Game Theory and Public Policy

Game Theory and Public Policy

Roger A. McCain

Game theory is useful in understanding collective human activity as the outcome of interactive decisions. In recent years it has become a more prominent aspect of research and applications in public policy disciplines such as economics, philosophy, management and political science, and in work within public policy itself. Here Roger McCain makes use of the analytical tools of game theory with the pragmatic purpose of identifying problems and exploring potential solutions in public policy.

Chapter 15: The Government Game

Roger A. McCain

Subjects: economics and finance, game theory, politics and public policy, public policy


This chapter sketches a non-normative theory of the state. For much of history, the vast majority of people have been governed by something we may describe as a state: a body defined on a particular territory that claims a monopoly of predictable violent force among all residents of that territory. Using the game-theoretic approach of this part of the book, such a predictable phenomenon should correspond to a highly stable solution of a game, which in turn would be a stylized description of interactions we may reasonably suppose that most people find themselves engaged in. While government has often been considered as a grand coalition for the purposes of producing public goods, we will see that this is a somewhat confused conception. We have already seen that the grand coalition is neither highly nor uniquely stable for public goods games in the model of encapsulated cooperation, and that public goods may be provided, though inefficiently, by coalitions that exclude some free-riders. Moreover, there may be many public goods, and no prima facie reason for a unique coalition to produce them all. Indeed, it may be that the assumed identity of the state and the producer of public goods is a source of some of the muddle about the role of the state. Some muddle also arises from the lack of clarity about the purposes of a theory of the state. If the purpose is normative – concerning what the state ought to do – then efficient public goods production is one of...

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