John Roemer on Kantian Equilibrium 2020
keeping them explicit may be important for agent implementations. The purpose of this paper is to contribute to the emerging literature on non-Nashian, morally inspired game theoretic concepts and, equally important, to bring its concerns and methods to the attention of the various communities represented in TARK. We are inspired by what we believe is one of the most intriguing classes of equilibrium concepts that can be seen as morally grounded: Kantian (a.k.a. Hofstadter) equilibria [54]. This notion emerged from three separate lines of research converging on an identical mathematical definition, but justifying it, however, from several very different perspectives: superrationality [38, 25], team reasoning [4], and Kantian optimization, respectively [54]. The common framework (most crisply developed for symmetric coordination games) only cons
しかし、それらを明示的にしておくことは、エージェントの実装にとって重要である。この論文の目的は、非梨園的で道徳的に触発されたゲーム理論的概念に関する新たな文献に貢献することであり、同様に重要なこととして、TARKに代表される様々なコミュニティにその関心と方法をもたらすことである。私たちは、道徳的に根拠のある均衡概念の中でも最も興味をそそられるクラスの一つに触発されています。Kantian (a.k.a. Hofstadter) equilibria [54]です。この概念は、同一の数学的定義に収束する3つの独立した研究ラインから生まれたものであるが、しかし、それを正当化するのは、それぞれ、超越性[38, 25]、チーム推論[4]、カント的最適化という、非常に異なる視点からである[54]。共通のフレームワーク（対称的なコーディネーションゲームのために最も明確に開発された）は、以下の点のみを考慮しています。
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I'm a neoclassical economist in
terms of general equilibrium theory and
what determines prices I think they're
determined by supply and demand and
preferences and technology so I disagree
with Marx about the falling rate of his
theory of the falling rate of profit
so for leftists I want to make
distinctions between what I'm what I
believe or what I think and what Marx
thought so it's not really wrong to call
me a Marxist but I did not to do that
among people that I'm interested in
having left-wing conversations too I
want to emphasize the important that
that for instance in economics I think
that using the neoclassical tools of
price theory and general equilibrium
theory extremely important for
understanding reality Romans has told me
that he's spent some time teaching you
the theory that I've developed about
optimization that I call content
equilibrium I'm going to spend their
various versions of this kind of
optimization I'm going to only talk
today about the simplest kind the
simplest version of it because it's the
clearest it's pedagogically the easiest
thing to try to teach to teach you
what's a symmetric game a symmetric game
is a game where all the players are
identical except for where they're
seated around the table think of it that
way they have the same preferences in
the same payoffs just subject to
changing the names of people so if you
think of a payoff matrix for a
two-by-two game like the prisoner's
dilemma or the stag hunt or the battle
of the sexes these are represented by
payoff matrices that are two by two
symmetric matrices on the diagonal.
players have exactly identical
preferences for which which profile
along the diagonal of the matrix they
would like and the off-diagonal elements
are are symmetric so as I said the your
you've studied a number of these I think
the prisoner's dilemma of the stag hunt
and so on now let me give an example of
a symmetric game in a production economy
that's a lot more complicated than a
two-by-two game suppose we have a bunch
of fishers on a lake and they all have
the same preferences over fish caught
and labour expended they want to catch
more fish and they want to work less
right so their utility is increasing in
fiction efficient decreasing in labor
very standard utility function but the
more people who fish on the lake the
harder it is to catch a fish because
they're they're only a finite number of
fish in the lake and they're congestion
problems if a lot of people are fishing
the probability that you'll catch a fish
goes down with lots of people who are
working on the lake so that's a monotone
decreasing game where the contributions
of people I'm going to call the strategy
of a person his contribution that is to
say how much he chooses to fish the
labor that he expends on the lake and my
payoff function is a decreasing function
of the if we're all have the same
preferences that's a perfectly symmetric
game that's all I have to say at the
moment
another example is voting if you think
it'd take a very simple view of voting
and everybody values the outcome in the
same
way then everybody who has your politics
who would like to who would like a
certain you know candidate a to win they
have the same preferences in a very
simple model they get a certain value
from the candidate winning and and their
whether the candidate wins or not
depends upon how many people come out to
vote with our politics that's a
symmetric game
another example is signing the
Declaration of Independence in the
United States and I'll talk about this
example more the politically active.
people who were fighting the British
were thinking of starting a war against
the British to get independence for the
United States we're called together to
discuss whether they should sign this
declaration of independence asserting
their asserting their freedom from the
British but more other people sign the
better the better I like the outcome
because the probability of winning
independence is going to depend upon the
the probabilities of everybody signing
so the payoff there are what's the
probability of winning independence with
however a certain risk involved in
signing the signing the Declaration so
that both a payoff and a positive
benefit from signing and a negative and
a positive cost also from signing the
probability that you'll get captured by
the British and thrown in in jail or or
hanged abstractly we can represent the
payoff function of a person in a
symmetric game as a function of the
contributions
II won through en think effort efore
effort some contribution it can be money
or labor or any kind of positive number
your contribution is a positive or zero
number.
and you get a payoff which is a
function of everybody's contribution now
in many symmetric games I mean that a
simple an example of a symmetric game
this is a completely general form these
functions can be different for different
people but suppose everybody can write
his or her payoff function as a function
of
his own contribution and then the
contributions of all the other people I
mean that's one way of writing this but
if they have the same function so my
fish pot depends upon how much labor I
expend and let's say the total labor of
everybody else and if we have the same
payoffs with respect to those two
arguments that would be an example of a
symmetric game now a game is monotone
increasing if every player's payoff is
increasing in the contributions of the
other players so I'll say it again I'm
not saying anything about how my payoff
changes with respect to my own
contribution but I am gonna say I'm
saying that in a monotone game my
utility or payoff has to be an
increasing function of what everybody
else contributes so what's an example of
that game of a monotone increasing game
it would be building a bridge producing
any kind of public good so each member
of the village has to chip in some money
to pay for the bridge and the better the
more that everybody else chips in the
bigger the bridge is gonna be and that's
good for me with my suspect.
my own
contribution it's a cost for me to
contribute so my utility may not be
increasing in my own contribution but
it's certainly increasing in the
contributions of others so building a
bridge production of any public good is
a monotone increasing game another
example is recycling so we each have to
decide whether to recycle there's a
slight cost to recycling nobody observes
whether you recycle or not you do it in
your own kitchen if I value the a clean
environment let's suppose everybody
values to clean an environment then my
payoff is an increasing function of how
much other people recycle so that's a
monotone decreasing game it may be
increasing or decreasing in my own
recycling I'm not so concerned about
that paying taxes and other idea another
example of a monotone increasing game
the more taxes other people pay the
better because that means we'll have
more good
provided by the by the government more
public goods more transfer payments and
so on so that's a monotone increasing
game now often people don't think about
that they only think about the cost of
their paying taxes themselves but you
really have to think about the fact that
you know you're paying taxes may be a
slight may be a cost to you may be
significant.
but you have to also
consider the fact that when everybody
else pays taxes that's very good for you
so there's a labor supply game with
taxation in which each workers utility
is an increasing function of the labor
supplies of other workers because the
more other workers contribute more they
work the more taxes they pay and hence
the greater will be the value of public
goods and transfer payments that I may
get signing the Declaration of
Independence was a very interesting
example Benjamin Franklin was the hero
of that meeting I don't know if you guys
have heard of Benjamin Franklin he was
an American founding father so to speak
and he gave a speech at that meeting he
saw people were hesitant about signing
the declaration that had been written
why because when you sign the
Declaration it's gonna be publicly
announced you sign it'll be in all the
newspapers and the British are gonna
maybe come after you they're gonna put
out a wanted poster for you so Franklin
gave a speech in which he said the
following he said if we don't hang
together then most assuredly we will
each hang separately so that expression
depends upon the fact that hanging
together in English means being solid
heuristic and working together so the
idea is and it's a cute phrase because
there's a pun on hang right
the second hanging in that statement
will all hang separately it said the
very different kind of hanging so he was
urging people to sign the Declaration of
Independence that was a monotone
increasing game because the more that
other people signed the better it is for
me because I value independence example
of amount
decreasing game is fishing on the lake
as I said when fish are scarce in the
lake the more that other people fish the
worse that is for me because it'll be
lower my probability of catching a fish
another example another example is
robber neck rubbernecking the accident
and the other Lane you're driving on the
on the highway there's an accident in
the other Lane everybody slows down to
look at the accident right and that
slows you down so that's a also a
monotone decreasing game the more that
others look at the accident that's their
contribution looking at the accident the
more that other people do that the worse
it is for you
emitting carbon in the atmosphere is the
biggest example today of a monotone
decreasing game I personally my country
I might the more carbon that my country
emits it has two effects it has some
some effect on the global climate but if
I'm a small country it might not be much
of an effect emitting carbon means I can
produce more at this point because
production requires carbon emissions as
long as we don't have completely non
fossil fuels
providing energy so but as far as other
people are emitting that's a negative
thing for me because it affects the
climate of everybody including me so the
contributions here are climate emissions
or carbon emissions monotone decreasing
game and I've said what a monotone
increasing game is now here's the let's
remember what a Nash equilibrium is a
Nash equilibrium is a profile of
contributions to the game such that no
player would desire to alter his
contribution given the contributions of
others and this idea is the foundation
of non cooperative game theory now
here's a very important fact that you
may not know Nash equilibria of monotone
games either monotone increasing
monotone decreasing it's true for both
kinds of monotone games are almost
always Pareto inefficient almost always
Pareto efficient now this fact has
the name has a name when the game is
strictly increasing what is that name
the name for the pareto and efficiency
of a monotone increasing game is the
free-rider problem it's got that popular
name in popular currents monotone
decreasing games also the Nash
equilibria are always Preto efficient
inefficient sorry Oh almost always
Pareto efficient videos did :
that's the tragedy of the Commons very
good so the tragedy of Commons is the
name the popular name for the Pareto and
efficiency of monotone decreasing games
and the free rider problem is the
popular name for Pareto and efficiency
in monotone increasing games those are
very very important problems which
afflict there they're often called
market failures if you have a market
economy okay now how would we model
cooperation instead of competition
between players so the Nash equilibrium
players are competing with each other
okay
one proposal is this a contribution
profile in which everybody contributes a
certain number of amount each star of a
game is a simple content equilibrium if
everybody if every player prefers this
profile to any other constant
contribution profile so you ask yourself
each person asks himself suppose we all
contribute the same thing what would I
like that thing to be if everybody
answers the same number that's a simple
content equilibrium I'm talking only
about symmetric games now because
everybody will have the same answer to
that question in a symmetric game
everybody has the same answer to that
question is the same amount contribution
that everybody would like everybody to
make so in words that got it in red here
he star is the contribution that each
would like all to make and the reason I
call that a simple content equilibrium
is that Immanuel Kant's famous ethical
position was called the categorical
imperative and it said a person should
take the action that he would will be
universalized
he should take the action he would like
to see universalized
so that's exactly what this is now the
the big theorem is that the simple
content equilibrium of any monotone game
is Pareto efficient so in other words if
people optimized in the content manner
if they ask themselves the Contin
question rather than the nash question
there would be no tragedy the commons
and there would be no free-rider
problems they would all vanish well that
would certainly be very nice that would
certainly solve a lot of Pareto
deficiencies in the real world if people
are Nash optimizing so why doesn't
everybody think this way well maybe
people do a lot of time but our non
cooperative game theory does not teach
us to look for this behavior why because
it models rationality as Nash
optimization but I say that's a very
narrow viewpoint Nash optimization is a
formal model of going it alone what why
I take the behavior of other people as
fixed I assume they're simply parameters
of my own decision problem I'm the only
one who's thinking of thinking about the
decision I simply assume other people
are fixed that's going it alone whereas
content optimization is a formal model
of cooperation
or solid heuristic behavior let's look
at the prisoner's dilemma so here's the
payoff matrix of the prisoner's dilemma
the row player can play either C or D
and the common player can play either C
or D and if we play CC they both get one
unit of utility if row plays C and
column gets Steve and roguettes - two
units
column gets three if they both defect
they get 0-0 the unique Nash equilibrium
of this game is zero zero but notice
it's Pareto dominated by cc
however CC is not a Nash equilibrium
why because suppose wrote plays CC and
column thinks well I can either take
this column or this column if I play C I
get 1 but if I play D I get 3 so if if
row player plays the first row column is
going to play the second column what
about if row player plays the second row
well then columns choice is between
again this or this but 0 is greater than
minus 2 so again column will play D
since this is a symmetric matrix the
same argument holds for row so this is
actually something that's a stronger
than a Nash equilibrium it's called a
dominant strategy equilibrium ok no
matter what the other fellow does the
best strategy for me is d so Nash
players are caught here what is what a
Content players do they simply say if we
were both to play the same thing what
would I prefer what I prefer we both
play C or what I prefer we both play D
well I'd prefer we both clacey because
I'll get a utility of 1 which is bigger
than 0 and column will reason the same
way so if they ask that question what is
the strategy I'd like both of us to play
they'll agree this that's the simple
content equilibrium and as you see it's
Pareto efficient
it can't be dominated by any of these
other any of these other choices why
doesn't everybody do this why in the
prisoner's dilemma doesn't everybody
they just cooperate and play cc because
row what happens if row plays C then
column if he doesn't want to cooperate
can do better by playing D because 3 is
better than one is bigger than 1 and
then rogue says well if he's gonna do
that I'm gonna get screwed I'm gonna get
minus 2 but if I play D if you place T
I'll get 0 which is bigger than minus 2
so that's how if you don't trust
the other player to cooperate then
that'll be you'll you'll decide not to
be a Content player so that's the key
thing
ro must trust column to cooperate to
make cooperation a good choice for him
that's the key problem is there enough
trust among the players of the game that
they will agree not to play nash against
other players but to cooperate with
other players suppose we feel solidarity
with other people we have an experience
of acting in concert to solve problems
perhaps I think you and I are very
similar we grew up in the same culture
my reason whatever I end up deciding to
do with the prisoner's dilemma you're
gonna come to the same conclusion
therefore I need only ask on the main
diagonal of the payoff matrix what
profile do I prefer well I prefer CC to
DD I know you'll come to the same
conclusion so I play C and you simply
reason that way too and you play C so
that's how a common culture can make it
possible for people to trust each other
and end up better off than they would be
in the Nash equilibrium here are some
examples I've given you this already
recycling voting and paying taxes I gave
you those three examples now let me do a
little economic example for you with
taxation we have a set of identical
workers all are earning the same wage
each has a preferences modeled by a
utility function represented by utility
function you over consumption and labor
a worker's net income with taxation is 1
minus T times the wage times his labor
think of this as the real wage so this
is the amount of the good that there's
one good that he can buy with his labor
earnings but with taxation each worker
also receives what's called the demo
grant
they receive one end of the total tax
revenues back as a as a check in the
mail from the from the Internal Revenue
Service so this is total income in the
society it's a total wage bill this is
the taxes paid on by those workers and
each person gets back one end of it so
the utility of the worker is a function
of his consumption which is the first
argument here
that's his after-tax income plus his
share of the Democrat Al assist means
the sum of all the else and then of
course the second argument is his labor
supply so I've just written that again
up here now how does a nash player
decide upon his labor supply well he
balances his utility from the take-home
income against the disutility of Labor
so what he does is I'm gonna do a little
calculus here he think he says what is
the L well there should be there's an L
missing here
so what the worker does is he has his
take-home income and then he has his
share of the demo grant and then this is
his labor argument if he takes if he
holds the other labor contributions
fixed and then he chooses the L that
maximizes his utility the L wan you take
the derivative of this with respect to
the first argument times the derivative
of the first argument with respect to L
1 which is just this remember there
should be an L 1 here and then plus the
only place that out 1 appears is in the
first argument here so when he takes to
the root of this with respect to L wanna
gets T over n times W and then plus the
derivative of U with respect to L 1
that's just YouTube and you can rewrite
that in this way notice that the sum of
these two things is essentially just
equal to 1 minus T over W suppose an is
a million and we can just ignore this
term it's going to be very close to zero
so the consequence of these of this
first-order condition
is that the worker sets what's called
his marginal rate of substitution equals
to 1 minus T times W but Pareto
efficiency requires that you set the
marginal rate of substitution equal to
your wage not your after-tax wage and
the result so this is not Pareto
efficient nice optimization with
taxation is not Pareto efficient and the
fact that this is smaller than this is
called the deadweight loss of Taxation
now what is the content do the content
says what's the L I would like all of us
to contribute well then my utility would
be this would be my after-tax wage now
everybody's contributing the same L so
the sum of the elves will just be the
sum of the Oh I will just be NL and here
I have an L and if you take the
derivative of this with respect to L
notice what you get here the derivative
of this first argument with respect to L
is 1 minus TW plus TW the ends cancel
out and this is just L so you get that
but what is the sum of these two things
its W so we get the formula which is the
condition for Pareto efficiency so what
this shows is if workers were optimizing
in the content manner then you'd get
Pareto efficiency at any tax rate that's
hard to believe any tax rate even a tax
rate of 1 all that happens when you
change the tax rate is you change the
distribution of income but you don't
hurt efficiency so the content solution
is Pareto efficient it solves the
deadweight loss of Taxation well the
deadweight loss of Taxation is just
another name for the free rider problem
see here when people Nash optimize in
the labor supply game they're not taking
account of the positive externality of
other people's labor for their own
consumption so what happens just to use
this externality language
content optimization internalizes the
positive externality of income taxation
now what if players have different
preferences well all of this generalizes
in a fairly sensible way to utility
functions that are different across
people the content question becomes more
difficult it becomes more complicated so
I'm not gonna go into that here I think
you've covered that with Romans I think
he's given you some examples now today
the biggest negative externality is
global warming created by greenhouse gas
emissions there are about 200 countries
each country would be better off if all
the others reduce their emissions so
it's just like the fishing game it's a
tragedy of the Commons so this is a
monotone decreasing game among
heterogeneous players because people
have different different GDPs have
different relationship of carbon
emissions to their own consumption in
the different countries and so on it's
no longer a symmetric game the Nash
equilibrium leads to huge prey to an
efficiency if we're essentially at a
kind of a Nash equilibrium now because
there's not much cooperation going on if
this continues climate problems are
gonna massively increase we're gonna
have Wars when people in Bangladesh try
to move to India because they're because
their country is flooding there'll be
millions or billions of live loss due to
climate change but the content
equilibrium is Pareto efficient so it
would be massively important for people
to learn to play that to play that
content equilibrium I view the annual
international meetings what are called
the the conferences of the parties as an
attempt to create solidarity and Trust
that are needed to reach the content
solution so let's think of Donald Trump
he's the perfect example of a nash
player he wants to dissolve all
cooperative ventures in which the u.s.
is involved his proto
was belligerently non-cooperative think
of his slogan America first because of
his optimization protocol the world is
now in the most dangerous place it's
been since World War two learning to
cooperate is now a matter of life and
death for billions of people economic
theory can help economists should teach
their students that Nash equilibrium is
not the theory of rationality
cooperation is another kind of
rationality having a way to model it
will teach us to see cooperation as much
more prevalent than we've been taught to
believe thank you I would like to hear
from you if you think that what you've
heard of Mexican current policies and
socialism in general can be consistent
with kansian equilibrium okay so that's
a very good question very complicated
question I've actually written a long
paper which is called what can socialism
be in the 21st century and it applies
content equilibrium to discussing
different kinds of property relations
that we could have which would be
socialists the main thing we should be
doing now is improving the lives of the
disadvantaged in society most people are
poor due to no fault of their own and
most people who were rich are also rich
due to that the fact that they had very
good luck luck and in the families they
were born into it particular if you're
born into a well-off family a highly
educated family this values education
and can give you a lot of resources
probability is our gonna do pretty well
in life if you're born to an uneducated
family people who are very poor who
don't understand the value of education
you're probably not going to do very
well in life so I think that injustice
is one of the main things we should care
about my view is there are three pillars
on which any economic system stands one
is a set of institutions and property
relations the second is of behavioral
ethos that is to say a theory of how
people should make decisions and the
third is a distributive ethic that is to
say a a moral view of how resources
should be distributed an ethical view so
under capitalism property relations are
what you know firms are privately owned
by individuals corporations and families
and people sell resources on the labor
market or on all markets capital market
labor market and so on commodity markets
the behavioral ethos is going it alone
do the best you can given your own
resources and the luck that you were
born with do the best you can
don't worry particularly about other
people other than your family so that's
going it alone and that's modeled by
Nash equilibrium Nash equilibrium is a
formalization of the deceive your
thoughts of capitalism and the
distributive ethic of capitalism is it's
all right for you to get whatever you
can get as long as you don't break the
law now what about socialism the
property relations of socialism there
can be many kinds but they're not gonna
be they don't they don't necessarily
have to be let's put it that way
private ownership of firms firms can be
owned collectively by groups of people
they can be owned by the workers who
contribute labor they can even be owned
by the investors also who contribute
investment but there won't be a stock
market in that model for buying becoming
an owner of a firm the only way you'll
get a share of the income of the firm is
by contributing something to it
labor or investment so that's the those
are the property relations the
distributive the behavioral ethos I say
is cooperation rather than going alone
the behavioral ethos is cooperation and
that's mob
by Content equilibrium by content
optimization and finally the
distributive ethic is well equality of
opportunity
its massive equality of deep equality of
opportunity which means that we try to
compensate people for bad luck that they
have mainly in the birth lottery by
having institutions that chiefly
education and redistribution which will
insure people against the bad luck of
being born the birth lottery so very
briefly what I do is I integrate the
behavioral ethos into the theory of
socialism and I contrast that with
capitalism and the big story is that you
get you will you solve all these Pareto
inefficiencies that exist under
capitalism because of free-rider
problems and tragedies of the comments
so it's basically just a further
articulation of what I've talked about
today how would the taxation problem
change if agents had different incomes
so if you use linear taxation but people
have different wages because some people
are more skilled than others then you
can still get the theorem that you get
Pareto efficiency regardless of the tax
rate if people content optimized but you
have to use what I call additive content
optimization you don't have a
homogeneous society again you don't have
a symmetric gang you have an asymmetric
game and they're basically two kinds of
content optimization you can use in an
asymmetric game to get Pareto efficiency
one is multiplicative content
optimization the other is additive so in
the taxation problem if people optimize
in the additive content manner you get
prade efficiency independent of the tax
rate now what does this require in a
society it requires that people think
solid heuristically that they're acting
in concert with other people
doesn't actually require you be
altruistic doesn't you still evaluate
the outcomes from your own viewpoint
terms of your own utility but you think
of acting in concert with other people
if there are way to cooperating
something where people think really
different in the sense of some people
see it as problem other people don't
okay here's a it's a good question
here's the here's the way that you have
to think to solve the climate change
problem so suppose that we have a
proposal which is an amount of emissions
from every country in the world or every
region of the world say say you have 15
regions in the world and suppose the
proposal is on the is on the bargaining
table which proposes how much each
region should be allowed to emit in
carbon a multiplicative content
equilibrium has the property that nobody
no country or no region would like to
rescale that vector of emissions as to
say nobody would like that you can't say
oh I want to cut my emissions I want to
increase my emissions by 10% you can't
say that you can only propose to
increase everybody's emissions by 10% or
you could propose to decrease
everybody's emissions by 10% or increase
everybody's emissions by 4% whatever but
the only acceptable proposals are to
rescale the whole vector by multiplying
it by a constant if nobody wants to
rescale the vector that's been proposed
that's what I call a multiplicative
content equilibrium and if you find such
a such a vector of emissions which you
can always calculate if you know all the
technologies of the countries and so on
it's a complicated calculation but you
can calculate that if if nobody know
region wants to rescale that vector it's
pretty efficient
which means it's really about as as good
as we can do right it'll in particular
we will avoid huge climate increases in
temperature because that's going to be
bad for everybody
so that's the way that you can't in
optimize their and that takes account of
the fact that people have different
preferences so some countries will get
to emit more than others but nobody will
want to rescale the whole bit if content
equilibrium is supposed to make everyone
to take East our action but given that
it's like intertemporal problem if our
grandparents or the previous generation
already didn't take the East our action
does it still hold yeah making the
problem a problem for every generation
makes it a much more complicated problem
but suppose you say the citizens of
every country compare care about their
descendants they compare about the
future right so their utility function
does not only include their own personal
utility but the utility of their family
going down into the future of their
descendants so then the content
equilibrium but they have to make this
decision today about how much to emit in
the next 10 years to actually do the
details of the intergenerational problem
is complicated but the general principle
is still there the general principle is
that there will be a vector which nobody
will want to alter rescale and that
vector will bring about Pareto
efficiency in the sense that you can't
possibly improve every country's utility
but now the utility is not just the
utility of the present generation it's
some welfare function of utility of the
present generation and all their
descendants
if there are already differences in
Ingham I just keep thinking of this
solution of this period or optimal
solution that they teaches where one
individual has everything and the other
one has nothing I guess Canton behavior
is not enough what you're saying is
Preto efficiency is not the be-all in
the end all that's correct we have to be
worried about equity as well as
efficiency so here's the here's one
answer to that question if you have a
completely symmetric game a homogeneous
society then there's no question that
the Pareto equal if the content
equilibrium is going to Pareto dominate
the Nash equilibrium it'll make
everything will not only be efficient
but it'll make everybody better off and
that will hold as long as people are
fairly close to being heterogeneous but
the more homogeneous the more
heterogeneity you introduce in the
population the less likely it is that
everybody will be made better off in the
content equilibrium the content
equilibrium will be Pareto efficient but
it might make some people worse off in
the games that we actually consider in
real life you won't have this terrible
solution where one person gets
everything but I can't guarantee that
everybody will be medic better off from
the content equilibrium than them but
I've done simulations showing that in
standard sort of tax models almost
everybody will be better off as long as
tax rates aren't really close to one if
tax rates get really close to one and
the rich will be worse off than they
were in the Nash equilibrium so
typically what happens in real economic
problems is that the very richest people
will be hurt by content equilibrium but
the core but the benefit is you'll have
massive improvements in efficiency so as
to say most people will be made much
better off the rich will never want to
lose money so direct cooperative
behavior would not be enough to
redistribute income right maybe
like in the tax problem if you set a tax
rate of 95% that'll make the very very
rich worse off but the poor will be
massively better off than they were
before in fact the bottom 95% will be
much better off so I've got simulations
of these examples which show what
happens with taxation and with
redistribution of wealth but the
distribution of wealth we have now and
in the kind of capitalism we have today
in most countries including both Mexico
and the United States is so terribly
terribly unequal that if we introduce
high taxation we will with content
optimization get Pareto efficiency but
the very very rich will be worse off
than they are now they won't be worse
off than the poor they'll be they'll
still be very rich but they'll be worse
off I'm a little sceptic about the trust
mechanisms you talk about the culture
being the trust factor there but what if
they're two individuals or the two
players cannot find a common ground
through which they can build a trust
relationship if the common factor isn't
that obvious like culture then how can
we trust that the other person will want
to get to the content equilibrium that's
right that's the big problem and
heterogeneity makes it difficult to
build trust but let me give you an
example of what's happened in the 20th
century in terms of cooperative behavior
if you look at the most highly developed
countries in the world let's say the
OECD countries on average the government
takes about between 30 and 50 percent of
the national income in taxes and it
spends that money on public goods and
redistribution of through transfer
payments
that's a huge form of cooperation the
each country is pooling between a third
and a half of its total income to be
used for redistribution or for public
goods in the Scandinavian countries and
in the northern European countries it's
about one-half about fifty percent of
national income is redistributed through
taxation and invested in public goods
that's a huge form of cooperation that
wasn't true in the nineteenth century
because it only came about with income
taxation which began use in most
countries in the early 20th century so
you have to see that societies have made
huge progress in being solid heuristic
to the extent that they've decided to
pool a lot of their income in that way
now how did that happen it happened
through democracy it happened through
the extension of the franchise so that
ordinary working-class people could vote
and when that happened then people
eventually voted to have a lot of
redistribution it also happened because
of various catastrophes that occurred in
the 20th century the Great Depression in
the 1930s and the to end the second
world war people came back from the
Second World War and they decided they
were gonna have a more solid heuristic
society than earlier and they voted for
to form welfare states and to increase
taxation so in the model you could
include things like democracy that make
Hitler Janey did not be like the limit
that faith at the mobile phases that's
right that's right I mean people have to
recognize that although they have a lot
of differences between them they also
have a lot of similarities that's the
important thing
it's worth if you can visit a
Scandinavian country Sweden or Denmark
or Norway or Finland I mean which is a
Nordic country you'll see that the
society is much more cooperative and
solid heuristic than any other country
in the world
they really have a huge degree of
solidarity among their among their
people and the reason that that happened
was that they were fairly heterogeneous
with respect to religion race language
culture and it was relatively easy for
them to be solid heuristic now they have
a lot of people who have immigrated to
those countries they're no longer as
ethnically homogeneous as they were
before but they've still maintained this
solid heuristic economic policies do you
think the current crisis will help
people realize that we are all in the
same boat and we should be more
cooperative.
I can't make any confident predictions
about what will happen very very hard to
predict. I mean I thought after the
financial crisis in 2008 that people
would learn that they have to be solid
heuristic and they would pass universal
health insurance but they didn't because
the Republicans succeeded in convincing
a lot of people that national health
insurance would be socialism and that's
a bad thing so I you know I I can't
predict what's gonna happen I mean I'm
sorry but I think there's no guarantee
that we're gonna get to a better world
out of this crisis I very much folk we
will and a lot of people are talking
about that but it's not clear it's not
necessary and it will happen it seems to
me..
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