About game theory, free riders and climate change

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Have you ever heard about Game Theory, the Prisoner’s dilemma, or the Nash Equilibrium? Probably many of us, and –hopefully- the majority of the policy-makers around the world, studied this subject once. For me, the principle taught by this great subject is basically that if players of the game (namely policy-makers, CEOs, etc.) act in the interests of the group, they are better-off than if they acted in their interests alone (Nash equilibrium). But what happens if not all of those players act in the interests of the group? Then the ones who did, will presumably be worse-off than if they would’ve acted in their own interests. What happens at the end, is that trust is worth nothing, that everyone is paranoid, and no one cooperates, achieving an equilibrium –if at all- that it is for sure not optimal.

Does this sound familiar to you? I would dare to call this the history of international climate policy. Even though there are many nations, with completely different leaders, ideologies, and priorities, there is only one world. Now, if we look at the outcomes of the last Conference of the Parties (COP 17) in Durban, we can see that reaching a binding agreement on such a level is almost impossible (there must be a bit of hope, though), and that some of the most important countries –in terms of CO2 emissions and GDP – do not want to commit for the second five-year period for the Kyoto Protocol.

During some lectures at my University, many of our Professors asked us why some countries would then commit to pollute less, knowing that there are a few very fat free-riders out there, taking advantage of others’ efforts. You know why? Because it is necessary, and because at the end, it is better than nothing! A group starts acting, and probably (and under pressure of this group), others will follow.

 

6 thoughts on “About game theory, free riders and climate change

  1. Laura, interesting post! It’s so important to have trust amongst the international players, but how to build that trust?

    • Dear Caroline, thanks for your comment. Your question is quite challenging. I would expect that if one group (the bigger, the better) starts playing the game correctly (accepting the initial loses caused by cooperating in a non-cooperative environment), they will eventually gain the trust of the other players, and the latter will start joining the coalition.

      Let’s see how long it takes until a strong “Leading Group” appears, and until the other countries start to follow.

  2. Nice, Laura.

    Maybe there’s an alternative to spending the next decade trust-building? Buckminster Fuller said that to overturn an established system you don’t fight it, you make it irrelevant. I wonder whether that’s what’s happening: ‘big politics’ (including megabusiness) is making itself irrelevant. So how about changing the players? If the rest of us – civil society, local government, small business – can learn to trust each other, maybe we can achieve what the big boys are impotent to do?

    That’s where I’m putting my money – and my life. And who knows, if we show the way maybe even the big boys will finally get their act together??

    • Dear Marylin, thank you very much for your comment. I completely agree that we cannot just wait for great things to happen. The change must come from all of us. At the end, politicians are supposed to represent the voters. Change coming from each individual and from communities is fundamental. We are the ones consuming without thinking about the product life-cycle and supporting unsustainable companies. If all of us change our consumption patterns and avoid working (or buying) at unsustainable places, we would already be doing a lot. Of course, much more can be done! … like you do 🙂

  3. Thought provoking post Laura. If you had to choose a strong “Leading group”, which countries would you include in it ? If its a choice between countries with high CO2 emission rates and countries with projected increasing emission rates, where would you place more importance?

    • Hi Tanaka, your questions are not easy to answer, as you might already know… What about thinking from another perspective? I really like Marilyn’s approach. I don’t know who should be in that group, but I beleive that there must be a leading group which shows the others that cooperation and trust could be achieved…

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