A PLANETARY PRISONER’S DILEMMA: GAME THEORY MEETS GLObAL WARMING
In 2005, the British government commissioned Sir Nicholas Stern, an economist at the London School of Economics, to lead a study on the economic challenges posed by climate change.[524] The Stern Review: The Economics of Climate Change (2006) illustrates the incorporation of rational choice theory into the analysis of the world’s most far-reaching and existential problem.
It demonstrates how the neoliberal orientation to individual choice and action has become accepted as conventional wisdom: “the problem of collective action in social contexts... is the Prisoner’s Dilemma writ large.”[525] The report’s main argument is that the costs that will be incurred if we avoid taking measures to protect the atmosphere from the unbounded release of carbon dioxide will far outweigh the costs required to make the changes necessary to rein in greenhouse gas emissions.Part VI, Chapter 21, of the report, “Framework for Understanding International Collective Action for Climate Change,” hones in on the game theoretic approach. Chapter 21 moves quickly from introducing game theory and the Prisoner’s Dilemma to specifying their relevance for studying collective action, public goods, and the tragedy of the commons. This keystone chapter of the Stern Review reflects the academic consensus regarding the implications of rational choice for studying collective action in its varying expressions.
Climate change presents a colossal challenge of collective action. Whereas everyone depends on the atmosphere to hospitably regulate climate, no appreciable causal impact results from any single individual’s dispersal of carbon dioxide into the atmosphere. The Stern Review first provides an overview of the state-of the-art economic analysis of collective action:
Economists seek to understand the incentives relevant to situations that require collective action, and have studied the institutional arrangements that can facilitate co-operation.
The study of collective action is concerned with understanding how to overcome the market failures that lead to the under-provision of public goods where individuals or countries face an incentive to free ride on the actions of others.[526]Economists view the failure of markets to provide solutions to social dilemmas in the form of public goods as “market failures.” An inhabitable climate is considered to be an under-provisioned public good because each individual contributes to releasing carbon dioxide into the atmosphere to promote personal goals while other actors absorb the cost. A market failure means that an allocation of resources could be altered so that at least one individual is better off and no individual is worse off. Noncooperative game theory explains how even in a mutual-best-reply equilibrium achieved through individuals’ rational choices, a suboptimal and hence inefficient outcome may arise, specifically when there are scarce resources that all actors alike seek as in the PD model of market exchange.
The Stern Review definitively recommends game theory as the leading approach to studying collective action of all kinds, including global warming. It resoundingly approves of Thomas Schelling’s acceptance of the centrality of strategic rationality and Prisoner’s Dilemma logic as the foundation of neoliberal political economy:
Game theory has been used to explore the underlying structure of some common problems. The Prisoner’s Dilemma Game has been used to explore a wide range of situations in which individuals act rationally in the light of their own situation and yet find themselves faced with an outcome that leaves them worse off than if they were able to co-operate.[527]
The report outlines five core findings from game theoretic Prisoner’s Dilemma analysis of how to achieve cooperation: (1) incentives can be changed, (2) reciprocity can be invoked in repeating interactions, (3) transparency and monitoring can be introduced to enhance compliance mechanisms, (4) persistent pressure to renegotiate agreements will be applied if they seem out of line with an actor’s coercive bargaining power, and (5) reputation may establish credible commitment.[528]
The authors of the review come to an apt conclusion about the prospects for successful cooperation obtained by following the dictates of rational choice.
They emphasize that standard rational choice assumes narrow self-interest and rules out procedural rationality and other-regarding normativity: “Though extremely useful as a starting point for analysing international collective action, most of these theories tend to focus only on self-interest very narrowly defined, and so leave out perspectives on responsibility and ethical standards - for example, the views on what constitutes human decency that are expressed by the public.”[529] However, rather than adopt a more encompassing framework, the authors recommend policies that are strictly in line with the standard operationalization of strategic rationality. Game theory typically works from the assumption of narrowly construed individualistic maximization and, by design, forbids normative consideration of the processes by which ends are realized. Ethical considerations are thus dismissed as irrelevant. Moreover, joint maximization consistent with team reasoning is also rendered impracticable. The Stern Review is brilliant for recognizing the limitations of game theory but nonetheless accepts that the rational choice policy prescriptions “are always imperative to implement correctly.”[530] As is standard throughout the mainstream game theoretic approach, although theorists acknowledge strategic rationality’s restricted vision of human conduct, they still tend to tacitly endorse its simplifying assumptions and address its limitations in an ad hoc, provisional fashion.[531] [532] In the end, the Stern Review exemplifies and perpetuates the characteristic neoliberal wisdom and centerpiece of the rational choice assessment that the necessary failure of collective action is due to Prisoner’s Dilemma logic.11