Prisoner’s dilemma & the Cold War
Militaries around the world have massive budgets. Billions are spend to maintain armies, and to arm new and more powerful weapons. From an absolute economic point of view, this is a waste of money. Specially given that most of these armies and weapons (such as nuclear warheads) aren’t at war and are just standing by in case there is one. Hence, a lot of people naively question the Govts why they spend so much money on maintaining armies. They propose that all the countries collectively agree to disarm themselves and instead spend all the money into humanitarian causes. It is a noble thought that can work in an ideal world, but one that is unfortunately not feasible in the real world. Because of a very important game theory concept — Prisoner’s dilemma.
The Prisoner’s Dilemma is a hypothetical game between 2 palyers which illustrates the difficulty of deciding whether to cooperate or compete with other people.
The game shows us that if two players are given the choice between cooperating (with the chance of a medium payoff, but at the risk of a very low payoff) or competing (with the possibility of a larger payoff and the risk of a slightly low payoff), then the most logical decision to make is to compete/not cooperate. This is because competing gives a higher payoff no matter what the other player does, with a resulting lower payoff to both. This constitutes their “dilemma.”
Let’s see the prisoner’s dilemma in terms of the arms race example, and take country A and B as players. The ideal scenario is both agree to not have any arms, which leads to ‘peace’. If country A then suddenly decides to build an army secretly, it will have an military advantage over country B. They can choose to inflict damage to country B — a high utility scenario for country A but a devastatingly low utility scenario for country B. Hence, as no country can trust the other of disarmament, they both decide to build a military and store weapons. This leads to a mutual medium utility of ‘very expensive peace’. Which a country would choose over the possibility of devastatingly low utility.
Read more on how the nuclear arms race observed during the cold war links to game theory in this well explained blog.
