Why Trump is a test case for tit-for-tat in foreign relations
Koichi Hamada cites the game theory concept of prisoner’s dilemma to highlight the mechanics of betrayal between nations, which a tit-for-tat approach may nullify. And even Donald Trump, with his classic defector’s attitude, may find cooperation works best
As with any human interaction, international relations, whether economic or political, is a combination of cooperation and competition. The “cooperation” part benefits all involved, whether by sustaining world peace or boosting growth and prosperity through free trade. The “competition” part creates serious risks, from economic impediments to war and environmental destruction. So why don’t countries cooperate more?
The answer comes down, in part, to the so-called prisoner’s dilemma. Countries may suspect that, by betraying their partners, they can obtain a better “deal” for themselves. Facing the temptation of duplicity, they may become concerned, or even suspicious, that their partners – facing the same temptation – are betraying them. As a result, they become even more tempted to betray their partners first.
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Game theory, which provides mathematical models of conflict and cooperation between rational decision-makers, has generally not offered much in the way of desirable strategies for overcoming this dilemma, let alone an optimal strategy for resolving actual conflicts. Yet, thanks to the University of Michigan’s Robert Axelrod, this may no longer be the case.
Axelrod held tournaments among major game theorists and political scientists to identify the most effective approach in a repeated game of prisoner’s dilemma. The winner – the strategy most likely to produce a cooperative outcome – was Anatol Rapoport’s tit-for-tat strategy.
According to this approach, a bilateral game should begin with cooperation: if the other player behaves cooperatively, so should you. Only if the other player defects – that is, begins to display non-cooperative behaviour – should you do the same.
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Of course, when the other player is cooperating, it might be tempting to defect, in order to increase your own pay-off and potentially even secure a windfall. But, according to the strategy, the other player would then also defect, creating losses that, whether immediately or over time, would offset whatever gains you had secured.
The tit-for-tat approach encourages positive and mutually beneficial behaviour. The question is whether it can work in the real world
By beginning with cooperation and penalising a player for defecting, the strategy encourages positive and mutually beneficial behaviour. The question is whether it can work in the real world.
With US President Donald Trump entering the fray of international relations with something of a defector’s attitude, perhaps now is the time to find out.
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Trump’s intuitive use of game theory is risky, because he is pursuing brinkmanship with actors that have shown zero interest in cooperation
History tells us just how easily defection in trade can backfire. In 1930, the US enacted the Smoot-Hawley Tariff, which raised import duties on more than 20,000 goods. Within three years, US imports plummeted by 66 per cent, while exports plunged as well, by 61 per cent. The rest of the world suffered too: from 1929 to 1934, global trade fell by two-thirds.
Fortunately, Trump has backed away from many of his more aggressive positions on trade. Most notably, far from labelling China a currency manipulator “on day one” of his administration, as he promised during the campaign, he has dropped the charge completely, asking why he should take that step, when China is helping with other challenges (such as the North Korea nuclear threat).
To be sure, Trump’s intuitive use of game theory is risky, because he is pursuing brinkmanship with actors that have shown zero interest in cooperation. Asian countries, in particular, are watching events unfold with bated breath. That is why the precise and informed execution of the strategy is so important.
Accommodating defectors’ aggressive behaviour will never bring peace. But establishing cooperation as the only viable option for the defectors might. In order to accomplish this, without putting anyone in jeopardy, the perception gap between Trump’s imagination and reality must be narrowed much further.
Koichi Hamada, professor emeritus of economics at Yale, is a special adviser to Japan’s prime minister. Copyright: Project Syndicate
