Nash Equilibria & Bribery

When everybody is bribing politicians for special exemptions, you can't gain anything by not bribing. This is called a Nash Equilibrium. It is a situation in which you have nothing to gain by acting differently from others. Every game has such a situation. Nash proved every game has at least one and won the Nobel. Not all Nash Equilibria are evil. There are good Nash equilibria and then there are bad Nash equilibria like the bribing scenario.

Interventionist governments are governments which believe that they can nudge an entire nation into a good Nash equilibrium. Until recently, many governments truly believed this was possible. They had supercomputers running complex econometric simulations to list the Nash equilibria, and the actions to be taken to nudge the nation into one.

Unfortunately MIT Professor, Constantinos Daskalakis proved that Nash equilibria for games with more than a few players will take more than the age of the universe to solve. Yet most modern economists (including Krugman) still have wet dreams of becoming Hari Seldon, the fictional social scientist in Isaac Asimov's Foundation series who nudged an entire galactic empire out of a 10000 year dark age.

Let us hope the Keynesians learn the mistake of their ways.

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