 In the past 10 to 20 years, interest in social dilemmas has grown quite dramatically within many domains, particularly those resulting from overpopulation, resource depletion and pollution of various kind. And we can note the study of social dilemmas is today one of the most interdisciplinary research fields, with the participation of researchers from anthropology, biology, economics, mathematics, neuroscience, political science and psychology among others. The social dilemma captures the core dynamic within groups requiring collective action, where there is a conflict between an individual's immediate personal or selfish interests and the actions that maximise the interests of the group. At the heart of social dilemmas lies a disjunction between the costs to the individual and the costs to the whole, or benefits to the individual and benefits to the whole. We call this value that is not factored into the cost-benefit equation of the individual and externality, and it is externalities that create this disjunction between the parts and the whole and result in the social dilemma. As an example of a social dilemma, we can think about the voting process within democratic political systems. In such a system, citizens are periodically called upon to make informed decisions about who should manage their country's government. Many choose not to vote, but of those who do, in order to make an informed decision, they have to gather and process information about the various candidates. Since each person's vote is unlikely to affect the outcome of an election, and everyone knows this, there is little incentive to the individual to increase their knowledge about relevant issues and overcome misinformation or preconceptions. The benefits of collecting and processing the information are diffused over the whole population, but the cost of doing such action is carried by the individual. Informed voting is then what we would call a public good. As another example, we can think of a situation where during winter, people in a village are asked to keep their thermostats low to conserve the limited amount of energy available. This would, though, require them to suffer from the cold without significantly conserving the fuel supply by their individual sacrifice, yet if all keep their thermostats high, all may run out of fuel and freeze. What is happening in these games is that there is a positive or negative externality. Some of the value that is being generated by the individual is being externalized to the whole organization. Thus this external value cannot be immediately factored into the cost-benefit analysis of the individual taking the action. If the system is simply operated according to this immediate cost-benefit analysis of the individuals, then there will likely be an undersupply of the required resource. Equally, we can have negative externalities, the classical example being air pollution and traffic jams. An important part of the social dilemma is that at any given decision point, individuals receive higher payoffs for making selfish choices than they do for making cooperative choices, regardless of the choices made by those with whom they interact, and everyone involved receives lower payoffs if everyone makes selfish choices than if everyone makes cooperative choices. One of the interesting things about the social dilemma is that it is not a feature of the agents involved but of the structure of the game. It has nothing to do with the personalities and particular motives of the individuals. It is a tragedy because you know what the outcome will be, but you cannot individually do anything to avoid it. Given only the self-interest of the individuals, no one has an individual motive to change their behavior even though everyone will be worse off. Our traditional tools of non-corruptive game theory that are focused on the immediate costs and benefits to the individual only really work when there are a limited amount of externalities. As soon as the externalities, both positive or negative, go above a certain level, we have to think and act collectively. Many private goods are rivalrous, meaning they can be only consumed by one agent and they are excludable, meaning it is possible to exclude others from their use. This reduces the externalities from the item and thus makes it possible to associate the value of that item with an agent and factor it into their cost-benefit analysis. Goods are public when they are considered both non-rivalrous and non-excludable, meaning that there will likely be many externalities and thus they cannot be effectively managed by the immediate cost-benefit analysis of the individual agents in such a case the social dilemma arises. When people can benefit from the positive externalities and produce more of the negative externalities without paying, the result is a macro-level imbalance that leads to the system being rendered unsustainable over time. As we'll talk about further in a coming video, there are essentially two different approaches to solving this imbalance and managing collective action towards dealing with the social dilemma. The organization can try to create some top-down structure that regulates the system to ensure that those who create negative externalities pay for them and those who create positive externalities in turn get reimbursed for them. This works to reintegrate the externalities into the cost-benefit analysis of the agents and thus try to maintain a macro-level balance and sustainable outcomes. This is our traditional approach taken to the situation, the classical example of which would be governments that use force and incentives to regulate the system towards these ends. Equally, a second approach is to increase the degree of connectivity between the agents and thus the potential for a higher degree of interdependence between them, given that interdependence means that what happens to one agent becomes correlated with what happens to another. As interdependence between agents and between the individual and the whole increases, externalities decrease because there's nowhere for them to go and the agents have to increasingly fact them in within their own decision-making process and this is one approach to managing the system and potentially solving the problem. Externalities are always a function of independence. If two things are one, then there is no possibility for externalities. The more independent they are, the greater the possibility for externalizing things. Thus, all solutions to externalities and a social dilemma would involve creating positive interdependence between the elements in the system, but different approaches will do this in different ways. We'll pick up this theme again in a future video where we go deeper into ways of solving the social dilemma. In the next section, we'll look at what game theory can tell us about the social dilemma as we talk about public goods games.