The Predictioneer's Game and Prisoner's Dilemma (the book)

This post is dedicated to reviewing my two main sources of information for my study of game theory: Prisoner's Dilemma by William Poundstone and The Predictioneer's Game by Bruce Bueno de Mesquita (BDM).

PRISONER'S DILEMMA

Let me begin by saying that if you're even slightly interested in learning about game theory, you need to begin by reading this book. Game theory is not a subject that one can just delve into without any prior knowledge because it is quite mathematically complex. I learned this lesson the difficult way; when I first started studying game theory, I used the Internet just like almost of us would do. Unfortunately, most of the information online falls under two extremes: either it was too basic for someone to reach a novice level of understanding or it was so complex that it already assumed you know a significant amount of game theory beforehand.

Prisoner's Dilemma is great for beginners because it isn't just another mathematical book about game theory. Sure, some math is involved, it has to be to illustrate the concepts. But at least the examples are all user-friendly. Also, it serves as an excellent biography of John von Neumann and as a brief history of nuclear weapons and the Cold War. In fact, most of the applications that Poundstone uses come from the Cold War. For a book that is discussing one of the most complex theories in mathematics, Prisoner's Dilemma is surprisingly easy to read and, dare I say, a page-turner!

In addition to what you'd expect a work of this caliber to be, Prisoner's Dilemma also boosted my confidence that I could understand what game theory was, even if it was at just an introductory level. When I first started this process, I really underestimated the complexity of game theory and I experienced serious doubts about whether I could handle the subject. But when Professor Wheaton recommended it to me in class, and I started reading it, I was able to refocus my goal. I'm pretty ambitious and I thought I could teach myself the mathematical intricacies of game theory. When I (quickly) realized that that wasn't realistic, Prisoner's Dilemma allowed me to recognize that most people probably didn't know much about game theory besides that it existed and maybe what a zero-sum game or the prisoner's dilemma was. I can say with absolute certainty, that without this book, none of what you're reading on this blog would've been possible for me write about. Prisoner's Dilemma discusses most of the main concepts of game theory in a way that makes the reader want to increase his or her knowledge to the point where he or she can understand complex proofs, at least in my opinion. Bottom line: if you want to learn about game theory, you MUST to read this book.

THE PREDICTIONEER'S GAME

Bruce Bueno de Mesquita is one of the world's leading game theorist, if not THE leading game theorist today. Although he's written several texts, this one is aimed at the average person who probably has not had extensive exposure to game theory. I like to compare it Freakonomics, but it's not quite as good. Unlike Prisoner's Dilemma, BDM's book is more about the application of game theory to real-world situations rather than an introduction to the theory itself and the use of historical examples to illustrate the theory. In addition, he acts like a salesman on behalf of game theory. That is, he argues that game theory can be used not only to forecast the future, but if used properly, to actually shape future events. In fact, I developed the model for my personal application using BDM's recommendations. Unfortunately, his constant reference to his model never leads to him revealing what that model is, therefore, without his algorithms it would be nearly impossible for a game theory novice like myself to recreate it.

Although the book is quite an interesting read, and accessible to average reader, BDM's ego shines brightly. He never misses a chance to congratulate himself on his successful predictions as is clearly evident with is discussion of the Israeli-Palestinian conflict (he predicted the 1993 accord in 1991). Moreover, even though he devotes an entire chapter to his failure to predict the outcome of the 1994 health care debate, he blames the fact that he did not have the most accurate information. He even claims he would have been right if Illinois Rep. Dan Rostenkowski was never indicted on federal corruption charges! I'm not sure how he can say that since that's not what happened. That's one of the biggest criticisms of game theory, by the way; the notion that if the expected outcome never comes to fruition, the flaw occurred in how the model was used, not that the model itself is flawed (although I'll give BDM credit for admitting he needed to change his model to account for unpredictable events).

Up until now, I've been pretty harsh of my critique of The Predictioneer's Game, but in reality, for all the issues I had with it, the book did come in pretty handy. Like I said earlier, without BDM's recommendations, I would not have known where to begin building my model (see Week 5's post for the recommendations). In addition, even though I was not able to replicate his model, because I did not have access to his algorithm, by using his recommendations I did not need a complex equation to build it. And that is the main lesson I learned from reading this book: that in order to apply game theory, you do not necessarily need a complex algorithm to arrive at the rational solution. Of course, having those complex algorithms would allow an analyst to express more confidence in a forecast, but it's better than nothing. Although The Predictioneer's Game is not quite the necessity Prisoner's Dilemma is, I would recommend it to anyone who has an interest in game theory. It is an easy and interesting read and helps lessen the intimidation factor of game theory.