Exploring Madman Theory in Economics

Madman theory in game theory suggests that one can manipulate opponents by creating an illusion of unpredictability, making them hesitate in decision-making. This theory relies on the idea that an opponent believes one may act irrationally, prompting them to avoid confrontations or options that could lead to negative outcomes. A practical example discussed involves the former U.S. president threatening tariffs against Colombia, which influenced the country to allow U.S. military planes for migrant repatriation. This raises questions about the long-term effectiveness of using such intimidation tactics in international relations, as it may only yield short-term compliance without addressing underlying issues.