Game Theory

A short history

Game Theory was devised in 1950 by the mathematician John Nash whilst studying at Princeton for his PhD. It seeks to make a simplistic examination and explanation of human nature.

At the same time as Nash and given the presence of a nuclear arms race, the US Government threw money at research. With some of the brightest minds at their disposal they demanded instant results. This gave way to the RAND corporation who were seeking to understand how the Soviets thought, in order to create a winning strategy.

Mathematicians at RAND started to study poker games to understand how and why players behaved in the way they did. They quickly realised that in these closed scenarios, players primarily pursued one option: the most rewarding and self-interested. This option gave the player the maximum advantage over their opponent.

In response to these studies, those at RAND began to conduct a number of experiments. In these experiments, you betrayed your partner to maximise your own relative position. Nash called this game F*ck you Buddy.

This experiment later become known as ‘the prisoner’s dilemma’, the most effective means of explaining Nash’s complex equations.

It went like this:

1. Imagine you steal the world’s most valuable diamond

2. You then agree to sell it to a dangerous gangster

3. You realise he might try to kill you, so you decide not to meet him

4. Instead you agree to call him to share where you will hide the diamond and where he will hide the money

5. But just before you do, you realise you could betray him. However, you also realise that he could also betray you

6. The rational decision, Nash says is always to betray the other person because at worst you get to keep the diamond and at most you get to keep both the money and the diamond

In my next piece, I will argue why and how this theory actually stemmed from the ideas of an Italian political advisor and diplomat from the 14th century, Niccolò Machiavelli.