Saturday, February 07, 2009

Hollywood 'John Nash' Was Wrong





Gavin Kennedy
Hwee Ling writes a most interesting Blog, The Learning Economist (HERE):

“Is Economics a "Science"?

The scientific approach involves the 4 following steps:
1. Observation
2. Reasoning
3. Formulation of Theory
4. Testing
In the movie "A Beautiful Mind", you can see part of this scientific approach in use: The scene is set in a bar in which John Nash (played by Russell Crowe) rebutted Adam Smith's idea that, 'the best result comes from everyone in the group doing what's best for himself'. Adam Smith had said: "In competition, individual ambition serves the common good."

But John Nash took an opposing view.

In the movie, he observed what was going on in the bar, in which it was clear that all his friends had the same idea.. to go straight for a pretty blond girl who had just walked into the place with her other pretty (but not quite as pretty) friends. He related to his friends how they could all score if they all didn't go for the blonde but for her friends instead... He told them that, 'the best result will come where everyone in the group does what is best for himself ... and the group.' He envisioned a scenario -- a bargaining strategy -- in which nobody loses.. Watch how the idea (which was later developed into a theory) was conceived after he carefully observed the scene...

In case you missed the dialogue, here's the transcript:

Nash : Adam Smith needs revision.

Hansen : What are you talking about?

Nash : If we all go for the blonde...we block each other. Not a single one of us is gonna get her. So then we go for her friends, but they will all give us the cold shoulder because nobody likes to be second choice. Well, what if no one goes for the blonde?
We don't get in each other's way, and we don't insult the other girls.
That's the only way we win.
Adam Smith said the best result comes from everyone in the group doing what's best for himself, right? That's what he said, right?

Others : Right.

Nash : Incomplete.
Incomplete, okay?
Because the best result will come...from everyone in the group doing what's best for himself...and the group.

Hansen : Nash, if this is some way for you to get the blonde on your own, you can go to hell.

Nash: Governing dynamics gentlemen. Governing dynamics. Adam Smith...was wrong.”

Nash leaves the bar.

I have commented several times on Lost Legacy on this scenario from the film, Beautiful Mind, and the above words written by Hollywood script writers, whose authority for attributing ideas to Adam Smith is an unknown variable, though it is unlikely to be accurate if influenced by the existing consensus of US academe with its, frankly, appalling record of misunderstanding, misattribution, and mistaken presentation in many matters relating to the philosophy and political economy of Adam Smith.

I have no objections whatsoever if the above scenario is presented as a strategic Prisoner’s Dilemma problem using a casual dating game as its subject, which, plausibly, is replicated in bars and clubs across the land. My objection is to the imagined scenario being associated with Adam Smith’s assertions about individual self-interest and group behaviour.

The lesson of the Prisoner’s Dilemma, either in its original form of a ‘red-black’ [NB. The convention later became a red-blue choice] 100-round game, or as the well-known choices of confessing or not confessing offered separately to two prisoner’s suspected of a major crime, is that acting for what is best for self (confess to go free – as long as the other prisoner does not confess) or acting for what is best for both of them (both of them not confessing), is that always acting for self, or always playing red, leads to long jail sentences or high negative scores, whereas doing what is best for both of them (both don’t confess; both play black), as long as they both choose leads to short sentences and high positive scores.

This was precisely what Adam Smith recommended through the venerable and ancient ‘propensity to ‘truck, barter, and exchange’, or bargaining: ‘give that which I want, and you shall have this which you want’.

To settle a bargain, the players should consider that which is best for both of them; competing in a bargain to get the best deal for self, generally means that they don’t get a deal; they deadlock, fail to agree, and go their separate ways in disappointment.

In the bar scene, all the boys have the same choice; pick separate ‘targets’ and go for their favoured girl. (Unsaid, of course, the girls had the same choice of picking one boy; the male script writers typicaly took a chauvinistic view of the scenario.) As everybody is a stranger, it doesn’t really matter which you pick; you’re not making a life-time choice!

The real lesson of Prisoner Dilemma games is quite interesting (I have used them thousands of times in Business School negotiating courses since the 1970s) is that in the overwhelming majority of cases (92 per cent, when I used to keep scores for analysis) the outcomes were sub-optimal, that is negative red-blue scores, translating in Prisoner’s Dilemma games to maximum long jail sentences. Only 8 per cent of pairs scored maximum blue points (48 each).

Other researchers (John Carlyle, for instance) reported slightly better results of 87 per cent and 17 per cent respectively, but while I can be sure that my pre-game briefings were the same each time, and no hints were given by me, it may be that John’s pre-briefing of the game was not devoid of ‘hints’, which would account for the slightly different outcomes.

In short, Adam Smith was correct. People who act without addressing the self-interests of the other party do much worse than those who do (See WN I.iii.2: p 26-7).

It may be that John Nash understood the better outcome of the co-operative choice as well as Adam Smith did - people bargaining are not competitors; they are co-operators; they do best for themselves by serving the interests of the other guy – or gal – too.

Bargaining exchanges that conclude successfully are co-operative outcomes; both do best by serving each other’s interests consistent with the best available outcome for themselves.

This propensity among humankind was of early vintage in the history and pre-history of humanity (see my Pre-History of Bargaining: a multi-disciplinary treatment, Part I’, downloadable from Lost Legacy’s Home Page). It’s in chapter 2 of Wealth Of Nations. The 'Beautiful Mind' scriptwriters are wrong about Adam Smith (John Nash may well have been innocent).

Incidentally, if only I had read Wealth Of Nations before I was 20:

when I was a teenager going to weekly dances (jiving, etc.,) I had a friend who demonstrated his dating technique, which was to dance with girls who were ‘wallflowers’, rather than ‘popular’ girls. He claimed he always got a ‘certain’ date that way, while most of us ended up walking home alone …

Congratulations to Hwee Ling for writing a most interesting Blog for students.

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Blogger michael webster said...

Keith Murnighan has great article:

Speaking the Same Language: The Cooperative Effects of Labeling in the Prisoners' Dilemma

on how labeling the choices gives hints to the individuals about what the group might be up to in the standard two person dilemma game.

Very interesting indeed. It is not online, but he will email to you.

3:29 pm  
Blogger Baconbacon said...

Interestingly there is no need for Nash to bargain in that scene once he figures out that going for the blond is sub optimal he has his pick of any of the others. If he convinces everyone else of his correctness he reduces his chances at the second best from the group. The only reason for him to advance this notion is, as was noted by one of the other characters, for him to be the only one talking to the blond.

3:44 pm  
Blogger Gavin Kennedy said...

Thanks Michael
I posted the url but it didn't download. I shall try again later.

The point about labelling - to give information - is not much diffeent fromsetting the task to pairs without any inromation - other than the rules - and then debriefing the score from their plays.

With learning comes improvements in scores. Hints step towards learning.

6:00 pm  
Blogger Gavin Kennedy said...

Leaving the bar was a scene closer I suspect and its more economical than watching it play out.

Aiming for the other girls is more or less what my friend Tony did.

6:02 pm  
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Blogger Unknown said...

I Am reading the comments and have to disagree. Goal was not blonde but to get laid. In making a choice for win opposed to get the blonde is only considered a win Nash lays out a way for the complete group to get what they want and at the same time increasing their odds for doing so.

Blonde is a catalyst for initiation of the needs yet fulfilling the need in not the blonde herself but getting laid.

Whole group wins only in case of focusing on end result rather on thchoice (path if you'd like) in acieveing it.

That's my two cents there. Adam Smith was correct in Darwin's behavioralistic approach, John Nash in civilzed world for non-alphas ;-)

There, that's my two cents.

8:41 am  
Blogger Unknown said...

I am using the human brain reward system as the judgement method as this is the highest form of reward we get. Neuro-science has shown us that everything (even sex & wealth) is related to this 'feel-good' factor of the reward system. We now know that we get two types of reward - one for personal achievements and a different type for groups (Dopamine & Oxytocin). If we do a task and get a personal induced reward for the brain, this is not as positive as a group reward. However, as we can get both rewards if we do something for the group and ourselves - then John Nash was correct.

1:10 pm  
Blogger Umesh Bawa said...

ADAM SMITH's theory work at individual level, whereas, NASH's theory work at both individual and in group.. So i don't find anything wrong in both discoveries....

5:11 pm  
Blogger Unleash Ideas said...

Interesting analogy and cleared many of the doubts I had as well. I was over whelmed by the contrasting theory brought in by Nash after watching the movie "Beautiful Mind". I think the explaination you have given are very logical and fact based. Tahnks..

11:06 am  
Anonymous Anonymous said...

From 2009 to 2015, and from the US to the UK, but here we go... Assumptions, assumptions, assumptions. I won't go in detail as to the levels and dimensions for assumptions, whether individualistic or societal, but, I'll turn it into a conversation. When I was a child, I had a well-rounded strategy when going out to parties with my friends: While I always wanted to score the hottest girl on the floor, I also knew that I didn't want to end up with the least-attractive ones, so my strategy was to go along with my friends, moving from side to side, and as soon as I felt a connection with one of them that "felt" like the best choice at that time based on risk and gains (assessing the situation, taking into account also the interests of the girls or choices at hand), then I won or at the very least improved my chances of walking off with something that felt like a win. Reason is that only her and I will know that there is a connection while at the same time I won't know whether she may have had a connection with more at the same time but that also applies to the other person, my friend if that's the case, but that can continue with the others. As you can see, there is a flaw in more than one way. We omit the free will of the options and it's unrealistic because decisions are subject to time and opportunity cost.

10:32 am  

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