Monday, May 24, 2010

The Health Care Debate and the Prisoner's Dilemma

In game theory, there's a concept called the Prisoner's Dilemma. There are many analogies used to explain the concept, but I think the best example involves the produce market in a rural community. One vendor brings vegetables to barter; another brings fruit. Every week they trade a box of produce, and open it when they get home.

If the fruit vendor gets home to find he's received moldy carrots but had given away his freshest apples, he'll be really ticked. And in that same transaction, the veggie vendor would have received the greatest gain-- he gave away something worthless and got something of value in return. Next week each may have a strategy based on the prior week's results-- the fruit vendor may want to retaliate, while the veggie vendor may realize he cannot go on forever trading the bad vegs because eventually he'll want some good fruit for his family. So as the rounds of trading play on, there may be cycles of "betray" and "cooperate". Even if both players were acting in good faith, there may be cases where accidents of weather and hired hands that prevent one from always bringing good produce to the trade. You may or may not choose to "punish" your best friend and trading partner for a single instance of bad produce.

(Thus, bad offerings to your partner might not always be due to an active choice to defraud-- that, I believe, is the weakness of the original articulation of the Prisoner's Dilemma, which involves the plea bargaining of two thieves in court. When trying to explain PD to a child, I got caught up in questions of, "Shouldn't you always tell the truth?" when talking about the police and courts. In contrast, the fruit/ veggie analogy is free of this ethical conundrum and makes it easier to understand how trading might work.)

The same Prisoner's Dilemma may be applied to the debate over slavery in the 19th century. England eventually took an ethical stance and forbade slavery within Britain and did so decades before America did. But once it had done so, Britain now had a HUGE incentive to get the other Altantic nations to forbid slavery as well. It was now bringing fresh vegetables and didn't want to compete with vendors habitually bringing moldy fruit.

Same goes for the recent health care debate. Whether you've been vilifying the HMO execs or decrying government intrusion, in my view it is clear that the health care companies have been operating under a Prisoner's Dilemma. I believe that the competition between companies has been so stiff that have felt forced to adopt several unkind practices, such as the one involving pre-existing conditions. I can see that one HMO might feel that otherwise, they'd attract a bunch of sick people and provide disincentives for getting coverage to healthy, working, 25-year-olds. They may fear being the only one company that makes it too easy to wait until you're sick until you get coverage. They may fear being the only company bringing the freshest apples to the market, if mold is "in".

Thus, I believe I've seen the health care companies ambivalent towards proposals by liberals that make every player in the market act in a certain way, in removing a certain amount of mold from the fruit. They don't want to take it on the chin by being seen as the nicest company on earth, but are willing to play a nicer game if everyone were forced to. I cannot point to a particular article, but I got this feeling from my reading. Same goes for environmental regulations-- some businesses don't mind a playing field where everyone is required to play nicer. I think liberals need a greater awareness of the economic limitations of HMO's-- sometimes it's not always an active choice to be an arse. And I think when conservatives get alarmed at even these modest proposals to eliminate incentives to be an arse, it just shows they have no compassion.

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