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Game Theory and the Global Economy

Who doesn’t like games? Board games, card games, video games, games of chance, games of leisure, games of sport, mind melding, what have you – if you can think it up, then there is a name for the game unless it is an entirely new game of course. Games are like theories; all you have to do is repackage an old theory and people will eat it up like candy. If you don’t believe the veracity of that previous statement, either recall the machinations of Dr. John Gray when he took gender relations seemingly by storm with a revolutionary new theory in Men are from Mars, Women are from Venus, or the recently crowned Princess of Positive Thinking Rhonda Byrne who with her bestseller The Secret has seemingly given new life to the world of self-help. Let’s get down to brass tacks and talk theory, and what better theory to talk about when it comes to games than game theory? Game theory attempts to capture behavior in situations involving strategy. It’s been touted as a way to scientifically and mathematically predict behavior. Traditionally, applications of game theory sought equilibria in strategic situations, that is, condition criteria in which individuals are most likely not to change their behavior when presented with a choice to make. Game theory has grown from this initial application to zero sum games where one individual does better at the expense of another. It now is its very own branch of applied mathematics, and is employed quite extensively in an interdisciplinary fashion across fields such as the social sciences (in particular, economics), biology, engineering, political science, computer science (most notably, in the study of artificial intelligence), and philosophy.

In the world of political and military strategy, game theory is most often employed to explain conflicts between countries. In fact, a pair of economists won the Nobel Prize in 2005 for their work in game theory as applied to economic conflicts such as price and trade wars as well as why certain communities are more successful than others in the management of resources that are commonly pooled. The pair who won the Prize did know of each other, but never collaborated, yet their research conducted individually was based on the work of the 1994 winners of the same prize. Nonetheless it has the possibility of producing a well spring of information and theorizing about merchant guilds and organized crime and how they form and maintain levels of credibility and influence. International sociopolitical climates and relations have a huge impact on global economies which can ooze or retract capital at every turn. Gross national products might stay relatively stable, but stock markets are epitomes of flakiness. You never know what is going to be king from day to day or even moment to moment -- one moment gold is king, the next moment it’s soy that’s the winner, the next Naugahyde. Game theory strives to understand the supply and demand of particular economies, and the sociopolitical interactions of the countries that the economies belong to. Many things can affect this relationship. For example, the mere fluttering of a butterfly’s wings in Angola or Sierra Leone can shake diamond cartel marketing specialists’ faith in whether a diamond is really forever or not. It is game theory that brings us closer to making and understanding the connection between these two seemingly disparate phenomena half the world apart. We are not so naïve as to think that markets are really free. They are actually deterministic and follow particular trends and are subject to the whims of the wealthy. Economic sense and balance come to game theory application when interactions are fully understood, consciousness has been raised and capital has been dispersed according to a system of distribution that has every household in the world boasting five chickens in the carport and twenty bushels of rutabagas in the cellar. Group dynamics also enter into the equation for game theory and global economics. Alpha and beta relationships and interactions contribute much to game theory outcomes, consequences and overall conclusions. Conclusions are to be drawn on the basis of thorough hypothesis testing and evidence gathering. The scientific method still rules the day in such studies and should be abided by on pain of death. No one wants to be singled out and made an example of in a tightly professional arena. Economies are complex systems that are constantly evolving, and the social scientist is always working to stay ahead of the curve with theories of great predictive power and prowess. Game theory is without a doubt a leading contender in the world of explaining and analyzing global economic development.