Ryan Byrd’s Ramblings

I’ve railed against the Black Friday madness for the last two years. This year might be different. Of course, in years past, I’ve simply stated that if you don’t have any money, you shouldn’t go on spending sprees; mounting consumer debt and a negative savings rates are big problems for America. However, if you HAVE money, you should spend some of it. Spending money creates jobs and inspires investor confidence. But, it only works if everyone, or at least a lot of us,  do it. Given the current economic climate, people are afraid, and even if they have extra money, they’re sitting on it– putting off those needed purchases, which only exacerbates the problem. Enter economic game theory’s classic Prisoner’s Dilemma:

Two suspects are arrested by the police. The police have insufficient evidence for a conviction, and, having separated both prisoners, visit each of them to offer the same deal. If one testifies (defects from the other) for the prosecution against the other and the other remains silent (cooperates with the other), the betrayer goes free and the silent accomplice receives the full 10-year sentence. If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge. If each betrays the other, each receives a five-year sentence. Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?

In a nutshell, though the suspects would do better if they cooperated with each other, fear and distrust leads them towards betrayal, even though the results are NOT optimal. Similarly, you have money and could spend it, but you don’t want to if others aren’t going to spend their money, so what do you do? Take a chance, and spend the money. Take it from me, it’s the right thing to do. You could buy me a birthday present, for example…

related: http://www.huffingtonpost.com/david-segal/trapped-in-prisoners-dile_b_310606.html