajectory of acquiring debt until it defaults.

Some of us have been saying this ever since Bear&Stearns went down, in the spring of 2008, that you cannot just prop up an non-solvent bank/country/whatever.

At that time all the "bright" economists were saying things like "it's only a liquidity problem, we just need to grease the system with a little more printed money and things will be just fine" (which they finally did, after Lehman's collapse), while now they're saying things like "let's just raise the debt ceiling this one more time to allow the FED to print more money and things will be just fine". Well, if things have turned up to be "just fine" first time around how did we "evolve" from the level of "Wall-Street bank going into default" to "the first military power of the Earth possibly going into default" ? To this question the bright economists don't have any answer, apart from stupid things like "we should have printed more money".

Eventually there will be a good deal of money printing involved in solving this problem, especially given the paucity of options available for fixed-income investors with a low appetite for risk (what, would you prefer the Euro or the Yen?), but it will never be the case that the US will have a solvency problem in the same way as Bear Stearns or Greece because they can always print their way out of it with inflation as the downside. Inflation is still very tame relative to the period between 1972 and 1982, and it is very unlikely that we will see contributory mistakes of the magnitude of imposing price controls and eliminating the link to gold during the upcoming period.

Is inflation tame according to the Fed calculations which ignore expenses that matter to people like oil, or according to meaningful calculations? Because it sure seems to me that the prices I pay are rising pretty quickly. Quickly enough that I can notice it. A cup of coffee that cost $1.95 a couple of years ago now costs $2.30. And I'm not earning any more money than I was then, so I can feel the difference.

Including oil in inflation costs distorts the picture though.

The standard response to inflation is to suppress demand within the economy to make price rises unsupportable and dampen things down. When the inflation is due to factors that are external to the economy though, such as a global spike in commodity prices, this measure is largely ineffectual; the dampening effect on global market prices is insignificant compared to the dampening effect on the internal economy. You only end up suppressing your own economic growth to your own cost while seeing a small at best effect on inflation in the commodity that was causing the inflation for which you're trying to control.

Oil prices are rising for perfectly sensible global reasons, get used to it. This is causing inflation you can't control and which the economy can't afford to compensate for; your standard of living will drop. If you want to avoid this, work harder to earn more; it's the only way out.

CPI is computed by the Department of Labor. There is both a CPI and a separate "core CPI" index that attempts to exclude energy costs.

That's a gross mischaracterisation of the situation.

The banking collapse was significantly due to a combination of over-weak market regulation causing a real estate market bubble and outright fraud at credit ratings agencies - I can think of no other term for securitising sub-prime loans into super-prime derivatives.

So, there's a major financial market crash / correction (significantly exacerbated by a very well known liquidity shortage due to institutions having to rebuild reserves and up risk factors), leading to a generalised collapse in revenues, government included.

If government is to 'live within its means' at such a time as some suggest then the spending cuts need to be utterly, utterly vicious, no way round it - cuts have to not just cover the reduction in revenues but also the increase in welfare payments, or would you rather have the suddenly poor and unemployed either starving or rioting? For the largest single player in the economy to make cuts on that scale at a time when the economy is already severely stressed, you bet the result would snowball and put the economy into an even more severe tailspin.

Which is why President Bush authorised the stimulus packages you're complaining about, which cost more on his short watch than Obama's rather longer period and yet which has still cost less than two other measures for which we should remember President Bush - top-end tax cuts and a war in Iraq over weapons that didn't exist and was pushed for after a terrorist attack by an opponent of the Iraqi regime.

All of which is on top of the limit being raised several times by Presidents Bush 1 and 2 and President Reagan, all of whom incurred significant debts. President Clinton, on the other hand, left a rising surplus which Bush took no time at all in reversing.

This whole debacle is idiotic and intellectually bankrupt pre-election grandstanding by the Republican leadership, who deserve severe electoral punishment for this absurdity.

> The president is best advised to do the same: declare that the other side has foregone all pretense at rational legitimacy, and simply proceed to govern as best he can for the good of the country.

This is seriously how the article ends? How does the author suggest he do that, considering one house is controlled by these "rogue elephants". That's the important question. Professor Captain Obvious hasn't really contributed anything new by labeling the republicans as a much of crazy animals...

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