Academic journal article The Cato Journal

Leadership, Prisoners' Dilemmas, and Politics

Academic journal article The Cato Journal

Leadership, Prisoners' Dilemmas, and Politics

Article excerpt

The prisoners' dilemma is a ubiquitous problem that can be effectively addressed by good leaders, but which is a major obstacle to achieving good leadership. A prisoners' dilemma is a situation where the behavior that is rational for the entire group is irrational from the perspective of each individual in the group. (1) For example, even if it is in the interest of everyone in an area for air pollution to be reduced, it may not be in the interest of anyone to incur the personal cost of reducing pollution. In this case, the suckers' payoff results from reducing your pollution but still suffering from the pollution of everyone else, none of whom reduced theirs. Or, to consider an example more relevant to our subsequent discussion, even if all groups in a political order would be better off if fewer resources were devoted to lobbying government for transfers of existing wealth so more could be devoted to creating new wealth, it may not be in the interest of any group to reduce its lobbying. The suckers' payoff here goes to the group that does not lobby for, or receive, any government transfers, but still has to pay for the transfers going to all the other groups that did lobby.

All groups confront prisoners' dilemmas of one type or another, and good leadership can help them deal with those dilemmas in ways that promote their members' interests. As Mancur Olson (1965) pointed out, just because everyone in a group would benefit from achieving a goal does not mean that it is the interest of anyone in the group to contribute to the goal.

This disconnect between the general interest of a group and the interest of each individual in the group is an obvious example of a prisoners" dilemma (although Olson did not use that term), and it points to the importance of group leadership. Good leadership can benefit group members by focusing a group's attention on generally beneficial goals, and encouraging members to contribute to those goals by lowering the personal cost or increasing the personal benefits of doing so. In other words, good leaders can enhance the welfare of a group by overcoming an internal prisoners' dilemma--facilitating collectively action that would not be in the interest of any one member to initiate unilaterally.

But the connection between good leadership and prisoners' dilemmas goes beyond dealing with internal prisoners' dilemmas. Often the advantage of group solidarity achieved by overcoming an internal prisoners" dilemma derives from the need to better confront an external prisoners" dilemma--one involving other groups, with the temptation for each to behave noncooperatively. Of course, when all groups behave noncooperatively, they end up with the worst possible collective outcome, but if one group behaves cooperatively, while the others do not, it ends up with the worst possible individual outcome--the suckers' payoff. Ideally, good leaders will achieve the group unity necessary to overcome the prisoners' dilemma by reaching cooperative agreements with other groups and their leaders, and then implementing and enforcing those agreements. When it is not possible to overcome the external prisoners' dilemma, then good leaders have a responsibility to reduce the harm their group suffers from the noncooperative behavior of others, which can mean engaging in noncooperative behavior itself to avoid the suckers' payoff. (2)

Unfortunately, good leadership is not always in the interest of leaders. Instead of benefiting a group as much as possible by helping it overcome prisoners' dilemmas, leaders can sometimes benefit at the expense of the group by taking advantage of an internal prisoners' dilemma commonly known as the principal-agent problem. (3) All members of a group would be better off if each contributed to monitoring and disciplining their leaders to align their interests to that of the membership, but no single member has a motivation to make such a contribution no matter what he believes other members will do. …

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