Free Markets, considered as bicycle races using the game "Slip Stream" from Game Theory.
Much is being said these days about Free Market solutions to :
Health Care,
Global Warming.
I would like you to think for a moment whether Free Markets even exist?
I've recently been "in talks" with Libertarians, and others Free Marketeers. I can tell you, these people believe in the absolute "the free-est market". They are serious, they think there is way way too much regulation of "EVERYTHING" now.
I've been at them--at the very rug they stand on--giving it a good pull.
If you think that Free Market solutions don't work for Health Care Reform, or Global Warming, you may want to use this argument after this...
This essay asks, are Absolute Free Markets even possible?
The game "Slip Stream", suggests that they are not.
The Paradox of Free Markets--can they ever be really free?
Free Markets, considered as bicycle races, using the game "Slip Stream" from Game Theory.
In recent discussions online and in person, I've explored with friends if Free Markets could be free. I went to a Libertarian meeting last week, and this is what I offered them.
The Game "Slip Stream".
Slip Stream, is a game in Game Theory, and a slice of life metaphor that Reed Aronow would appreciate right now.
First a brief word about Game Theory. Game Theory, is really just "Strategy Theory", and was given the name by statisticians, and they often referred to interesting problems as "Games", in reference to the statistics of gambling.
Game Theory, is given the name in 1935 by Jon von Nueumann and Oskar Morgenstern, they discover the "MiniMax" theorem which is extremely analalogous to Chess. Game Theory, was in heavy use when we were trying to determine Nuclear War fighting strategies. While Game Theory is often given Nobel Prizes in Economics, it's in use in Philosophy, Evolutionary Theory, Psychology and Sociology. It appears that the latest Nobel in Economics winners, are shared between two complex decision-games. Enough.
Lets take a look at a game you already know from life, and see if it doesn't describe the decision making process we see at work in so-called "Free Markets".
Last week, when I met my Libertarian fireside chat group, I began with this :
The Big X, that's what I call it, or the "relationship between group size and outside threat".
As the outside threat increases, group size falls. This is classic thinking in both Biology and Psychology.
And in life, this relationship is used by Biologists to explain why fish school or elk herd. The outside threat--a shark, a wolf--induces cooperation in the group. But, when the threat leaves, the animals go back to competing amongst themselves.
Now, let's look how it effects humans for a moment. Like Republicans and Democrats. When out of office, subgroups form up and become one. For the Republicans : Neo-cons, Joe-six pack, Religious Fundimentalists come together when they feel threatened and out of office.
But when in office they don't feel threatened, Democrats can then split apart. Subgroups start to form, and split apart and compete amongs themselves. They each ask, "isn't our group--ignorred and the most important--shouldn't our issue come first?" And then we see that the Democrats are really composed of sub-groups like : Minorities, Education, Unions, Environmentalists, and they all start to compete again when in office, with each other.
So, we have this relationship, between threat and group formation built into us. It goes way back, back millions of years.
It is instinct.
Note, if you looked out the window right now, and saw UFO's with Purple-Death Rays raining down that threatened mankind's existence, wouldn't we cooperate with North Korea and Iran, till the UFO's were gone? And when they were gone--we would resume competition.
And now, our game that describes this behavior. You may know it already. Game Theory, often finds everyday "games" to describe strategic decisions, and today we will turn to a game called "Slip Stream".
Have you ever watched the Tour de France? I spent hours next door watching it on cable at Josh's house. We discovered, that we'd been fans of bicycle racing seperately for years, and we were both delighted to find someone else that understood the complexity and subtlety of bicycle racing.
The Tour de France is a complex race. Teams compete. The primary on every team, is "helped" in any way possible by teammates. They may hand them their own water, or exchange bikes if the principle's goes down, or they will "slip stream" for them.
Slip streaming in bicycle racing is critical. The majority of reisistance in the race, is actually wind resistance. Team mates, take the burden away from each other, and bike ahead in narrow collums almost touching the wheel of the rider in front. In this position, the rider behind feels far less wind resistance because the rider ahead carries that for them. From this resting position, the team leader can rest behind team mates and save himself for the finish.
Now, lets' look at two leaders shall we? Lance Armstrong, for most of his carreer had one person that was his biggest threat named Jan Ullrich of Germany. They competed against each other for almost a decade. With every interview they had with someone knowlegable, they were ALWAYS asked, "what about the other one?!" I'm sure, they even dreamt about each other, and they would have had to know everything about how each other breathes and races. And, they rather hated each other...
But, when they were in actual Tour de Frances, and they were in the lead as a competing duo out front, what would happen?!
They would very often slip stream, and cooperate.
Why?
Because, when just the two of them were out front, and they looked around and saw the Itallian and the Swiss guy that weren't on either of their teams, they would always immediately start to cooperate and slip stream.
Why?
Because, they didn't want others, to come up to the lead pack and join them. Life and the Tour de France, are races. We compete for limited resources. We meet resistance, we have to conserve energy/money/resources.
But, Armstrong and Ulrich, had no reason to want non-team members in the lead pack.
Their chances of winning the race, went down with every racer they added to the lead pack. Together, they shared a 50-50% chance of winning. If they added 4 racers to the lead pack, their chances went down to 1 in 6. So, they fall with everyone that joins this front pack.
If they turned around and saw two people behind them, from the same opposing team, that would be an even bigger threat because the lead pack would know that those two would certainly cooperate all the time, not just when threatened.
But, when the lead two are threatened by someone from behind, they cooperate and immediately without any communication slip stream. Once they look back, and see no threat, they would immediately resume competition between them.
And so it is in life.
When Independent Jesse Ventura became Governor of Minnesota, we often saw the Democrats and Republicans cooperate and compete against him.
And when we look at Markets, note the leaders often cooperate to keep competition from joining them.
When Big Oil, looks behind it and sees Ethanol approaching, Big Oil tends to cooperate and reduce prices until Ethanol goes away and competition may resume.
Big Insurance, normally competes with each other, but right now they are cooperating and wanting the public option to not join the lead pack.
The point of Slip Stream is this.
Free Markets, may not really exist except in theory. Because the market leaders will tend to cooperate, and keep competition out. And the mechanism for it is instinctual and built into us all. Free Markets--self regulate, in that the leaders restrict competition and cooperate to keep others out.
Free Markets, appear to be a paradox to me, because the leaders tend to Slip Stream.
Or, this is a way of "modeling decisions in near monopoly conditions".
Markets, over time if stable tend towards fewer players. If markets are in a changing environment--say data storage for computers that went from in my lifetime :
Cards,
Tape,
8 inch disks
5 inch disks
3.5 inch disks
Hard Drives
Optical Drives
Terabyte Hard Drives
Flash Drives.
In a changing environments, either biological or economic, there tend to be many players.
But, in a longer term more stable markets, players tend to shake down to fewer players, and near monopolies form. Such as the once 150 year stable--news paper market. There are about to be many players in their niche again. When there are fewer players, they will tend to slip stream new competition.
The fewer the players, the greater the tendency to Slip Stream.
Slip Stream, "models decisions in near monopoly conditions", and we look around and see many of them.
Free Markets regulate themselves, in that the market leaders turn around and try to make sure there is not a Free Market!
Free Markets, exist in theory it seems to me, but not in real life.
For many though, Free Markets are the solution to Health Care and Global Warming.
Relying on Free Markets, may only work in theory, because the market leaders have no self-interest in a truly free market.
Mac vs. Pc :
Mac and Pc vs. Linux :
Do Mac and Pc Slip Stream Linux?
Does the Carbon Energy Industry Slip Stream Green Alternatives?
Does the Insurance Industry want a truly Free Market, or do they wish to Slip Stream?
Update, I'll be videoing I hope, Lord Monckton, Climate Change denier and Thatcher Cabinet member at "The Free Market Institute" tomorrow night at Bethel College Minnesota, here's a link. Check back in a day to see what Lord Monckton thinks is the free market solution--to climate change that isn't happening...