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Wed April 6, 2011

Budget Negotiations: A Study Of Game Theory

Originally published on Wed April 6, 2011 9:40 pm



The budget is, of course, not a game. It could have serious consequences for the economy, public health and people's jobs. But game theory is one way to understand what's happening. Game theory tries to find order in the chaos of something like a budget negotiation.

NPR White House correspondent Ari Shapiro reports on how the budget debate is a bit like a game of chess.

ARI SHAPIRO: The budget negotiations are full of complicated players who are larger than life. Politicians bluster and posture in front of microphones, and then, they do some different behind closed doors. But to a game theorist, each one of these people is a rational, logical actor.

Kenneth Shepsle is a political scientist at Harvard who studies game theory.

Mr. KENNETH SHEPSLE (Political Scientist, Harvard University): Just as in chess there are many, many paths through the game, in politics there's a lot of uncertainty about what the best way is to play it.

SHAPIRO: Like chess, the uncertainty in politics plays out within a fixed set of rules and goals. So for example, the goals of the budget negotiation game might include: number one, of course, do what's right for the country; number two, get re-elected; number three, serve your constituents - not necessarily in that order.

The problem is, the rules are different for every player, and even so, your constituents might vote you out of office for doing what you think is right for the country.

But even a complicated game like this follows a logical, analyzable path. One of the first things to note is how many players are at the table, says Northwestern University Professor Daniel Diermeier.

Professor DANIEL DIERMEIER (Northwestern University): It turns out that games that are easy to analyze are those that have few players and that have a lot of players. The really difficult part are the things in between, when you have a few hundred players just like we have in the case of the U.S. Congress.

SHAPIRO: Even in a less-complicated situation, game theory is not a crystal ball, says professor Shepsle.

Mr. SHEPSLE: The reason that game theory, and for that matter most other theories, are not much better than meteorological theories, that is we can see a day or two in advance, but we can't predict the long run very well, is that there are many, many paths to that long run.

SHAPIRO: In meteorology, forecasters say a butterfly flapping its wings on one side of the Earth can cause a hurricane halfway around the globe. In politics, the butterfly, the influencer, can be anyone. Tea Party activist Deborah Munoz rallied at the capitol last week.

Ms. DEBORAH MUNOZ: I don't know what people mean by compromise. Is that a euphemism for caving in and saying, OK, you know, we'll give you this, we'll give you that, but you can keep spending? No. It's like we need to stop this.

SHAPIRO: In the budget debate right now, she could be the ultimate reason negotiations land on $40 billion in cuts instead of $33 billion. Or she could be the reason the government eventually shuts down.

And here's something else that makes the political game tough to analyze. Chess has a winner and a loser. It's called a zero-sum game. Professor Diermeier says that is simpler than a game of cooperation like politics, where Republicans and Democrats must agree on a final budget deal, and no one will get everything they want.

Prof. DIERMEIER: We have a typical bargaining game between the president and Congress. It is always something that looks very ugly or very complex when you look at it. While everybody agrees that a certain common outcome needs to be reached, in this case that the budget needs to be reduced, there's always a conflict then between the specific interests and in this case what the constituencies want.

SHAPIRO: So while Tea Party activists say the government should shut down if the Democrats won't cut enough, the liberal group is sharing this video.

(Soundbite of video)

Unidentified Man #1: I know we talked about a one percent cut. It's going to have to be three.

SHAPIRO: On the TV show "The West Wing," President Jed Bartlett refuses to cave to a Republican House speaker demanding greater cuts.

Mr. MARTIN SHEEN (Actor): (as President Bartlett) And I said no.

Unidentified Man #1: Let's be clear, sir. We cannot, we will not vote to keep on footing the bill. You will be held responsible for shutting down the federal government.

Mr. SHEEN: (as Bartlett) Then shut it down.

(Soundbite of doors slamming)

SHAPIRO: Politics may be a game, but it is not a fairy tale. And while this debate will eventually end, there is no rule that says it will end happily ever after.

Ari Shapiro, NPR News, the White House Transcript provided by NPR, Copyright NPR.

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