Game theory and the environment: you’re on to a winner

Game theory could save this guy’s tusks. AAP

The most serious environmental problems facing our planet require cooperative solutions. 

Ensuring the sustainability of the Murray-Darling river system requires the cooperation of several states. 

Preserving species, such as migratory birds, with ranges spanning several countries typically requires the cooperation of all countries involved. 

And reducing the effects of anthropogenic climate change requires the cooperation of all greenhouse-gas-emitting nations. 

Who should pay for climate change action?

In each of these examples, the benefits of cooperation are plain to see. The difficulties arise when the costs of the various environmental management and mitigation schemes are considered.

Take climate change, for instance. 

Sorting out who should foot the bill here raises thorny issues about global and intergenerational justice. 

How much of the cost should developing countries be expected to bear? How much of the cost can we reasonably pass on to future generations? 

While every nation wants to slow the effects of anthropogenic climate change, there is still reasonable disagreement about how much the various parties in question should pay to achieve the desired result. 

To be sure, there are other disagreements about the best ways to achieve the desired result and even about what the desired targets should be. But let’s focus on the issue of who pays. 

To put the point crudely and from an Australian perspective, a successful mitigation scheme with minimal financial or other inconvenience to Australia is better than one in which Australia pays dearly. 

The problem is that someone must pay if the desired results are to be achieved.

Enter game theory

What we have here is a particular kind of group decision problem known as a game, where one party’s decision is influenced by the actions of another party and vice versa.

The mathematical theory of such games is rich, with many important applications. 

Game theory, as it is known, was originally developed during the Cold War to model the nuclear arms race and first strike strategies. 

Since then, the theory has become indispensable in economics and is enjoying applications in diverse areas such as ethics, biology, dating, and, more recently, in environmental management and policy.

One of the enduring lessons of game theory is that in certain common situations, cooperation can be hard to achieve and may be difficult to maintain.

The stag and the hare - lessons in betrayal

We need not go into the mathematical details of the theory to see this. Consider the game known as the stag hunt

Here we have two individuals hunting for a stag. Let’s suppose that success in a stag hunt requires the cooperation of the two parties in question and if they cooperate, they will succeed. 

But there is always the possibility of one or more of the parties going it alone and defecting to hunt some smaller prey, such as a hare. 

Let’s suppose that both parties agree that a stag is the best outcome, a hare is second best and going home empty-handed is the least desirable. 

What you should do in this game depends on what the other party does — or rather, what you believe they will do. If you believe they will defect and hunt hare, you’d be a fool to continue hunting stag alone.

This just means the other party will have a hare and you’ll go without. 

In this scenario, you should hunt hare as well. And, of course, they will be reasoning along similar lines. 

If there is any question over the trustworthiness of either party, you end up with mutual defection from any agreement to jointly hunt stag.

The optimal outcome — optimal by everyone’s lights — is not achievable. The failure to achieve cooperation means that both parties must settle for second best.

No such thing as a free ride

Now consider the free riding problem. Here we have a bus passenger failing to buy a ticket. 

The passenger reasons that the bus will be travelling its designated route in any case, and no one is harmed by a single passenger failing to pay their fare. 

If this is right, every passenger should reason along similar lines. 

But then the bus system would have no paying passengers and would grind to a halt. The cooperative solution whereby everyone willingly pays their fare is unstable and is open to abuse from each and every passenger. 

Initial cooperation can easily degenerate into widespread defection.

Shirking responsibility for the environment

Many environmental problems can be understood in the same way. 

For example, free riding in greenhouse gas reduction amounts to failing to participate in the reduction of emission targets but enjoying the benefits of the reductions in question. 

In effect, free riding forces others to absorb the costs, while all parties enjoy the benefits. 

As we have seen, this response flirts with a deeply undesirable slide into complete non-cooperation.

Similarly, no nation wants to “go it alone” with greenhouse gas reductions, absorbing all the costs and none of the benefits.

Both these lines of thought are familiar enough and readily found in discussions of reducing greenhouse gas emissions. 

What game theory brings to the debate is a systematic way of structuring such cooperation problems in order to illuminate the core issues. 

Be careful what you wish for

Once the common structure of a problem is recognised, solutions from other domains can be adapted. 

With game theory in hand, we can see that the best way to stop free riding on public transport is to impose hefty fines; we make it so that it’s cheaper to pay the fare.

In environmental free riding, similar strategies will be needed, in the form of international sanctions against non-cooperative nations.

Game theory also helps alert us to unintended outcomes in the form of reactions to implemented strategies. 

For example, it has been suggested, on game-theoretic grounds, that making ivory trading illegal may in fact impede conservation efforts directed at saving African elephants. 

The idea is that banning ivory trading will result in an increase in the price of ivory and this, in turn, will motivate more widespread elephant poaching. 

We need to put environmental policies in place that guard against such unintended flow-on effects. 

Without due care, biodiversity may be one of the unintended casualties of a poorly thought through carbon-trading scheme. 

We need to ensure that reforestation at the expense of more biodiverse ecosystems is not unduly rewarded.

Cooperation the key to action

There are no easy solutions to the environmental problems we face. 

But whichever way we turn we will need to seek cooperative solutions and guard against undesirable unintended flow-on effects. 

On both counts, game theory is the tool of choice. 

Forget about thinking outside the box (whatever that means); think game-theoretically, the world may just be a cooler and greener place for it.

M. Colyvan, J. Justus, and H.M. Regan. 2011. ‘The Conservation Game’, Biological Conservation, 144(4): 246-253.