Let’s get back to basics- the study of game theory is, for all intents and purposes, the study of strategy. It reveals to us what is, and how to, execute the best possible plan given a particular scenario. This field of study applies to a ubiquitous range of situations- from childhood board games such as Monopoly or Risk, to heavyweight financial issues such as monopolies or risk.
Arguably the single most important assumption in game theory is that we assume all individuals to be rational decision makers. That is, actors in a given situation will seek to maximize their own personal gain, whether this is defined as wealth, utility, or some other arbitrary term. For example, a person should prefer to have more money than less, and an individual theoretically should not give away things for free. Pretty simple. Pretty reasonable*.
Perhaps now is a good time to set the scene.
In preparation for the latest Batman movie, I recently watched Christopher Nolan’s The Dark Knight, featuring Christian Bale as Batman and Heath Ledger as The Joker. A critically acclaimed film by most accounts, The Joker is a self-monikered “agent of chaos” and is portrayed throughout the film as the single most irrational character in Gotham City. However, I would like to enlighten readers to a very simple truth. The Joker is not only the most sensible character in The Dark Knight, but the most rational as well. Let’s look at an example.
A particularly memorable scene, the Joker has set up a social experiment. He has rigged two separate ferryboats full of explosives. One boat is filled with innocent civilians while the other is filled with ex-convicts. Each boat has the ability to blow up the other boat, thus saving their own lives but pitting the other passengers to their doom. If neither boat chooses to blow up the other, then both boats will blow up at midnight.
This can be illustrated in the game-table below:
|Civilians’ Boat||Don’t Explode||Limited survival, Limited survival||Death, Unlimited survival|
|Explode||Unlimited survival, Death||Death, Death|
Without getting too bogged down in the theory, it is a winning strategy for both boats to chose the ‘explode’ option, or alternatively, it is in both boats interests to choose to blow up the other boat. Clearly, this is exactly the outcome that the Joker wants as it will lead both boats to their demise.
Despite how grizzly this may be, by casting an economist’s eye over the situation we recognize that total destruction should indeed be the predicted outcome: provided that the people on the boat act rationally. That is, survival is a commodity that boat passengers want more of, and that each boat is acting in their best interests.
However, as the scene actually plays out, both boats refuse to blow each other up out of some misguided (irrational) sense of justice and Batman saves the day. I am adamant that, as learning economists, recognition must be given to the fact that the Joker’s failure was single-handedly caused by the irrational behaviour displayed by the passengers on the boats. His assumption that the boat passengers would act rationally is not only entirely sensible, but one that economists around the world assume every single day. As callous as it may sound, in a perfectly rational, economical world, the Joker would have won.
And they call him the crazy one…