Obama's Politics and Game Theory

I have been required, time and time again, to explain President Barack Obama's bargaining beliefs. Why does he always seem to get taken to the cleaners by his Republican opponents? I've grown increasingly disinclined to have these arguments. It's like being a Cleveland sports fan. Why keep cheering for a loser? Yet I do, whether it's the Indians or the Browns or the President.

With the help of Jon Elster and Cristina Bicchieri, I think I have a handle on it. Obama is a conscientious bargainer, but a slow learner. To see this more clearly, let's use something I can't use very well: game theory.

Classic two player games are designed to show what rational actors would do given specific known payoff formulations. For example, consider this:

This is a simple two player game. In this game, there is common knowledge that both players are rational. The rules are straightforward. One player moves at a time. Player I can either move down, terminate the game, and walk away with a 1, leaving player II with nothing. Or, he can chose to extend the game, offering player II a chance to either: a) move down, allowing player II to collect 2, leaving player I with nothing; or b) continue the game to the third node, where player I will terminate the game, either walking away with 3, and leaving player II with nothing, or - less plausibly - giving 3 to player II and walking away with nothing himself. Given this scenario, a rational player will take the first payoff available. If player I is rational, he will terminate the game at node 1. If player II gets the chance - because player I waffles or misunderstands the payoffs - he will end the game, walking away with 2.

Barack Obama is not rational, at least not in the simple formulation depicted in this game. He has commendable, but in this political environment naive, faith in bargaining. For Obama, the game looks like this:



Obama has confidence that as political opponents negotiate, the ability to accomplish even greater things - grand bargains - emerges. He's not wrong. A body of theory I often return to - Putnam's work on social capital - informs us that repeated engagement helps build trust and patterns of reciprocity. We get better at working together the more we try. This allows us to risk things that we might not attempt otherwise. We feel less vulnerable, because we have confidence that our opponents/collaborators will not take advantage of a concession. To illustrate what I mean, imagine a school board and a teachers' union making some difficult decisions about how to keep schools open in the face of a budget crisis. The teachers and the administrators have had a history of encounters, bargaining over issues large and small, and across that iterative history of encounters, the two sides have learned that, although they view challenges through different lenses, each side wants to serve the public good, and educate as many kids as possible, as well as possible. With that in mind, the two sides might agree to a bargain that cuts pay for new teachers, preserves pay for more experienced teachers, and creates a process requiring neighborhood school boards to make recommendations about how, and under what criteria, new teachers are given tenure and higher pay. The school board gets the cuts it wants, but surrenders some control over how teachers are assessed and rewarded. The teachers make some concessions regarding entry-level pay, but map out approaches to promotion that allow teachers working in difficult settings - violent, low income neighborhoods filled with struggling families, for example - to be evaluated by context-relevant criteria. It's a socially preferred outcome - schools stay open, teachers stay on the job - that might not be possible if the two sides were negotiating without trust and expectations of reciprocity.

Obama's problem is that he is negotiating with opponents who have no interest in serving the public good. He has been too slow to learn this, perhaps because his faith in the value of iterative negotiations is too strong. He believes in engagement, and the power of long-term rationality. If Republicans and Democrats continue to work together, he believes each party can get some of the things they want and the country will be better off. But he's misjudged his opponents, while they have quickly learned to take advantage of his vulnerabilities. What we get is something like this:

Republicans, knowing they can, because Obama is loathe to defect, continue the game across several iterations, then terminate, winning twice as many concessions as they could have had they defected earlier. Obama is left to hope he gets some political gain because he is the only participant in the game with the nation's interests in mind, or because he is the only adult in the room. But, in the meantime, his poll numbers drop, his followers are dispirited, and we haven't really done anything to help the unemployed, or regulate banks, or solve our most stubborn, long-term problems. I have many friends who believe faith is a wonderful thing. In this case, it's a handicap.

Wages and the Wages of Sin: Evangelicals as the Right's Soldiers

The comparison I mapped out in my last post - linking the collapse of democratic politics in Brazil in 1964 with the current political sentiments of the Republican Party - can be developed a little further.

As industrialization developed and deepened in Brazil in the years prior to 1964, the goods being manufactured in Brazilian factories were higher end consumer goods, destined for elites, or products, in most cases manufactured in Brazil by foreign corporations, intended for global markets. If the goods produced in Brazilian factories were manufactured to be sold to Brazilian consumers, then the state and Brazilian industrialists might have felt compelled to improve workers' pay. With better wages, consumers could buy more goods, increasing demand, creating opportunities for growth, and putting more profits into manufacturers' pockets. Because this wasn't the case, Brazilian technocrats and industrialists had no incentive to grow workers' wages. In fact, to compete in the global market, Brazilian planners and manufacturers wanted to suppress wages, to manage production costs. The result was an increasingly desperate working class which attempted, through unions and politics, to air their grievances and demand a larger share of the nation's wealth. In the end, industrialists, state technocrats, and the military stepped in to overturn democratic institutions and suppress working class aspirations.

This parallels America's present economic realities to an unmistakeable degree. American manufacturers don't produce consumer goods in any meaningful quantity anymore, with perhaps the exception of the automobile industry. The items we do manufacture - medical devices, sophisticated technology for business, precision-manufactured parts for industry - aren't targeted to rank and file consumers. As a result, it is irrelevant to American corporations whether workers make enough to buy toys and shoes and clothes and kiddie pools. What matters is how well business is doing, since the market for our manufactured goods is the business sector. Wages can drop, unemployment can rise, and Wall Street doesn't blink. But when businesses stop buying, Wall Street reacts. Over the years, America's business sector has corrupted the country's political leaders, as lobbyists and campaign contributions have marginalized the interests and the voice of nation's working class. Regulatory oversight has been dismantled, workplace safety has been compromised, the right of workers to unionized has been attacked, wages have stagnated, and the wealthy have grown wealthier, all while politicians, including Democrats, sat by and watched. Our compromised political process, incapable of producing meaningful solutions for an increasingly desperate working class, has lost its legitimacy.

In Brazil, industrialists joined with the military to overturn democratic institutions. That hasn't been necessary here. Corporations and their lobbyists have managed to render our political institutions irrelevant. Here, the coup was carried out without armed forces.

But the right does have foot soldiers to aid it in its efforts. The evangelical right, as deeply concerned about social chaos and moral decline as the Brazilian military was, has been recruited by the Republican Party to take the battle to the streets. In a nation of increasing diversity, shifting moral precepts, and growing tolerance for non-traditional forms of sexual identity, the Christian right has moved from moral panic to moral panic, accomplishing three things useful to the Republican Party. First, by mobilizing to prevent the legalization of gay marriage and address fears about the declining influence of Christianity in America's civil institutions, Christian activists have increased Republican turnout. Second, they have managed to shift the frame of political discourse, positioning moral issues ahead of economic concerns. Third, by doing so, they have divided middle-class and working-class voters, and persuaded working-class Christians to ignore appeals from their unions and co-workers, voting for morally-crusading Republican candidates, who, once elected, set about the work of suppressing wages and attacking unions. It's a cynical type of politics, divisive and deeply anti-populist.

Our Banana Republic

Years ago, when I was a student of Political Science, I focused on political development, mainly in Latin America. For a time, the literature on the subject was dominated by authors seeking to explain the collapse of democracies in Latin America, and the emergence of authoritarian regimes. One of the classics of the genre was an edited volume, assembled by Alfred Stepan, called Authoritarian Brazil. I've begun to reread it, as an attempt to understand our present politics. If that seems crazy, it shouldn't. Our politics now increasingly resembles the models social scientists once linked with the developing world: vast inequalities in wealth; persistently dysfunctional political processes characterized by the concentration of power in the hands of an economic elite; and a shift toward a politics of "authenticity," where politicians, incapable of crafting genuine solutions to deeply rooted societal ills, opt for a hyper-nationalist rhetoric, aimed at painting their opponents as enemies of the state.

The complete disregard the well-off have for other Americans, and the representation of this attitude in the politics of the Republican Party, resembles the political mood in Brazil prior to 1964, when the military seized power. The accumulation of wealth, rather than the collective needs of the wider society, has become the dominant political concern of Republican politicians. Some might argue this has been true since at least the 1980s, and Reagan's repositioning of the Party and its message. In Brazil, the "anti-populist sectors of the military and the technocracy," decided that "the accumulation process required that the instruments of pressure and defense available to the popular classes be dismantled.1" This meant overturning the electoral process and dismantling labor unions and other vehicles for the expression of middle class and working class aspirations. Those who continued to agitate for political change, demanding a voice for the politically marginalized, where branded enemies of the state, criminals, radicals who prioritized their commitment to left-wing doctrine over the well-being of Brazil.

What I see unfolding every place Republicans acquire power resembles this era. Labor unions are stripped of bargaining rights and the demands of working people interested in preserving their quality of life are portrayed as illegitimate. Working class voters are stripped of voting rights, and obstacles are erected to prevent their participation in elections. And all of this done to preserve the accumulation of wealth by a tiny elite.

Unlike Brazil, this is unfolding within the existing framework of politics. There has been no coup, no one has banned elections. Yet the motivations and the sentiments are remarkably identical. A powerful elite, no longer concerned with the suffering and impoverishment of the wider population, disconnected from the sentiments and common attachments that once joined society together, has attempted to seize political control, in order to guarantee the preservation of their wealth and lifestyle, as they see the machinery that created their wealth collapsing around them.

1. Fernando Henrique Cardoso, "Associated Dependent Development: Theoretical and Practical Implications," from Alfred Stepan, Ed., Authoritarian Brazil (New Haven: Yale University Press, 1973), pp. 145-146.