09-10-2008, 01:35 PM
Jan,
Very interesting post. Seems like classic Prisoner's Dilemma to me.
All the banks would benefit if they collectively started to lend to each other. But they don't because each thinks it can do best if others participate but they don't. So no one does and they all suffer.
They would all do best if they participated in the bail out plan as it will help them all in the long run. (whether or not it helps us, I doubt - but that's another matter) But they don't because each reasons if the others participate the system but we 'cheat' ( say we'll participate but then don't ) we can get the benefits of the system being rescued without taking the costs of participating.
Interesting to remember that PD doesn't really reflect accurately how real people act - except for a single group of human beings ( I use the term loosely) Economics students.
PD will kill them in the end.
Very interesting post. Seems like classic Prisoner's Dilemma to me.
All the banks would benefit if they collectively started to lend to each other. But they don't because each thinks it can do best if others participate but they don't. So no one does and they all suffer.
They would all do best if they participated in the bail out plan as it will help them all in the long run. (whether or not it helps us, I doubt - but that's another matter) But they don't because each reasons if the others participate the system but we 'cheat' ( say we'll participate but then don't ) we can get the benefits of the system being rescued without taking the costs of participating.
Interesting to remember that PD doesn't really reflect accurately how real people act - except for a single group of human beings ( I use the term loosely) Economics students.
PD will kill them in the end.
Now could you tell the second thing which came to your mind?