Towards equilibria-breaking methods
All of this is vague intuition.
Much has been said about the problems of Nash equilibria. I’ve been wondering about how to quantify these sorts of problems. From Moloch’s Toolbox:
3. Systems that are broken in multiple places so that no one actor can make them better, even though, in principle, some magically coordinated action could move to a new stable state.
My animating thought is that information and incentives aren’t evenly distributed, and further there is an important time dimension to the problem. I expect it should be possible to temporarily disrupt any given equilibrium. From disruption, a better equilibrium could be reached. Alternatively, maybe it is possible to go directly to the better equilibrium.
We should be able to get knowledge of the actors.
Information, which is to say beliefs-about-the-current-equilibrium, is not perfect or even among them. How imperfect and how uneven?
With knowledge of the actors, we should be able to get a distribution of their incentives.
Now we know how many actors, and their incentives, and their information. With this knowledge, we should be able to determine how big an incentive we need to offer in order to shift them into a target equilibrium.
If we want it to be a new equilibrium, we will need to affect enough actors to make it fairly stable. How many actors will we need, a la the hundredth monkey effect?
It is probably important to be able to tailor incentives to actors.
My intuition for the threshold is that the weaker the belief in the current equilibrium, the less incentive will be required to shift them. So the target is something like (current incentives from equilibrium + incentive to overcome belief).
I think of this like surveying a rock face for blasting. Once we identify the lowest-dynamite method, anyone else with enough dynamite can come along and detonate.
My default assumption is that this will take the traditional form of getting a lot of capital and using that to directly or indirectly provide these incentives. Under this assumption there needs to be a reason for that capital to be available, which is to say a profit; maybe this is realizable through market operations directly. Alternatively this could be the vehicle for a startup’s pitch; it seems like this process would qualify as superlative market research.
However, it does occur to me that actors might be more like individuals who work in key positions, rather than entire firms. If that is the case I expect the belief-disparities to be even higher than they would be for firms, and the cost of shifting them probably smaller.
Near as I can tell, no one has really taken a startup-pitch-worth of effort to describe an attempt at shifting an equilibrium, especially not in the sense that we talk about them.
I think it’s important to distinguish knowledge, incentive, and trust. Many (perhaps most) coordination problems are _not_ about knowledge, they’re about trust. All players know there’s a better equilibrium possible, but without a trust/enforcement/guarantee mechanism, none of them will risk being the punished minority who changes when others don’t.
Trust is part of what I was gesturing at with beliefs-about-the-equilibrium, but it feels like that would be the hardest thing to quantify. I have been mentally equating “how far can I trust this player” with “what do I think this player’s incentives are” and assuming that even if very few players are willing to take the risk of changing, how close that calculation is must vary.
To a first order of approximation, my theory of success is to provide a new incentive which exceeds the cost of being a punished minority in the short term.
A few further thoughts/questions:
It seems like temporarily disrupting the equilibrium is probably just equivalent to reducing the confidence of actors’ beliefs about other actor’s incentives. If the hard incentives are permanently changed, that seems like a permanent shift in the equilibrium.
It would be really hard to correctly identify an exact new equilibrium. It feels like we would realistically need to identify the properties we want the new equilibrium to have, identify where those properties are in the space of possible equilibria, and then try to shift the current equilibrium in that direction.
How continuously can equilibria move? I have a vague intuition it is more continuous the more types of actors are participating in it, but is incremental progress actually possible or should we expect that if we don’t move to the target it will ‘snap back’ to the same place it was before? Is there some kind of equilibria density in economics?
How well would we have to understand a prospective equilibrium to tell whether a business idea might be successful?
Following on that, it seems like the faster businesses appear to capitalize on a new equilibrium the more fixed it should be. This suggests to me that maybe a battery of start-ups would be a good approach even without the profit motive. I keep wanting to say mission hedging and activist VC firm.