Capitalism and The Prisoner’s Dilemma

How a simple thought experiment demonstrates the problem with free market capitalism

Erik Engheim

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Upon first introduction, the prisoners’ dilemma can come across as dry theory detached from everyday life. It is a thought experiment from the field of game theory, which is a branch of mathematics. Yet, the reason I am choosing to discuss the prisoner’s dilemma is because it helps explains why so many things go wrong in society. Or more specifically, why free market capitalism never seem to work as well as promised.

It is a thought experiment which helps illuminate the two most central themes of political and ideological conflicts: The friction between individualism and collectivism. Or, to frame it in another way, should decisions primarily be made individually and independently of others or collectively through some democratic process aimed to maximize the benefit of that decision to the community as a whole?

Capitalism and socialism are exponents of these two ideological opposites. Proponents of capitalism favor individual decision-making above all else, while socialists will elevate democratic decision-making; meaning, there is a preference for society or groups of people making decisions together for common good.

To clarify, I am not in favor of any extreme outliers. I believe history has shown clearly that us humans thrive best on a healthy mix of individualism and collectivism. However, in this particular story, I am going to direct my criticism against favoring individualism and free market capitalism above all else.

Let me first explain the thought experiment before diving into a description of the wider implications to society, and how it helps us analyze flaws in free markets.

The Police Have Arrested Two Suspects

The thought experiment could be explained in numerous ways, but it is most commonly explained as the police having arrested two suspects for a crime. The police have minimal evidence. Only enough to charge both suspects on a minimal charge carrying a sentence of one year. Thus, the police are determined to get a confession out of the suspects.

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Erik Engheim

Geek dad, living in Oslo, Norway with passion for UX, Julia programming, science, teaching, reading and writing.