Negotiations around the so-called "sequester" are at a stalemate in Washington. In order to shed light on why the issue has been so difficult- and to assess whether an agreement is likely anytime soon- Ideas got in touch with a couple of scholars who know a thing or two about strategy and negotiation. Avinash Dixit, an economist at Princeton, and Barry Nalebuff, professor at the Yale School of Management, are the co-authors of the 2008 best-seller, "The Art of Strategy," an illuminating look at how game theory plays out in all sorts of everyday circumstances. In the following interview, they talk about the dangerous game of chicken House Republicans and President Obama are playing right now, and how a snapshot of Speaker John Boehner in a Speedo might be just the thing to break the logjam.
IDEAS: When you look at the sequester situation, what types of game theory ideas do you see playing out?
Barry Nalebuff: There was a TV show, on ABC primetime, where we helped people lose weight. The way we did it, is we had photographs of them while they were essentially obese in a bikini and the deal was if they didn’t lose 15 pounds over eight weeks those photographs would be shown on national TV and essentially embarrass them into losing weight.
I think the sequestration is in many ways like this bikini experiment, which is they’ve committed themselves to an outcome that is so unpalatable that they thought they’d be forced to reach an agreement. The problem is that the demonstration of the photographs in the bikini may not actually be as bad as people thought they’d be.
IDEAS: How does it affect negotiations that we can only guess about the political and economic consequences of not reaching an agreement?
Avinash Dixit: Good strategy for both parties is to make the consequences of failure as bad as possible. But for each side it is better if the consequences of failure are really terrible for the other side, because then that will put greater pressure on the other side to concede.
BN: I think Avinash is right, except if you go too far and end up in a situation that’s so bad it’s the equivalent of suicide.
AD: Some threats are so big that the other side never believes you’ll actually carry them out. An example is, you don’t say to the person next to you at the table, “Pass the salt or I’ll stab you.”
BN: In some ways I think the sequestration would have been more effective if we’d literally taken compromising photos of legislators and randomly taken them out each day and displayed them if they didn’t reach an agreement. That would be personally more costly to them than possibly messing up our whole economy.
AD: It’s interesting to speculate what legislators would regard as compromising information.
KH: Both sides are waiting for the other to blink. But what if neither does?
AD: This is often described as a game of chicken, with two sides speeding towards each other, and you want to see which one will swerve. But the question isn’t really whether to swerve or not, it’s when to swerve. And as you delay the swerving, the risk increases that even if you actually decide to swerve at the last minute, it will be too late and you’ll crash anyway. These kinds of games are really very tricky and can end badly because you wait too long and the risk has risen to a point where it actually comes to pass. And quite likely that in fact has happened.
BN: I think one other analogy that’s interesting is between the dockworkers’ strike and the NBA lockout. When the NBA had a lockout, the primary people who lost in that were the owners and the players. There was less collateral damage. Contrast that with the dockworkers' strike. They may have been arguing over $10 million but it caused billions of dollars of loss to the economy. The sequester is a case where in some sense, the disagreement is all about creating collateral damage. That’s why ultimately I think it will lead to an agreement. But I think it’s going to be very costly.
IDEAS: How do you see this playing out?
BN: I think in this case we really will need to start seeing pain before the coalitions will form to get people to change their stances. And I think the politicians want that pressure. That’s the sort of sad part.
AD: I’m a little more pessimistic. In labor negotiations, sometimes negotiations fail and the strike starts. Experience shows that once that happens it becomes harder to restart negotiations because people have taken positions that they’re behaviorally less willing to back down from. The strike, once it starts, becomes harder to settle.
BN: I think the sequester is different because in the case of a strike, the workers are the victims and they’re being hurt personally. Whereas here, because the victims are not the legislators themselves, I don’t think failure adds acrimony to the mix.
IDEAS: Are there ways to change things so that we don’t keep getting into these kinds of crises?
BN: Here’s what I’d do. The new version of the Grover Norquist pledge is a legally binding commitment not to run for reelection unless there’s a budget. The biggest personal threat Congress could have is that they don’t get to run again. This is potentially something that could really get them to reach agreements.
Image courtesy of the White House via Wikimedia Commons
The author is solely responsible for the content.
Leon Neyfakh is the staff writer for Ideas. Amanda Katz is the deputy Ideas editor. Stephen Heuser is the Ideas editor.
Guest blogger Simon Waxman is Managing Editor of Boston Review and has written for WBUR, Alternet, McSweeney's, Jacobin, and others.
Guest blogger Elizabeth Manus is a writer living in New York City. She has been a book review editor at the Boston Phoenix, and a columnist for The New York Observer and Metro.
Guest blogger Sarah Laskow is a freelance writer and editor in New York City. She edits Smithsonian's SmartNews blog and has contributed to Salon, Good, The American Prospect, Bloomberg News, and other publications.
Guest blogger Joshua Glenn is a Boston-based writer, publisher, and freelance semiotician. He was the original Brainiac blogger, and is currently editor of the blog HiLobrow, publisher of a series of Radium Age science fiction novels, and co-author/co-editor of several books, including the story collection "Significant Objects" and the kids' field guide to life "Unbored."
Guest blogger Ruth Graham is a freelance journalist in New Hampshire, and a frequent Ideas contributor. She is a former features editor for the New York Sun, and has written for publications including Slate and the Wall Street Journal.
Joshua Rothman is a graduate student and Teaching Fellow in the Harvard English department, and an Instructor in Public Policy at the Harvard Kennedy School of Government. He teaches novels and political writing.