In the afternoon of your life you tend to appreciate the opportunities blown up in your youth, as a part of growing up. In my youth, I blew up many opportunities. These are now sunk costs. In spring 2011, I was making the best of an opportunity for the first time. My daughter, Annapurna, was five then. She asked what I was doing. My response, “Maa, I'm doing Game Theory.” Annapurna asked, “What is Game Theory, Baba?” The math behind Game Theory may be complex, but the intuition is very simple. I told her a story.
A mother returns home every day with a cake. Mummy divides the cake into two equal pieces and gives it to her two children. Both kids believe that Mummy gave the sibling a larger piece. One day, the mother brings the cake and gives the cutting knife to the elder child. She asks the elder child to cut the cake, but the younger child will decide which piece to choose.
My daughter got it right. The solution to the game: the cake will be cut into two equal pieces. This is Game Theory. My decision depends on what you do. Your decision depends on what I do. Sometimes we play together; sometimes we play on our own.
Seventy years ago, at Princeton, an economist of Austrian descent, Oskar Morgenstern approached the mathematical wizard of Hungarian descent, John Von Neumann. Princeton in those days was 'the' global centre of mathematics and theoretical physics. Einstein, Von Neumann and Nash were just three of the largest fish swimming in a very big pond. In 1944 Von Neumann and Morgenstern launched The Theory of Games and Economic Behaviour. It gave birth to Game Theory and laid the foundation to see social science as an interaction between its characters where the decisions of the characters depend on each other.
Initially, Game Theory analysed games that were played only once and where people make decisions on their own, not in groups. For this, the power of this Beautiful Math eluded economists and social scientists. In societies, we usually play the same game with the same person or group more than once. Our results depend on the results of the decisions others take. For instance, if we are polite to the same person or group most of the time, they reciprocate with polite behaviour. This harmony leads to peace and stability. Otherwise, there is tension that can lead to conflict. Periods of peace (stability) and periods of conflict (tension) is how societies and social interactions move over time. For instance, your relationship with your best friend is never always rosy. Neither is it always sour. It's a mixture of both. Similarly, peace doesn't last for too long, just as much as conflict doesn't last for too long. Societies move along this see-saw of peace and conflict. This is the basis of social interaction that economic theory, sociology, anthropology, political science and other branches of social sciences analyse in their own way.
Even after seventy years since The Theory of Games and Economic Behaviour and twenty years since its first Nobel (in 1994 to John Harsanyi, John Nash and Reinhard Selten), Game Theory remains in the wilderness. Very few economics departments in Bangladesh have a separate Game Theory course. It is taught as a separate chapter mainly in microeconomic theory. In other branches of social sciences and business studies, Game Theory almost doesn't exist.
Recently, I had the opportunity of meeting the first year economics students of the University of Barisal. While we discussed Game Theory, I advised them to make the best of the opportunities they get since they don't have a separate Game Theory course. Game Theory may not be 'the' tool, but it is a very powerful and Beautiful Math that can explain why people do what they do. If you can appreciate in your youth that blowing up opportunities is a part of growing up, you have grown up sooner than you were supposed to.
Asrar Chowdhury teaches economic theory and game theory in the classroom. Outside he listens to music and BBC Radio; follows Test Cricket; and plays the flute. He can be reached at: email@example.com