Risky Business with Nate Silver and Maria Konnikova How Trump is Getting the Game Theory Wrong
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Mar 6, 2025 This discussion dives deep into Trump’s tariffs through the lens of game theory, highlighting the complexities of cooperative versus zero-sum strategies. The hosts explore the implications of revenge and altruism in international relations, particularly with U.S.-Ukraine dynamics. They also dissect the audacious return of Billy McFarland and the Fyre Festival, examining the psychology behind con artists and the allure of deception. Prepare for humor and thought-provoking insights on market reactions and decision-making in a fluctuating economic landscape.
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Trump's Misunderstanding of Game Theory
- Trump miscalculates the payoff matrix of international relations by assuming an isolationist approach will benefit America.
- He believes bullying other countries will make him "king of the world," neglecting the importance of alliances for security and prosperity.
Cooperative Games in Game Theory
- Game theory applies to both zero-sum and cooperative games, with most real-world scenarios involving a mix of both.
- International trade, like the exchange of German cars for coffee beans, exemplifies a cooperative game where mutual benefit is possible.
Cooperation and Revenge
- People initially cooperate more than game theory predicts, assuming shared humanity.
- However, betrayal triggers strong revenge-seeking behavior, potentially rationalized as a long-term deterrent.