Sunday, August 1, 2021

Game theory says we overuse common resources


Published in the July edition of Games and Economic Behavior is a research article entitled “Fragility of the commons under prospect-theoretic risk attitudes” by Ashish R Hota, Siddharth Garg, and Shreyas Sundaram of Purdue University.

The authors show how people are naturally predisposed to overuse “common-pool resources” like transportation systems and fisheries, even if it means the system will fail or society as a whole will lose out.

The hypothesis is supported by the Nash equilibrium, which is part of game theory and predicts how players of a game will react if neither player knows what the other will do. The classic example of the Nash equilibrium is the prisoner’s dilemma:

You and your partner in crime have been arrested, and the police are interviewing you in separate rooms. You made a pact with your partner not to rat each other out if you’re ever arrested, but in separate rooms, police tell each of you that your partner has already provided evidence that could be used to indict you for the crimes and send you to prison if you’re convicted.

Keep in mind, you don’t know or assume that the police are telling you the truth. But you know one thing: If you don’t rat your friend out in the event that he has already ratted you out, you’ll suffer a more severe punishment for the crime, since you’ll be the only one charged.

The “prisoner’s dilemma” happens as players weigh the risks and payoffs from ratting out their partner. If they don’t rat out their partner but were ratted out by their partner, it’s bad for them, since they’ll go down as the lone actor in the crime.

Police know every individual will tend to do what is selfishly in their own best interest, even if that means risking the overall group benefit—and thereby reducing their own gains.

“We are surrounded by large-scale complex systems, and as engineers we are trying to figure out how to design systems to be more robust and secure,” said Mr Sundaram, an assistant professor in Purdue University’s School of Electrical and Computer Engineering. “One aspect would be how you could engineer systems so that the incentives for people to use them are aligned with perhaps what’s best for society. As a government, what sorts of things can you do to make sure people use systems in a responsible manner?”

Schools that compete against each other are, in some ways, in the same boat as the two people in police custody after committing a crime. They don’t know what moves other schools are going to make, although they aren’t totally isolated from each other. Competition—in PARCC test scores, though, which were released Tuesday for all public schools in Maryland—tends to move them toward a Nash equilibrium, despite how detrimental that position is for our overall educational community in the games we play.

Another example would be the charter school movement. Parents do what they think is best for their own children, which might very well be sending them to a charter school. But this takes the student and the money out of the traditional public school and reduces the quality of our public school system overall. I don’t know why we continue to push charter schools and use them in an irresponsible manner (for-profit) while we ignore sound research about how we behave when we’re all trying to get the best possible outcome.

The trick is creating incentives in our schools so that they aren’t competing for resources: student enrollment, money, good teachers. We reject the selfish behavior shown by schools that spin statistics. This behavior is detrimental to our children’s development.

Voxitatis is developing a database to look up and compare scores on the PARCC tests for both Illinois and Maryland, and we’ll publish it, most likely, within a week. Articles in newspapers and on TV stations that compare schools’ performance to other schools or to last year’s results are meaningless. They interfere with school operations in the sense that reporting scores like a horse race can result in a sense of competition among different players. That could lead to a Nash equilibrium, even though such an outcome benefits no one.

For example, an article in Bethesda Magazine, not the most education-rich of publications, says schools in Montgomery County, Maryland, “have to bring PARCC data into the classroom” and “may need to change the way they teach subjects.” The author quotes Janet Wilson, an associate superintendent for the biggest school district in Maryland.

“We get information back … from PARCC and use that to analyze our curriculum against that and make adjustments,” she was quoted as saying. Scores are up a little in Montgomery County, but “even though it’s a 2 percent gain, it’s moving in a positive direction,” she said. “I would say it means that we are moving in the right direction, and we have every desire to close that opportunity gap for our students.”

She won’t do it by introducing a horse race or any other aspect of competition. We must apply what we know of human nature and any other research in game theory we can learn about. If we want scores—or, more importantly, learning—to go up, we work to our overall detriment by instigating competition between subgroups in how we spin these meaningless and invalid statistics. Doing so fails us every time, and these failures have been on the published scientific record for several decades (John Nash died in May 2015).

Paul Katula
Paul Katula is the executive editor of the Voxitatis Research Foundation, which publishes this blog. For more information, see the About page.

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