I’m a proponent of the value of free markets and their ability to enrich people. The problem is that the free market only works in a closed system, in other words a free market is not favored when intersecting with markets which are being manipulated. The issue of how to compensate for intersecting our supposedly free market with other markets which impose duties and protective tariffs on imported good led me to think of the Prisoner’s dilemma from game theory.
Briefly, the prisoner’s dilemma is a situation where the results of your actions will vary depending on the actions of others over whom you have no control. If one market imposes tariffs and the other does not the market with tariffs benefits at the expense of the other market. If both markets impose tariffs then the playing field is level, but both are worse off than if neither of them impose tariffs.
Thankfully there may be a solution to the problem by studying the prisoners dilemma. Our economic interactions specifically resemble a specific form of the prisoner’s dilemma called The iterated prisoner’s dilemma. Under this specific variation the interactions are repeated so that the participants have a history of interactions. In a competition of computerized players the winning algorithm was one called “tit for tat” (later improved versions have been classed as “tit for tat with forgiveness”). This kind of a strategy encourages others to play nice without simply being a doormat for those who wish to use tariffs.
Does this sound like it would work in international economics?
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