The Prisoner's Dilemma, or: Why Forced Charity is Harmful to Society

I wrote this today and thought everyone here might enjoy it.

The premise of the prisoner’s dilemma is as follows (Copied from Wikipedia):

There are two players and a banker. Each player holds a set of two cards, one printed with the word “Cooperate”, the other printed with “Defect” (the standard terminology for the game). Each player puts one card face-down in front of the banker. By laying them face down, the possibility of a player knowing the other player’s selection in advance is eliminated (although revealing one’s move does not affect the dominance analysis). At the end of the turn, the banker turns over both cards and gives out the payments accordingly.

If player 1 defects and player 2 cooperates, player 1 gets the Temptation to Defect payoff of 5 points while player 2 receives the Sucker’s payoff of 0 points. If both cooperate they get the Reward for Mutual Cooperation payoff of 3 points each, while if they both defect they get the Punishment for Mutual Defection payoff of 1 point.

In summary:
Both players cooperate = 3 pts each
Both players defect = 1 pt each
One player cooperates and the other defects = cooperator gets 0 pts and defector gets 5 points

The best simple pattern for repeated play against a single random person is to cooperate at first, then do whatever your opponent did on the previous term. This is called the “tit-for-tat” strategy.

However, suppose you are in an enormous building playing the game with an uncountable number of other people. After every move you can choose to continue to play your previous opponent or move to someone else. In addition, you must mark the number of cooperations and defects you have made on a card that is visible to everyone. What is the best strategy now? It is cooperating with other cooperators, and avoiding defectors completely. In effect, the cooperators are “rewarded” and the defectors “punished”. It is also advantageous to the entire group to try to “rehabilitate” some defectors into cooperating.

The prisoner’s dilemma is constantly being played in our world today. People agree to contracts with other people. If they both follow through, both are better off. If they both decide to reject them, no one is better off than they were before. And if one agrees to sell an car, or anything else for the matter, but runs off with the money, than the scammer is a little better off than if he had not performed the barter (he has the money and the car, after all) and the buyer is worse off. Once people get bad reputations, it is hard to redeem them unless they start proving their trustworthiness through keeping agreements with the (now) relatively few people that agree to them.


My point:

Social Security, tax-payed health care, and welfare programs do not just limit people’s liberty:
They force people to “cooperate” with others who have histories of “defecting”.

As we have seen from the dilemma, the strategy for maximum points is cooperating with other cooperators and AVOIDING defectors completely or DISCOURAGING them from defecting.

I am not saying that all poor/old/sick people are defectors. However, SOME are, and SOME is all that is needed to make the systems detrimental. I would love to be able to give money to people who need it. However, I also want to make SURE the people receiving it are trustworthy and honest. Currently, the government mismanages my earnings AND gives it to people I would have NEVER given to if I had the choice. Sooner or later people have to realize that societies only work when those that cooperate benefit more than those who don’t, and the exact opposite is going on right now.

As I have often been told by people on this website “somebody will have to hold the bag in the end”. Or as Prof. Rozeff rightly wrote on LRC (I am NOT quoting verbatim) we wish our children and grandchildren all the best in the world but we are hoping they’ll pay for our mistakes sometime in the future well after we are dead.

Bismarck knew very well the State-funded pension system was a scam but his only objections were towards the possibility of this scheme taking away money from his arms race with France and Britain. The scam has worked ever since but it’s beginning to show some deep cracks. We live longer, we have less children, we cannot raise taxes that much anymore hence financing the pension system is becoming harder. Countries like Japan and Italy will probably face a colossal financial and social crisis over pensions in the next fiteen years.

No matter what the situation, people need economic opportunities more than handouts. It’s better to employ a man, than to pay him to sit at home doing nothing. It is better to find something the old can do that is productive, than to pay them to wait out their days, or provide a retirement lifestyle because they are entitled to stop working at a certain age.

The state removes rational calculation, whether it is distorting money, whether it is regulation of prices, or forced trade between parties with incentives NOT to trade. Ultimately, this chaos leads to wealth destruction and the devolution of society.

When I originally authored this I hadn’t thought of that. Thanks!

Well said, well said.