Economics: We’re Rational–Really

I’ve disconnected my television’s cable and started visiting bookstores regularly. The benefit is incredible as I find my frustration with the mindless programming is being replaced by the satisfaction of reading good literature and non-fiction.

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One of my most recent finds is The Logic of Life: The Rational Economics of an Irrational World by Tim Harford. In this very intelligent book, Tim asserts that there is an underlying rational economics to all human behavior. He examines behaviors that are both acceptable and taboo: Why are more adolescent girls practicing oral sex? Was no-fault divorce a good idea? How is the gay community dealing with AIDS? What is rational crime? What is rational racism? What is rational sexism? Tim is not afraid to examine any of these issues under the scrutiny of the economic microscope. Some of the insights are uplifting, some reveal tragic dilemmas.

I feel that The Logic of Life, Freakonomics and other economic books like it are more than necessary, they are essential in bringing society’s deepest flaws out into the open and offering us the potential to correct them.

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Tao Te Ching – A New Translation

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I just finished my first reading of Tao Te Ching by Lao Tzu. It’s a new translation by Stephen Addiss and Stanley Lombardo.

I have to say it is a very fine work of literature for its poetry, brevity and wisdom. I would recommend this translation to anyone for its cleanness and lack of burdensome commentary.

Diversions: stumblecard

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Social Psychology: Escaping the Prisoner’s Dilemma

For the past several decades the Prisoners’ Dilemma has been a dominant frame in Game Theory. It’s quadrant model has crossed the boundaries of many disciplines especially political science, economics, business, biology, computer science and philosophy. There are also the games Stag Hunt, Chicken and Hawk-Dove which are 2×2 games. My argument in this post will be that the Prisoners’ Dilemma is not adequately representative of reality.

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The Prisoner’s Dilemma was originally framed by Merrill Flood and Melvin Dresher while working on game theory at RAND in 1950 which Rand pursued because of possible applications to global nuclear strategy.
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Albert W. Tucker formalized the game with prison sentence payoffs and gave it the “Prisoners’ Dilemma” name (Poundstone, 1992).

The game has two prisoners who cannot communicate and each has only two moves:

  1. to conceal their guilt or
  2. reveal their guilt

They are aware of the potential outcomes of their actions as follows:

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The canonical payoff matrix for the game is represented as follows:

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In “win-lose” terminology represents the game in the following manner:

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The flaw I see in the Prisoners’ Dilemma is that it only provides the following payoffs:

  1. Win-Win (Collaboration)
  2. Win Much-Lose Much (Exploitation)
  3. Lose Much-Win Much (Exploitation)
  4. Lose-Lose (Altercation)

It does not provide for Win-Lose or Lose-Win (Distribution). The absence of distribution may be suitable for Mutual Assured Destruction (MAD) games, but not for most other human transactions. Consequently the Prisoners’ Dilemma can be presented as follows:

pdmatrix10.jpg

Now, I am going to take a different tack with the Prisoner’s Dilemma.

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I am going to view it from the perspective of Stephen B. Karpman’s Drama Triangle, a concept derived from Eric Berne’s Transactional Analysis. However, I am going to adhere to game theory’s premise that the players are rational.

Stephen categorized interpersonal transactions into three roles:

  1. Persecutor
  2. Rescuer
  3. Victim

In the Prisoners’ Dilemma there are only the Rescuer and the Persecutor:

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In what I will call the Transaction Triangle game there are three roles and thus three moves:

pdmatrix11.jpg

In “win-lose” terminology the Transaction Triangle is as follows:

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And the canonical payoff matrix is as follows:

pdmatrix12.jpg

As you can see, distribution is incorporated into the model to provide for most human transactions while still preserving the key components of the Prisoners’ Dilemma. I also concluded that the lose-lose payoff of the Ultimatum Game was suitable to provide for no transaction taking place. It is time to abandon the 2×2 mindset of mutual assured destruction and adopt a more human and realistic 3×3 game frame.

Further Reading:

Om: The Perfection

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“Do you hear?” Vasudeva’s mute gaze asked. Siddhartha nodded.

“Listen better!” Vasudeva whispered.

Siddhartha made an effort to listen better. The image of his father, his own image, the image of his son merged, Kamala’s image also appeared and was dispersed, and the image of Govinda, and other images, and they merged with each other, turned all into the river, headed all, being the river, for the goal, longing, desiring, suffering, and the river’s voice sounded full of yearning, full of burning woe, full of unsatisfiable desire. For the goal, the river was heading, Siddhartha saw it hurrying, the river, which consisted of him and his loved ones and of all people, he had ever seen, all of these waves and waters were hurrying, suffering, towards goals, many goals, the waterfall, the lake, the rapids, the sea, and all goals were reached, and every goal was followed by a new one, and the water turned into vapour and rose to the sky, turned into rain and poured down from the sky, turned into a source, a stream, a river, headed forward once again, flowed on once again. But the longing voice had changed. It still resounded, full of suffering, searching, but other voices joined it, voices of joy and of suffering, good and bad voices, laughing and sad ones, a hundred voices, a thousand voices.

Siddhartha listened. He was now nothing but a listener, completely concentrated on listening, completely empty, he felt, that he had now finished learning to listen. Often before, he had heard all this, these many voices in the river, today it sounded new. Already, he could no longer tell the many voices apart, not the happy ones from the weeping ones, not the ones of children from those of men, they all belonged together, the lamentation of yearning and the laughter of the knowledgeable one, the scream of rage and the moaning of the dying ones, everything was one, everything was intertwined and connected, entangled a thousand times. And everything together, all voices, all goals, all yearning, all suffering, all pleasure, all that was good and evil, all of this together was the world. All of it together was the flow of events, was the music of life. And when Siddhartha was listening attentively to this river, this song of a thousand voices, when he neither listened to the suffering nor the laughter, when he did not tie his soul to any particular voice and submerged his self into it, but when he heard them all, perceived the whole, the oneness, then the great song of the thousand voices consisted of a single word, which was Om: the perfection.

“Do you hear,” Vasudeva’s gaze asked again.

Siddhartha

Herman Hess

When I read this passage, I am amazed at the parallels between Siddhartha’s river and the internet. And the more social networks propagate the more voices the listener hears until he hears only one voice, the perfect “Om” of the global web.

As far as the Six Hats, Six Coats Methodology goes I see six rivers I am gradually trying to merge into one. I have coined the term PerfectionRiver for this goal. And as an analyst and designer, Vasudeva’s whisper, “Listen better!” holds the key to success.

Related Posts:

Systema: Seven Hats, Seven Links

Rules: The Connecting Tissue

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The nodes for the network graphics are Cause states, Observer states, Energy states, Mass states, Space states and Time states.  To make this more relevant to business we can use the terms Goals, People, Functions, Data, Locations and Events.  The edges that connect the nodes in all the networks are Cause rules, Observer rules, Energy rules, Mass rules, Space rules and Time rules.  Nodes give the system its concepts, while edges give the system context.  States provide extegrity (new term) while Rules provide integrity.

Each of the networks is composed of finite steps between the starting and terminal node called paths, the potential ways of following the rules to perform the steps are called the strategies, the actual strategy followed is called the tactics, the edges operations and the  nodes are states .

Whether you are negotiating Goals, People, Functions, Data, Locations or Events, you have to create and observe the rules to maintain the integrity of the networks.  Goals are connected by Rules, People are connected by Rules, Functions are connected by Rules, Data are connected by Rules, Locations are connected by Rules and Events are connected by Rules.  Even Events (Time) is a network, because we are continuously referring to different clocks in different frames of reference.

All rules have the same characteristics:

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We’ll explore how we will model this for each of the Six Hats, Six Coats networks in a subsequent post.

Now we have the connecting tissue of our networks.  Knowing this, we can embark on a course to model all six networks separately.  Once that is complete we can work on integrating two, three, four, five and finally all six networks into a single set of conventions.

Related Posts:

Systema: Seven Hats, Seven Links

Atheism: The Brights and The Not So…

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I love this group just for the humour of its name, but also for the impressive roster of members and a clear vision.

The Vision

Persons who have a naturalistic worldview should not be culturally stifled or civically marginalized due to society’s extensive supernaturalism. Rather, they ought to be accepted as fellow citizens and full participants in the cultural and political landscape.

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After the deletion/restoration of the Atheist/Agnostic Group from MySpace, I decided I would become a bright to protest this discrimination.

They can be found at the-brights.net

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