Why Game Theory Is Breaking Britain – but Could Also Save It

Game Theory examines when and why people choose to cooperate or compete. Its central insight is that our decisions are shaped not only by what we want, but by what we expect others to do. Well known game theory scenarios include the Prisoner’s dilemma, the Cold War, and on a simpler scale, even Rock, Paper, Scissors. 

An important aspect of Game Theory relates to whether and why we choose to cooperate or compete. Researchers found that the success of either strategy is dependent on how others in the system behave, and that people instinctively know this. Our decision-making routinely includes an assessment of whether the other person is acting cooperatively or competitively. 

Experiments have surprising results

Many early experimenters were surprised at the high proportions of people choosing the cooperative strategy (sharing a reward) rather than taking it all for themselves. This raised the question of why people might voluntarily forgo the higher reward. They hypothesised that people recognised benefits to acting cooperatively. If you are known to ‘play fair’, people will trust you, and that helps in your future transactions. Trust goes the other way – in a system where the majority ‘play fair’, you are confident that if you share your benefits with others now, others will treat you the same way in the future. 

A society built on trust

The welfare state and the NHS are the result of establishing a stable society that recognised the mutual benefit of cooperation: we all pay a little now, but we benefit if we fall ill or lose our job. However, these systems require two conditions to remain stable:

1. ‘Cheating’ must be punished in some way to make it a less attractive option.
2. Trust must be maintained – the promise of future reward must be honoured.

Researchers also found that the system could be ‘flipped’ from predominantly cooperative to predominantly competitive if a relatively low proportion of individuals choose the competitive strategy. As more people encountered a ‘cheater’ they learned that the cooperative strategy did not work out well, so they also switched to a competitive strategy.

Trust has been broken

The other fatal blow to cooperation is loss of trust. We contribute to the cooperative system in expectation of benefit when we find ourselves in need. This trust has been broken over the past 15 years.  One example is in the ever-increasing retirement age, which continues to be raised, despite concerns about stagnating life expectancy. The other two areas where this is hitting home are housing and health. Young people are entering the job market to find that a full week’s work will not earn them enough to be able to afford decent housing. Middle-aged professionals are shocked when they find themselves needing the NHS they clapped for, only to find long waits and barely adequate care. This breaks the social contract and erodes trust.

Extremes gain as the centre fails to hold

This triggers a switch to a competitive strategy. People who are in need of services become more aggressive in consuming them, and those who are currently the wealthiest become even less willing to pay into the system. This is why we are seeing a gulf opening up, (which is swallowing up centrist politics) and the rise of two oppositional political forces, outside the traditional parties. On the right, Reform appeals both to wealthy interests seeking lower taxation and to voters who feel the social contract has failed them. On the left, the Greens appeal to voters who feel economically and socially excluded, with their manifesto promising more social welfare benefits and to address issues such as the low-pay job economy and housing poverty.

Two very different parties, offering different solutions to different people, but actually both the same, in that the solutions they offer involve switching from a cooperative to a competitive strategy. The policies of the Greens may seem kinder because they claim to protect disadvantaged groups, but the similarities between the two challengers may matter more than the differences. Both are arguing over how to cut the cake, not how to make a cake. And both risk shrinking the cake further with extreme policies. 

Labour misunderstands the problem

Labour, and Keir Starmer in particular, are making mistakes and losing support because they interpret declining social trust primarily as a moral or cultural problem, rather than a rational strategy shift. They believe that people supported the welfare state and supported concepts such as ‘sanctuary states’ because they are ‘good’, and now that there is opposition, they believe it is because they have become ‘bad’. Labour is wrong on both counts: the electorate was not ‘good’ in the first place, and are not ‘bad’ now. Individuals were simply navigating life and trying to make the best choices, based on what they understood about the society they lived in.

We are all still doing that. We have not changed, the rules have.

The Liberal Democrats are failing to articulate their philosophy

The Liberal Democrats believe in cooperative systems, but we are not cutting through because of this loss of faith in cooperation as a social strategy. I believe the architects of our “don’t tell anyone what we stand for so no-one can hate us for it” strategy instinctively understood this: understood that what we offer is a route back to a cooperative society, but few people are buying that right now, so there may be no point in trying to sell it to them.

We should understand that people will always be driven to choose the winning strategy, so we need to re-sell the benefits of living in a cooperative society. We are not going to achieve this unless we acknowledge the way it is currently failing, and are able to offer convincing evidence that we are prepared to make the hard decisions needed and have a realistic plan.   

Our core value of cooperation

If we believe, as liberals, that cooperation benefits us all, and we respect individual freedom, we need to reject the interest-group politics of Reform and the Greens, reject the authoritarianism of Labour, and rebuild the conditions in which cooperation makes sense.