Thursday, June 7, 2018

The G7 summit is a real-life example of The Prisoner's Dilemma

Leaders of the G7 
​(the seven largest developed economies in the world) ​
will gather on June 8-9 at the 
Fairmont Le Manoir Richelieu, in La Malbaie, in the beautiful Charlevoix region of Québec, Canada.

One of my co-workers referred to it as the G6 + 1, as one of the seven participating nations has acted antagonistically towards the other.  That nation has been singled out for special attention at the summit.  The other six nations want to know WHY that nation has acted, as it has, in a hostile manner toward the others.

So it's not 7 nations, its 6 
1.   There are
​ really two groups
, and this is a real-life version of what is known in game theory as "The Prisoner's Dilemma", which explains why it is not in the best interest of the six to ignore the actions of the other.
The G7 was formed because all of those nations agreed to act as 
The decision that six
​ of them​
 now face is whether they should consider the seventh friend or foe.

The issue is protectionist trade tariffs.  One of the nations in the G7 acted aggressively toward the others in imposing 
​trade tariffs on imports from the others, 
in the expectation, probably, that those nations would not retaliate in kind.  To do so would mean a loss for everyone.  But here's the thing:  game theory would say that 
to retaliate would mean
​ that​
 the one nation who acted as a foe of the other six will pick up ALL the money on the table
​, and emerge the ONLY winner of the game.​

However if, at this summit, all parties agree to co-operate 
​ ​
in dropping 
tariffs, instituting free trade, they
​ ​
​will ​
reap benefits from
​ ​
that free
​ ​
​  ​

The one nation that has decided to act like an enemy of the others is betting that timidity will keep those other nations from calling this what it really is, hostility, and from calling that nation what it is, an enemy.

​Which is why this summit is so important.  Will six defer to one, or will they stand united against the rogue nation?

Fairmont Le Manoir Richelieu
La Malbaie, Québec