 Hi, Professor Friedman. Again, Department of Economics, University of Massachusetts. We're here today to talk about Prisoners' Dilemmas. These are a lot of fun. And note that in the course syllabus, there's a link to a game conducted on some British TV show. That's a Prisoner's Dilemma. Check it out. It's really cool. Okay. Why do economists talk about games? You know, we're not the athletic department. When we talk about games, we mean social interactions, strategic interactions, with what happens to you depends on what others do. And you know this, and they know this. So you choose a strategy based on what you think others are going to do. And they choose a strategy based on what you are going to do. So we're moving a little away from the neoclassical or the orthodox world where Robinson Crusoe stuck on his desert island. Now there's Robinson Crusoe and Roberta Crusoe or something. Two people. And they're both thinking about how to do the best for themselves given what the other person's going to do. You've already been in this game. Some of you may be first year students. Others in college. Others, you know, remember being in high school. Senior year in high school in Massachusetts, people are supposed to drive to school and not take the bus. I found this out when my older daughter was a junior. And at the end of the year, she asked me, are you getting me a car? I said, no way! Why would we do that? Haven't you ever heard of global warming? And she said, well, how am I going to get to school? I said, the way you always have. On the bus. She announced to me, seniors don't take the bus. I took this information to my class and they were very upset that I wouldn't get her a car. They told me I was going to ruin her social life if I made her take the bus to school. I figured it out, but think about it. You drive to school. Your friends are thinking, what are they going to do? Are they going to drive to school or not drive to school? You want to drive and you want nobody else to drive because your favorite situation is where you're driving, you're cool, you can park easily, you don't have much traffic and nobody else is driving which makes you extra cool. Your friend's favorite situation is she drives, nobody else drives, you stay home and take the bus, she gets there more comfortably, parks easily, no congestion and lords it over you. There's another possibility which is nobody drives and you all take the bus and it's like, well, okay, at least there's no congestion. And the worst possibility of all is you all drive. Nobody's cool because everybody's driving, everybody has to get a job after school to pay for the car. There's lots of congestion and you actually leave the house earlier than if you took the bus because of all, because you can't park anywhere near the building. Okay, you could put this into a table. You drive, your friend drives, horrible traffic, horrible congestion, you drive, your friend takes the bus, you're cool, they're miserable. You take the bus, your friend drives, you're in a box over here, where? She's cool, you're miserable. Or everybody takes the bus, you're in a box down here and you just live with it. This is the same situation that Greek philosopher Sakretis faced in one of his dialogues he talks about, how he was in this battle. And he sat there thinking, hmm, if we win, nobody will care what I do because we'll have won. But if I fight, I risk and kill. If I run away and we win, fine. If I run away and everybody else runs away, we get slaughtered. If I fight and my friends run away, then I get killed. Prisoner's dilemma. Same situation that happens with bad guys. Two thieves captured by the police. The police didn't see them do it. Police have some evidence. Put them in separate cells. You've seen this on Law and Order and other police shows. You go into one bad guy in a cell, you offer them a deal. Rat on your friend and you'll walk. Your friend gets nailed. What do you do? Do you rat? Or do you keep quiet? If you all keep quiet, you'll be okay. If you rat and your friend keeps quiet, your friend goes to jail for a long time and you walk away. The problem is your friend's thinking the same thing. So what do you both do? You both rat on each other and you're both screwed royally. Worst situation possible, just like you all driving to school, or everybody fleeing from the battle. You all act on your best interests thinking about what the other person's going to do and you all end up worse off. Prisoner's dilemma is also about good guys. Think about how much money you spent on your prom dress, or your prom van or whatever it is. You get this escalating war where everybody's trying to outdo the other, get a higher status activity. Prisoner's dilemmas undermine the idea that individual action can lead to a social optimum. The social optimum may be you and your friends all get together and set standards for the prom dresses, for the prom vans, for how much money you're going to spend on corsages for your friends, and things like that. All get together, collectively govern these things. Left to their own devices, the prisoner's dilemma and game theory indicates a situation where people's individual choices can lead to the worst situation possible. If you have any doubts about that, think about the little island nation of Tuvalu, which is sinking under the rising seas because so many Americans drive their cars to school. Thank you.