What Is Game Theory?

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Ray Briggs
Is life just one big game?

Josh Landy
If you can get away with cheating, why should you play by the rules?

Ray Briggs
Can mathematics help us prevent a nuclear war?

Josh Landy
Philosophy Talk, the program that questions everything…

Ray Briggs
…except your intelligence. I’m Ray Briggs

Josh Landy
And I’m Josh Landy. We’re coming to you via the studios of KALW San Francisco Bay Area.

Ray Briggs
Continuing conversations that begin at Philosopher’s Corner on the Stanford campus, where Josh teaches philosophy.

Josh Landy
And at the University of Chicago, where Ray teaches philosophy. This is actually Ray’s last episode as co-host.

Ray Briggs
It’s been such a pleasure being part of this.

Josh Landy
Right back at you, Ray. It’s been an incredible treat to work together for all these years.

Ray Briggs
And we’re ending on one of my favorite subjects: game theory.

Josh Landy
Okay, game theory. Now, if I understand correctly, that’s that’s a branch of mathematics, and it’s one that tries to model strategic interactions, like the prisoner’s dilemma.

Ray Briggs
Right, which is the imaginary scenario where you have these two prisoners who have committed a crime together, but there’s not enough evidence to convict without a confession, so the cops take them to separate interrogation rooms, and each of them gets offered the same deal. So if you confess but the other guy doesn’t, we’ll sentence him to five years and let you off scot-free.

Josh Landy
Okay, well, surely I’m going to confess then, right? I mean, who cares about my friend?

Ray Briggs
Well, not so fast, Josh. If you both confess, you both get three years.

Josh Landy
So I guess we should each keep our mouth shut.

Ray Briggs
But then the cops are going to get you on some bogus charges, and each of you will get a one-year sentence.

Josh Landy
Okay, so now I’m stumped. If if I turn my friend in and he says nothing, I’m free to go. Okay, great. But if we both stay quiet, I get one year, and if we both confess, it’s three years. Oh, and if he turns me in first, I get five. So what should I do?

Ray Briggs
Well, a lot of game theorists would argue that you should confess. Like, think about it this way: you have no control over what your friend does. He’s off in another room doing whatever he’s gonna do, and if he keeps quiet, you can get off scot free by turning him in instead of having to serve that year in prison. And if he turns you in, you better protect yourself by turning him in too, so that you get only three years in prison instead of five.

Josh Landy
I mean that sounds good, but isn’t my friend going to have exactly the same idea? He’ll decide to turn me in, and then both of us will get three years. Whereas if we just kept our mouths shut, we’d only get one year. How is game theory helping me?

Ray Briggs
Well, it might not give you a single answer about what’s the best thing for everybody to do, but it at least helps you understand what’s going on. If both people confess, you’re in what’s called a Nash equilibrium.

Josh Landy
Nash, as in the guy from A Beautiful Mind.

Ray Briggs
Yeah, yeah. The economist John Nash. He came up with the idea of an equilibrium. That’s where nobody has an incentive to change their mind about what to do, even if they learn what everyone else is planning to do too. So if you are planning to confess and then you learn that the other guy is too, that shouldn’t change your plans at all, and he can reason in exactly the same way.

Josh Landy
But it’s still better for both of us if nobody confesses, right?

Ray Briggs
Right. And game theory tells us that there are actually two different ideas of what it takes to solve a problem like this. So you’ve got your Nash equilibrium, but you’ve also got this thing called a Pareto optimal solution, which is where there’s no alternative that makes everyone better off.

Josh Landy
Okay, Ray, that is a lot of maths and a lot of jargon. I mean, I get it that it’s useful for purely imaginary prisoners, but is it actually helpful in the real world?

Ray Briggs
Absolutely. The prisoner’s dilemma was originally invented as a model of nuclear deterrence between countries, and game theory is really useful for thinking about business decisions like price competition, and biologists have even claimed that it helps explain evolution.

Josh Landy
Well, that makes sense. I mean, it sounds like your model’s pretty Darwinian, Ray. You’re talking about people who are out for their own interests, and only the fittest survive. What kind of model is that for how we should behave?

Ray Briggs
Well, I think that game theorists actually have quite a lot to say back to you. So let’s talk to one. Our guest is John Levin, who also happens to be the current president of Stanford University.

Josh Landy
But first, we sent our roving philosophical reporter, Molly Blair Salyer, to see how game theory plays out in everyday domestic disputes and in the manufactured chaos of reality TV. She files this report.

Molly Blair-Salyer
When was the last time you thought about game theory? In econ class in high school? Maybe during the big redistricting that states took up in the past couple of years? Game theory can be used to tackle some mighty big topics, but the thinking about our wants and needs in relation to what other people may do shows up all the time in our daily lives, like who should have to do the dishes? One partner, both, or should they both pay a cleaner and go out on a date instead?

Alyssa
Is it a free date, or are we paying for the date?

Molly Blair-Salyer
That’s my very good friend Alyssa. I pose this very unscientific domestic game theory scenario. Her and her husband Tony. In the end, it sounded like these two would rather just split the labor.

Speaker 1
Myself, because I’m a bit of a control freak and kind of prefer to do it in a certain way. And Tony, because he probably wouldn’t want to pay someone else to do it.

Molly Blair-Salyer
I talked to Tony on his own later, and he basically said the same thing.

Tony
Something that I could do myself, I probably wouldn’t pay for someone else to do unless it’s really hard or requires expertise or is really involved.

Molly Blair-Salyer
And he added a shared motivation I hadn’t even thought of.

Tony
She and I don’t get that much time, just the two of us, where we’re home together and there’s no kids around to kind of manage those responsibilities, so I’d say it’d be nice just to have that time, even if we’re cleaning side by side.

Molly Blair-Salyer
Am I crazy that this sounds really romantic? Alyssa and Tony are playing the long game in their relationship. It makes sense for each of them to pitch in and take care of things as a team to cooperate because they plan to be a team for the long haul. It means they can strategize with confidence about what their partner wants and needs and is motivated by, and they can trust each other. But this got me thinking about how people strategize when trusting someone is really risky, which made me think of my favorite show.

The Traitors
Deep in the Scottish Highlands, there’s a castle where the faithful reside. Their goal: win a quarter of a million dollars. But hidden amongst them are three traitors. Exciting, isn’t it?

Danielle Lindemann
Host Alan Cumming invites everyone to his castle in Scotland, and basically, some people are designated to be the traitors, who are the murderers, and then the faithfuls, the ones who are not the traitors, have to kind of figure out who the traitors are.

Molly Blair-Salyer
This is Danielle Lindemann, a professor of sociology at Lehigh University, and author of the book “True Story: What Reality TV Says About Us.”

Danielle Lindemann
It makes for high drama. It’s fabulous.

The Traitors
In this game, the person sitting next to you may smile and smile and be a villain. I would not have picked that outfit, so I don’t think I trust your judgment completely.

Molly Blair-Salyer
The traitors is game theory turned over-the-top murder mystery, made more complex by a number of factors. First of all, there’s not just one traitor; there are several, and sometimes the traitors aren’t even clued in to who the other traders are, all the while they’re living in one Scottish castle, developing real friendships and building confusing levels of trust.

Danielle Lindemann
People are not completely rational actors, right? These shows teach us that feelings do get in the way of rational action, just as happens in life.

Molly Blair-Salyer
While each player comes onto a show like The Traders with a strategy of how they’re going to approach their gameplay, it isn’t easy to stay the course.

Danielle Lindemann
You have people going into you know their confessionals and saying, “I feel awful about doing these things,” or saying, “I can’t believe that person did these things to me.” When theoretically, you should be freed from the shackles of having these emotions that we’re all socialized to have in order to coexist in polite society.

Molly Blair-Salyer
Trust, loyalty, affinity—all of these play a part in how people make choices and ultimately behave. But greed and self-interest are also involved, especially in the end game play, because success can look like different things to different people.

Danielle Lindemann
Does it mean increase your profile? Does it mean get the prize pot? Does it mean stay as long as you can? You go into a situation and you’re a rational actor, and you assume everyone else is rational actors, but you learn quickly that they’re not. But you go into this semi-chaotic environment, and it can go out the window.

Molly Blair-Salyer
This added chaos really shakes things up, and it’s where things can be scaled up to represent game theory on a larger level.

Danielle Lindemann
They’re all coming from different places, and then you have to kind of adjust. So, actually, I think that’s a really apt metaphor for, I guess, international trade. Who knew?

Molly Blair-Salyer
Life in a nutshell: tust, long-game goals, and chaos.

The Traitors
I think you’re a trader. I think you’re a trader. I trusted you. So trust no one.

Molly Blair-Salyer
For philosophy talk, I’m Molly Blair Salyer.

Josh Landy
Thanks for that super fun report, Molly. You know I’ve actually had a similar experience playing games like that. It’s really hard to keep your emotions out of it. I’m Josh Landy. With me is my fellow philosopher Ray Briggs, and today we’re thinking about game theory.

Ray Briggs
We’re joined now by Jonathan Levin. He’s the president of Stanford University, but he’s also a widely published economist, and he’s served as dean of the Stanford Graduate School of Business. John. Welcome to Philosophy Talk.

Jon Levin
Thanks for having me on.

Josh Landy
So Jon, you’ve been thinking and writing about game theory for some time now. How did you first get interested in it?

Jon Levin
I think my first foray into game theory might have been in high school. I was a huge fan of the television show Jeopardy, and at some point, I was frustrated by the way people were bidding in Final Jeopardy, and I worked out what I thought was a theory of optimal bidding in Final Jeopardy, optimal play in Final Jeopardy. My parents, we lived in New Haven, Connecticut. My parents knew a professor at Yale, Barry Nelbuff, wonderful game theorist, and they said John has solved Final Jeopardy. I showed my answer to Barry, who managed to withhold his laughter because it was just so completely wrong and missed the mark by a million miles. But it had a silver lining because Barry took some pity on me and hired me as his research assistant. Research assistant, of course, I was a high school student to help him with his game theory textbook, and that was how I opened my eyes to what game theory actually was.

Ray Briggs
So Jon these days you don’t just write about game theory; you take it out into the real world. Can you tell us a bit about your work with vaccines?

Jon Levin
Yeah, that story for how I got involved in that goes back to when I was in graduate school. I was a PhD student at MIT, and there was a young, at the time, young faculty member, Michael Kramer. He was very interested in development economics and in innovation, and he had the following problem that he was working on, which is there are many products, for example, vaccines, that would be hugely beneficial in the developing world, and yet the markets economically are not that big. So, for example, there is still no vaccine for malaria. If you had a vaccine for malaria, it would be socially enormously beneficial in terms of saving lives, and yet you might not be able to charge very much for it. And so, investing hundreds of millions or billions of dollars to develop a vaccine like that, the private sector just doesn’t have the right incentives. So he, of course, knew there are different ways to create incentives for people to develop vaccines. You can do patents, which we have in this country. Then you need the market to have some returns. You could have a prize, but if you have a prize, you might get the specification wrong. Someone might meet your specifications, but no one wants to use the vaccine. That’s why a patent is so good because your vaccine has to meet the market test.

Ray Briggs
So what do you do?

Jon Levin
So he came up with an idea that combined features of both. The idea was, you promise that if someone develops a vaccine that people want to buy, you’ll subsidize the purchases. You commit to do that, and he called that an advanced market commitment. He had this idea back in the ’90s.

Ray Briggs
So, did you try it? Did you get to try it?

Speaker 2
So, a couple of years later, this idea caught on, and a group of countries agreed, mostly European countries, along with the World Bank and the Gates Foundation, agreed that they would try this out. They would commit about four and a half billion dollars to pilot to try and experiment with an advance smart commitment, and they settled on pneumococcus vaccine. At the time, pneumococcal disease was the second largest cause of childhood death in the developing world, they asked a group of folks to design the advanced market commitment, and they asked Michael. Michael called me up one day and said, “Would you like to work on this? And another economist at Dartmouth, Chris Snyder, and we, along with a interdisciplinary group, basically spent a year designing the first advanced market commitment for pneumococcal vaccine. At the time, there were two available vaccines in the U.S. and Europe, but no vaccines available in the developing world. Historically, it took about 20 years for a vaccine developed in the developed world in the U.S. and Europe to disseminate to the developing world. And our idea was we were trying to create a mechanism, advance mark commitment that would inspire the firms to build capacity, to build factories, to start producing a vaccine that they would make available all over the world, and that was rolled out about 15 years ago, and it dramatically sped up the dissemination of pneumococcal vaccine. We did a study about five six years ago, looking at the effects and estimated that it had sped up the diffusion of pneumococcal by many many years, and probably in doing that saved about 750,000 lives.

Josh Landy
Wow, that’s truly fantastic! You’re listening to Philosophy Talk today. We’re thinking about game theory with the president of Stanford University, Jon Levin.

Ray Briggs
When you’re interacting with other people, how do you strategize? What happens when your choices depend on other people’s choices? What happens when those people are corporations?

Josh Landy
Cooperation, competition, and collusion, along with your comments and questions, when philosophy talk continues.

Queen
Everybody play the game of love.

Josh Landy
Can mathematics tell us anything about the game of love? I’m Josh Landy, and this is Philosophy Talk, the program that questions everything…

Ray Briggs
…except your intelligence. I’m Ray Briggs, and we’re thinking about game theory with the economist Jon Levin, president of Stanford University.

Josh Landy
Got questions about cooperation and competition? Email us at comments at philosophytalk.org, or you can comment on our website, and while you’re there, you can subscribe to our free podcast and get your game on in our library of more than 600 episodes.

Ray Briggs
So Jon, so far we’ve talked a bit about the prisoner’s dilemma, nuclear deterrence, and vaccines. What about auctions? How does game theory help us understand those?

Speaker 2
Well, auctions turned out to be one of the areas where the tools of game theory have been hugely impactful, and there’s a couple reasons for that. One is auctions are a very structured form of economic competition bidding. The rules are precisely defined. The players are precisely defined. Sometimes, often, you know what their incentives are, what they’re trying to accomplish, and so auction theory has been very helpful in in two ways in economics. One is to understand strategic competition in a lot of different settings. People bidding for natural resources or bidding for on the internet for advertising. There’s big markets that can be analyzed as auction markets. It’s been very helpful for economic analysis of competition. Secondly, in many settings, you get to design the rules of the auction, and so you, if you want to allocate something, something scarce, and you want to use prices to do that, designing an auction is a powerful way to solve allocation problems, solve the problem of who should get what, and you can use the tools of game theory to help guide the problem of auction design, and that area of market design, auction design, has been one of the biggest and most exciting areas of economics, really over the course of my own career.

Josh Landy
So, when you use game theory to help you design auctions, what’s the benefit here? Is is it that the auctions come out more fair? Is it that they make more money for people? Is it that people aren’t you know getting out their swords and dueling with each other on the street? I mean, what’s the main benefit to applying game theory in a case like that?

Jon Levin
Well, I’ll give you the example that was what got me interested in this area when I was a student, which is the allocation of the rights to use the radio spectrum. So, in the years and years ago, the FCC observed that there was a problem in people building at radio stations, which is if I put up a big radio antenna and then you put one up nearby, our signals interfered if we use the same spectrum. So only one person could be using a particular station at once. Someone has to have some rules about who gets the radio spectrum. Okay, now fast forward up into the 1990s, you can see that the thing that is coming is wireless communications. People are going to have cell phones, car phones, maybe cell phones in the future. The world is going to change, but to do this, we need to have some rules about who gets to have the rights to have cell phone towers and cell phones and so forth. And the FCC, the Federal Communications Commission, they looked at some ways of doing this, like where there would be a beauty contest and people would say, “Well, I’ve got a great plan. You’ve got a great plan, and the federal government would decide. And it looked rife for corruption, possibly, and favoritism and politics. And they said, “Let’s run an auction. Let’s do it by auction. Let’s let prices decide. Let’s let the firms that have the highest value get to build out the wireless industry. And they got a couple of economists, including two at Stanford, Paul Morgan and Bob Wilson, to design the first radio spectrum auction, and I read about that in graduate school, and I thought that’s a way to use all this game theory and economics that I’ve been studying and actually put it to work. That is cool.

Ray Briggs
So I have a couple of questions about this. I guess what does a good outcome look like? Like, what does a good distribution of radio spectrum ownership look like? And then then I want to know how to achieve it. But first, I I want to know even what the goal is.

Speaker 2
I think the way it was thought about at the beginning was, we need to put these rights to use the racetrack in the hands of some companies that will make big investments in infrastructure, so that people could have car phones and cell phones. This is back in the 1990s. I mean, it’s ancient history, like the ice age, practically, for wireless communications. And then over time, the thinking got more sophisticated, and people started saying, “We got to make sure these markets are competitive, so that there’s a bunch of.” Competing firms-they all can offer good products. The prices don’t get too high. We got to make sure there’s a chance for entry. Maybe people with new ideas about how to do this. We don’t just want the same fixed people. Maybe nowadays, it’s hey, we don’t just use cell phone towers. We could talk straight to satellites. We should make sure there’s some competition from new technologies, and so all those things go into the consideration of how do you design a market that is going to enable, as a consequence, a vibrant competitive ecosystem that brings, in this case, new technology to people and helps expand their horizon and opportunities. We we just take it for granted, of course, that all this happens nowadays. But it wasn’t a foregone conclusion that it would work out in this way.

Josh Landy
So it seems like we’ve got a couple of different advantages from applying game theory to real-world situations. The the vaccines case, pretty extraordinary advantage that a vaccine gets produced, and also that it becomes affordable for people, and there’s an incentive for people to actually get vaccinated. That seems pretty great. In the case of the radio auctions, we try to remove corruption as much as possible and have this vibrant radio space. What about collective action problems? So I’m thinking one example that comes to mind for me is EVs, electric vehicles. For a long time, there was a kind of a chicken and egg problem because you’re not going to get someone to buy an electric car unless there’s a whole bunch of charging stations, but you’re not going to get someone to build a large network of of charging stations unless there are a lot of electric cars out there. It seems like there’s a bunch of problems like that in the world where you know A can’t do anything before B does something, but B can’t do anything before A does something. Does game theory apply here too? Can we use the tools of game theory to somehow solve those problems?

Speaker 2
That’s it’s a great example because you can use the tools of game theory in both the ways that I said. One is you can use it to understand, you know, why is a market that seems like it should be developing, developing so slowly. Like, who are the players? What are the different incentives? Of course, you’re not buying cars because there’s nowhere to charge them. Of course, you’re not buying building charging stations if there’s no one who wants to use them. So you got the chicken and egg problem you you talked about that can come up in a lot of settings. And then you might think about how do you solve that? How do you make an intervention that will change the game, that will change the game for car buyers or for people building out infrastructure for EVs. In the case of the U.S. the tool of choice was to put in place subsidies for car buyers and jumpstart the EV market. And Europe was a little bit different, but that’s that game theory helps you understand that market design problem or market shaping problem.

Ray Briggs
You’re listening to Philosophy Talk today. We’re thinking about game theory with Jonathan Levin, president of Stanford University. John, we have a listener question from Bob, who emailed to ask us about the concept of utility in game theory. So Bob says that people often mistake utility for money or pleasure, but it’s actually neither of those things. And he quotes the economist Ken Binmore, who says that until we come up with a better version of psychology that fully explains human behavior, economists will have to get by with no theory at all of what why people choose one thing rather than another. The modern theory of utility makes no attempt to explain choice behavior. So, John, what exactly is utility, and why does it matter?

Speaker 2
You’re asking Ray that you’re you’re getting into a very deep problem in in economics, which is why do people make certain choices? That’s the foundation of you know really all of economics and the foundation of game theory. Because game theory, you’re in a strategic setting, and you got to decide what to do, and what are your motivations? And economics is not the only discipline that looks at that. Psychology and philosophy look at those questions as well. I always taught when I taught first year economics. You know, I always would would try to talk to people about the sort of caricature version of economics where you sort of specify a preference as utility function that’s very material. People are trying to achieve material lens, and then of course talk to them about the world is much more complicated than that. People are trying to achieve love and happiness and friendships and social stature, and the whole field of behavioral economics tries to expand economic thinking to bring that breadth in there, and you can do that. Often, you have to do that in solving problems of market design because you have to recognize that people have complex incentives and goals, and they’re not just material, not necessarily just profit. They’re not necessarily just getting money. They can be all kinds of of different different things, and and that’s essential in in good good market design. I’ll give you a just a example of that. For many years, I taught an undergraduate class on market design. I asked the students always to design a market as their final product. And this actually happened the year after I stopped teaching, and Paul Milgrom, one of my colleagues, was teaching the class. But one of the famous examples to come out of this class was a dating algorithm, the Stanford Match algorithm, that has now become quite a successful product used on college campuses to match people. People aren’t trying to maximize money when they’re looking for a dating partner. They’re trying to fall in love, or at a minimum, find some friendships. So you you can’t think about it from a material standpoint. You got to think about it from a much broader standpoint of what people are are looking for.

Josh Landy
Okay, but this raises a kind of deep question about the limits of the applicability of game theory. You know, Molly talked in the Robin Philosophical Report earlier about a couple who seem perhaps to be applying it in their personal life. You just talked about a a dating app. How well does it work, given that human beings aren’t always completely rational? I mean, yes, we’re looking for certain things, we’re looking for love, and so on. But are human beings actually predictable in the way that some of these models seems to suggest, or or is human variability and kind of weirdness and unconscious drives and things like that? Do they just sometimes come in and mess up the models?

Speaker 2
Unfortunately, the answer I think mostly has been it depends. That is how. What is the predict? This is a big question in economics. What is the predictive power of our models? Models are simplified abstractions. This is this is the power of economics, but also sometimes the limitation that you simplify things, you try to strip everything down, and come come up with a simple way, structured way of thinking about a phenomenon in the world. And then the question is, does it have any predictive power? It’s it’s so simplified. It’s so unrealistic, and game theory it goes right to this. When I started my career in economics, I was really interested in the question of does auction theory have predictive power? I wanted to test that. I and I started studying auctions for timber in the national forests, and it turned out, in that setting, that the auction theory models had actually quite tremendous predictive power. You could, for example, model the environment with one kind of auction, and then predict what would happen if you ran a different auction, different kind of auction, ran an ascending auction stay instead of a auction where people submitted sealed bids, and you got very close in predicting what would actually happen. And one of my colleagues at Stanford, Susan Athey, and I have a work on that. There are other settings, like if you put people in a classroom lab and you ask them to play the prisoner’s dilemma, the example you you started with, do they play it the way the theory predicts? Not necessarily. Not necessarily, because they might want to look like a good person or have other ways of thinking about the problem. So, actually, I think one of the the challenges in using the tools of of game theory in the world, just like using tools of economics, is you you have to you have to be acutely conscious of the difference between the world and your model of the world, you know the map is not the territory, and you have to think hard about that translation.

Ray Briggs
So this is actually making me wonder about the application of game theory in evolutionary theory, where I think for a lot of the things that game theory is is supposed to be useful from modeling in evolution, it’s really implausible that there’s any rational decision making going on at all. So I’ve seen papers talk about using game theory to explain why, like, a population of bacteria will thrive in a beaker if you don’t stir it, but then not thrive if you do stir it, and bacteria are not rational decision makers because they’re not decision makers at all. So I guess do do you have anything general to say about like how much psychology game theory needs, or whether like it needs any? Is is there anything general to say there?

Speaker 2
So this is not the area that I worked in evolutionary biology, but I I do believe it’s it’s one of the areas where game theory has proven to be most powerful, and it uses game theory in a different way than we often do in economics. That is, in in economics, we’re thinking about humans who are participating in a strategic setting; they have to face choices. They make those choices consciously with different motivations, and then you try to look at, you know, what kind of outcomes might result, or how could you set the rules to achieve certain things like an efficient outcome of allocation of radio spectrum. In evolutionary biology, you’re looking at populations could be of cells, viruses, animals, and you’re trying to ask if an animal behaves in a certain way or has certain traits. That’s you can think of that as if they’ve chosen a strategy, as if a lot of is doing a lot of work there, and then you see who’s going to be successful in this setting, and then you can think of. At what dynamics might result if the if certain traits are successful over time, they’ll grow and the population will evolve, and that’s there’s you can draw parallels with economics like in a market if I behave a certain way and you behave a certain way and other people compete in different ways, who’s going to be successful over time and what strategies might evolve, and there are theories that sort of try to study those kinds of dynamics and ask where will you land. And one of the the insights from many of those theories is that very often under those under different dynamics you might land at something that looks like a Nash equilibrium of a game, and that’s a link that ties game theory to evolutionary biology to the dynamics of learning in economics or strategic evolution, and that the underlying math is the same.

Josh Landy
It’s one of the beauties of maths is just how many places you find it, right? And I mean, we’ve we’ve been ranging from reality TV to evolutionary biology, but what about literature? I mean, I’m wondering whether we could think about the relationship between an author and a reader as a kind of game-like situation where each of the players in this game is anticipating moves that the other one is going to make. So think about Agatha Christie writing a detective story, and so Agatha Christie makes one of the characters look suspicious, and she knows that we’re gonna think, “Oh, that person’s probably the killer. But a good reader is gonna think, “Yes, but I know that Agatha Christie wants me to think that this person is the killer. So it’s probably a red herring. So I probably shouldn’t think that person is the killer. Does that seem like a situation that could be modeled using game theory?

Speaker 2
I hadn’t thought about that particular application of game theory, but it’s entirely possible. There are areas of game theory that try to look at things like deception and bluffing, and how do you lead or mislead people, and and those are game settings where there’s incomplete information, where one person or some group people know something that other people don’t know. You can think of poker as being a game that is a perfect example that people have been trying to model the game theory of poker forever, and the and the bluffing and the names. It’s a very hard game to model. Actually, poker is the very coming up with optimal strategies in poker is very hard. People spend their whole lives trying to get really good at the strategy of of poker and all the mathematical calculations that underlie what bets to make.

Josh Landy
You’re listening to Philosophy Talk today. We’re thinking about game theory with Jon Levin, president of Stanford University.

Ray Briggs
Are human beings rational enough for game theory? Does modeling us as optimizers make us selfish, or can it help us do the right thing?

Josh Landy
Games, aims, and moral claims. Plus commentary from Ian Shoales the Sixty-Second Philosopher, when philosophy talk continues

ABBA
What’s the name of the game?

Josh Landy
The name of this game is Game Theory. I’m Josh Landy, and this is Philosophy Talk, the program that questions everything except your intelligence. I’m Ray Briggs. Our guest is John Levin, president of Stanford University, and we’re thinking about game theory. So, John, we’ve been talking a lot about the advantages of game theory, but are there any significant disadvantages we should know about? Any limits to its application? Anything you haven’t been telling us?

Speaker 2
You know, often a problem in economics is you look at a setting, and it’s just hard to do the kind of simplification that you need to sort of use a game theoretic way of way of coming at it, I mean, many situations, whether they’re in politics or organizations or or in life, you could represent a sort of game theory, but you’d be missing too much of the world. Think about marriage. People have tried to use economic analysis to analyze marriage, but

Josh Landy
good luck.

Speaker 2
It’s you might be able to get some insights, possibly into you know should you sign a prenuptial agreement, but boy, you’re missing a lot of life if that’s really the way you’re thinking about you know your life partnership.

Ray Briggs
John, one criticism that I’ve often heard of game theory, and that Josh was kind of making at the beginning, is that it assumes people are selfish. Do you think that’s accurate?

Speaker 2
I think that I don’t think you you you can use game theory by making the assumption that people behave in a sort of a fundamentally self-interested way, or you can change that assumption, and there are you know game theorists who have thought about trying to analyze strategic situations where people are altruistic in some fashion. When I was a student, I wrote my dissertation using game theory, and the problem that I was was interested in was was one that. Doesn’t at first glance seem at all amenable to using game theory. It was about how do you sustain and build trust in long-term relationships. In the long in long-term relationships, trust relationships, people often behave in ways that don’t look self-interested. And one of the insights of game theory, going back to the 1950s and early days of of game theory is that, in fact, there are cases where self interest can lead people to behave in ways that don’t look self interested because they care not just about the moment, the decision at the moment. They care about their reputation or they care about a future interaction with the person they’re engaging with. And actually, you know, I found that to be an incredibly powerful insight. And I, in my dissertation, I use that to think about things like employment relationships and trading relationships and sovereign debt. Trying to build models that would help us understand those kinds of long-term economic relationships where people often look like they’re doing something that’s going to be good for the other person, but not for them. But it will help them to have a trust relationship, and you know, to me, that’s actually one of the insights. It’s sometimes hard to quantify that exactly and get sharp predictions from those kinds of theories. But particularly now that I moved into a world of leadership, you know, I always think of George Shultz was a Stanford professor and Secretary of State and great leader, and you know he he had the view that nothing is more important in leadership than trust. He said trust is the coin of the realm, and so it’s funny that my career has come full circle back to that topic that I studied as a graduate student from a game theory perspective,

Josh Landy
so that’s one way to think about the relationship between game theory and morality, which of course takes us back to some 18th-century thinkers and enlightened self-interest and Adam Smith’s invisible hand of the market and all of that stuff. Right? If you, it turns out that if you are really thinking about what’s in your own interest. You will actually do some things that seem altruistic, but then doesn’t it seem like there are other cases as well? I mean, go back to vaccines. Part of the problem in regard to vaccines, and of course we’re seeing this quite a bit in recent years, is the free rider problem is the idea that some people are saying, “Well, I don’t have to get vaccinated. I don’t have to get my kids vaccinated because look, the community around me is getting vaccinated, and so there’s no real danger of me or my kids contracting this disease. So you know, I think I won’t do it, and that seems like it’s not what we were just talking about, where self-interest actually leads to pro-social behavior, it seems like it’s the other kind, where people are just kind of saying, “I’m not really thinking that much about the community. Is there any way that game theory can intervene in cases like that to incentivize better behavior?

Speaker 2
That’s a wonderful and deep question. I think unpack two ideas there. So the first was your your point about Adam Smith. Adam Smith had the observation that in a market setting, people can act in their own self interest, and it works out in a way that benefits everyone. And that, of course, was formalized, turned into a theory and model by people like Ken Arrow, former Stanford faculty member, and that’s a brilliant insight that guides why having freedom of choice, freedom of markets, can lead to great economic outcomes. People make decisions because they make products available that people want, and that’s good for the people they sell to, but also good for them. Helps to understand many things in the in the world. You know, game theory often tackles settings where there’s some kind of market failure, where the Smithian, the Canaro presumption of large competitive markets it breaks down. There are important players in the market. There are people who make consequential decisions for other people, individual consequential decisions, and as a result, market failures come up. People take advantage of other people. Maybe there’s failures to cooperate, like a free rider problem, like we getting vaccinated could be construed in that way. A lot of game theory, and particularly a lot of the market design issues we’ve been talking about, their attempts to structure those environments to get better outcomes, to get better cooperation, to align people’s incentives in socially positive ways, when markets aren’t working effectively, and you know a lot of people go into economics and they sort of fall in love with the free market part and they start thinking about all the cases that doesn’t work, and that’s where they ended up in my class normally to start talking about gaming, how do you understand that, and what could you do about it?

Ray Briggs
So I have a little example that I have to bring up here, which is about asking questions at a talk. This is such a like energy philosophy example. If you spend a lot of time in academia, you will notice that there is you. Usually, a small group of like loud, powerful, like let’s be honest, senior white men who are hogging the Q and A and trying to disrupt that, like, is partly a problem of market design. And I I went to a conference that had this brilliant idea for disrupting that, which is that everybody got issued a finite number of cards. There were like three cards. They were different colors, and you could spend them on whatever question you wanted. But once you raised your card, you you could not have that card for the rest of the conference. So like everybody had had three cards, and there was like the the highest priority card, the second priority card and the lowest priority card, and the highest priority card always got prioritized first, and so it was a really interesting combination of free market, and everybody has the same starting point, which is not usually the case in a market, and it was great because everybody got to talk.

Speaker 2
It was a little like if you had an incredible fishery and there were a lot of people who wanted to go out and fish. And if you know some people get out early and and fish for all the fish, there’s none left for anyone else. This is sort of a how do you how do you give everyone chance to to get in there and ask a question? I will say just you know as you’re at the University of Chicago, so I have to point this out. You know, there’s different cultures in academic seminars. There are fields in academia where people listen very politely to the entire talk, which sometimes is read. It’s true in many of the humanities, maybe in philosophy, that’s sometimes done, and and then they ask very polite questions, and then there are fields like economics where you put up your title slide, and the University of Chicago I always thought of as the sort of exemplar of this. You put up your title slide, and people start telling you that you’re completely wrong, and what you have to say is nonsense, and you haven’t even gotten past the title slide. Like what was objectionable? The truth is, personally, people have different views, preferences about this, and feelings about this. But I kind of love the rough and tumble of the academic engagement. It was part of what made me become an academic. I liked the arguing over ideas. I liked the challenging. Sometimes I got frustrated if people just kept talking in my seminar. But I always loved going to Chicago to give a seminar and looked forward to putting up that title slide and to whether people would tell me I was wrong before I even flipped to the next slide.

Josh Landy
Chicago is justifiably famous for this, and I’ve enjoyed it too. Although it’s not for the faint of heart, but I want to ask you a little bit about strategies. One of the things I found most interesting in learning about game theory is the various strategies that this you know branch of thought has cooked up for how to handle negotiation, so for example, minimizing your maximum possible loss seems like a good strategy. Or you know, in a complicated negotiation like a disarmament treaty, do it over several stages so that trust builds and accumulates over time. Or my favorite, if you’re if you’re acting against a stronger opponent, be unpredictable. So in a way, go against what you would normally do, because otherwise they’re just going to beat you. What do you think our listeners can learn from in a practical sense? You know, they could take away into their everyday lives, or their business lives, or their economic lives. What do you think is the the most helpful strategy advice to learn from game theory? The

Speaker 2
types of things that that I try to think about in in kind of just practical application in negotiation are who is the person I’m negotiating with? What what is it they’re trying to accomplish. Game theory is an incredible tool to remind you to try to think, put yourself in someone else’s shoes, and think things through from their perspective. Often in a negotiation, that’s understanding what the other person is trying to accomplish is the single most important thing to getting to a good outcome. So that’s that’s one point, and then trying to understand what are my options here? That is, you know, if if I have to walk away from this negotiation, what will that look like? If I go down this path or make this, you know, offer this or you know so so forth, what what will that look like? And sort of articulating alternatives, you know, one of the it was a there was a very influential faculty member at the Stanford Business School who taught classes on management and and leadership, and he likes has always liked to say, good decisions come from good options. I always try to remember that. What are the options? Let’s have some good options, then we can make good decisions.

Josh Landy
Well, John, it was a very good decision to have you on the show today. Thank you so much for joining us.

Speaker 2
Thank you so much for having me.

Josh Landy
Our guest has been Jonathan Levin, 13th president of Stanford University and former dean of the Stanford Graduate School of Business. So, Ray, before we. Close today. I really want to thank you from the bottom of my heart for these wonderful years working together. It’s been an honor. It’s been a delight from start to finish. Any final thoughts about this show that you’ve helped to keep alive and thriving?

Ray Briggs
Just that it’s been such a joy to get to do this. I have really enjoyed getting to be part of Philosophy Talk. I’ve really enjoyed all the thoughtful questions and comments our listeners have sent in over the years, and it’s been really great talking to our guests, and it’s been really great working with you.

Josh Landy
Well, Ray, I don’t even know what to say. I’m I’m sad, but I’m delighted that we had this time together, and I’m just in awe of your extraordinary range of talents. This is something that our listeners only get to see kind of the final version of, but I get to I get to be there behind the scenes and see just how brilliant you are at every stage of the process. So, just a million thanks for all of everything throughout these years, we’re going to put links to everything we’ve mentioned today on our website philosophytalk.org, and while you’re there, you can subscribe to our podcast for free and question everything in our library of more than 600 episodes.

Ray Briggs
Now, a man who wins at every game of speed: it’s Ian Shoales the Sixty-Second Philosopher.

Ian Shoales
Ian Shoales… Did the ancients use game theory at Troy? No, Ulysses came up with the idea of the Trojan horse all on his own. It wasn’t exactly a classroom situation. Trojan horse has since become a meme, however, an important element to much game theory, at least in conversations about it. But Ulysses didn’t call it that. He kept his mouth shut. We all know what it is now. It’s the bomb and the wedding cake, the clown with the silencer, the lovely parting gift just before the divorce comes through, because the Trojan horse was the first Trojan horse, and as such got naming rights, but also came a mistrust of Greeks bearing gifts, and the strange fact that the first dependable condoms sold in drugstores at the turn of the 20th century were called Trojans. The tin that came in showed a picture of that cool Trojan helmets containing the profile of a Trojan warrior shattered on a white background. Extinct as a dodo, Troy still fights on and mourns itself in the sterile ether, along with Custer’s last stand, Henry the Fifth, and yes, the Wild Bunch. Troy contains grief and glory in equal measure, but always seems to get lost in the shuffle between what came after the Odyssey and before Greeks grousing on the beach. I don’t get a lot of game theory myself, and even though the Trojan horse concept pops up a lot in the literature, it doesn’t seem to be actually part of that many games because it would have to be common knowledge for all participants. The game came with a bespoke Trojan horse, in which case it would lose strategic value because everybody knows what the deal is with their Trojan horse, and they just leave it on the beach for the crabs. Kind of a dumb thing to bring it into the city like that, but I guess they thought the game was over and they’d won. I’m given to understand that most art, music, culture, philosophy, poetry, games, and gaming came from this ancient Troy Greek milieu, in times of peace, the Trojans, I suspect, would play shuttlecock and 40 chess and farrow. We can see artifacts of ancient games in museums today. Naked men would wrestle in backyards and arenas, and later the Greeks would write down the rules and chide you when you broke them. Of course, there are those who say all honor died at Troy. We’ve never been the same since. But strangely, it wasn’t until the 20th century that philosophers tackled games and gamesmanship. At first, zero-sum games like poker and life, but then found that their game theories were more handy and more fun tackling economics and evolutionary theory than pondering if the smashing of the Nash equilibrium could guarantee a winning strip poker hand and a full moon to somebody who loves me and feels lucky. Probably not. Game theory does not factor this sort of thing into game play, now does it? Just sexy Trojan horses. You might say that Troy was the Garden of Eden of civilization, had borne fruit, but now the doors were closing. The gods were already fading. This Troy thing just pushed them over the edge. All powerful in Homer’s world, they vanished. Only a memory by the time of Socrates, waiting for hemlock to take hold. His last concern was to make sure a rooster was sacrificed to Asclepius, the son of Apollo, so skilled in medicine he could raise the dead. Is that what Socrates wanted? Well, he was already risen, wasn’t he? Plato was certainly chatting him up, and he wasn’t even dead yet. But this old history, the myths, the stories, the beliefs-that’s a game that never ends. But then, speaking broadly, you can say the same of Indian poker. 52, pick up, pick it up, begin again. It’s just another hand. Output uncertain. Old maid. Oh wait, the old maid is the Trojan horse of old maid, isn’t it? I might really be onto something with that cogent analysis. I gotta go.

Ray Briggs
Philosophy Talk is a presentation of KALW San Francisco Bay Area and the trustees of Leland Stanford Junior University, copyright 2026.

Josh Landy
Our executive producer is James Cass. The senior producer is Devon Strolovitch. Special thanks to Merle Kessler, Angela Johnston, Karen Ajluni, Steve Choy, and Linda Fagan.

Ray Briggs
Support for Philosophy Talk comes from various groups at Stanford University, and from the members of KALW Local Public Radio San Francisco, where our program originates.

Josh Landy
The views expressed (or mis-expressed) on this program do not necessarily represent the opinions of Stanford University or of our other funders.

Ray Briggs
Not even when they’re true and reasonable. The conversation continues at our website, philosophytalk.org, where you can become a subscriber and question everything in our library of more than 600 episodes. I’m Ray Briggs.

Josh Landy
And I’m Josh Landy. Thank you for listening.

Ray Briggs
And thank you for thinking.

Deli Boys
We put the money in here. So it’s like a Trojan horse, except filled with cash instead of whatever was in a Trojan horse. Pretty sure it was Trojans.