HBR has an article by Justin Fox on the government shutdown in Washington in game theory terms. It’s good as far as it goes, but it amounts to this:
- It works, they get some of what they want
- People keep doing what works.
Let’s add some more specifics.
The article mentions that the freezing of redistricting in most Republican states means that Republicans can’t lose the House. What it fails to mention is this: they can lose their seats by losing the primary. The Tea Party (unlike progressives) is very good at winning primaries. Even if they don’t succeed in a primary challenge, their challenges are serious, and politicians don’t want to chance it. Fighting a challenge is expensive, risky and time consuming.
Fox notes that Obama has repeatedly given in.
But has he? Remember the famous FDR comment, “I agree with you, now make me do it?”
Obama has a long record of statements and actions which indicate he wants a lower deficit, wants to cut back on entitlement and spending and desires a grand bargain.
Were Republicans making him do things he really didn’t want to do? Perhaps he might have chosen to do things somewhat differently (he wants mostly spending cuts but at least some new taxes, they want no new taxes). But the goals of the Republicans (cut entitlements and the deficit) and Obama’s goals (cut the deficit and entitlements) aren’t that far apart. What they differ on is the exact way in which it should be done.
Obama agreed to past debt negotiation events because he wanted to. He did have other options. He could simply declare that the constitution says that debts must be paid, argue that one law (the debt-ceiling) does not outweigh another (the budget) and tell the treasury to keep on keeping on. There is nothing the House, alone, could do about that.
Obama, in other words, to use a game theory term, has a unilateral move: something he can do that cannot (or will not) be stopped by other actors. His BATNA (best alternative to a negotiated settlement) is to simply tell the House to suck it and keep spending. He chose not to do so.
When you’re dealing with game theory you have to consider all the players possible moves and their goals. Obama and the Republicans have been in an extended negotiation over not whether to do a Grand Bargain cutting entitlements or whether to cut the deficit, but what that bargain will look like and how the deficit will be cut.
Add in one more player: Democrats. Obama cannot, using just Democratic votes, get the entitlement cuts he wants, this was true even when Democrats controlled the House. Republicans can vote for entitlement cuts and get reelected, too many Democrats can’t. To slash Social Security and Medicare Obama must have Republican votes.
In other words, this multi-year session of threats about the debt limit, the government shutdown, the furloughs, is a multi-year negotiation between Obama and Republicans.
